Rio Narcea bullish at Aguablanca (August 01, 2002)

With a positive bankable feasibility study of its advanced Aguablanca nickel-copper project in southern Spain in hand, Rio Narcea Gold Mines (RNG-T) intends to immediately begin the process of awarding basic engineering contracts and arranging off-take agreements and project financing while project permitting is finalized.

The study, completed by South Africa’s Metallurgical Design and Management (MDM), contemplates an open-pit operation producing about 10,000 tonnes of nickel-in-concentrate annually.

An earlier in-house study, pegged annual production at 9,080 tonnes nickel- and 6,810 tonnes copper-in-concentrate over 11 years. Cash costs are expected to average US$1,762 per tonne nickel, net of byproduct credits.

The in-house study put the operation’s net present value at US$97 million or US$61 million, depending on whether a 5% or 10% discount rate is applied. Both projections assume capital costs of US$52 million, average exchange ratios of E1.05-to-US$1 and metal prices of US$5,947 per tonne nickel and US$1,696 per tonne copper. The internal rate of return is 35%.

Between 1993 and 1996, then-owner Rio Tinto (RTP-N) sank 32,000 metres into Aguablanca to outline a resource of 28.4 million tonnes grading 0.67% nickel and 0.49% copper, plus platinum group metals. Most of the material was classified as measured and indicated.

The latest study incorporates drill results from both companies (16% of the open-pit material used in the internal scoping study came from the inferred category).

Elsewhere in Spain, Rio Narcea has budgeted US$1.5 million for exploration of 10 mineralized gabbros identified along the 150-km-long Olivensa-Monesterio antiform. The company holds more than 5,00 sq. km in the region. Planned is a program of airborne and ground geophysics, soil surveying and drilling.

MDM is also in the midst of a feasibility study at Rio’s Corcoesto gold project, in the centre of the Malpica gold belt, 215 km northwest of the company’s El Valle mine.

An internal scoping study envisages an open-pit, heap-leach operation shipping loaded carbon to El Valle for refinement into dor bars. Annual production is projected at 30,000 oz. and cash costs, at US$179 per oz., and Rio expects to have to invest only US$6 million upfront.

Corcoesto comprises five gold mineralized zones hosted by a well-developed, sheeted quartz-vein system that formed large, silica-rich envelops in altered metamorphic rocks. Recoveries from clay-free material are expected to average 76%. The zones are defined by 16.3 km of trenching and 15,481 metres of drilling in 127 core holes. Three-quarters of the drilling was carried out by previous operators.

Final environmental and mining permits are pending.

During the second quarter of 2002, Rio pumped out a record 61,674 oz. of gold thanks to the mining of the high-grade Charnela zone at El Valle in March.

During the three-month period, the El Valle plant ran through 202,783 tonnes at an average of 9.86 grams gold per tonne with a recovery of 96%, all above budget estimates.

In the first six months of the year production hit 86,791 oz., and the company has boosted 2002 production targets to more than 160,000 oz. at cash operating cost below US$150 per oz.