Rio Narcea bullish at Aguablanca (August 19, 2002)

Having completed a bankable feasibility study of its advanced Aguablanca nickel-copper project in southern Spain, Rio Narcea Gold Mines (RNG-T) is awarding engineering contracts and arranging project financing.

The study, completed by South Africa’s Metallurgical Design and Management (MDM), envisages an open-pit operation producing 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 5,000 sq. km in the region. Plans call for 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 calls for an open-pit, heap-leach operation shipping loaded carbon to El Valle for refinement into dore bars. Annual production is projected at 30,000 oz.; cash costs, at US$179 per oz. 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 envelopes 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. gold, thanks to the mining of the high-grade Charnela zone at El Valle in March.

The 3-month period saw the El Valle plant run 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, 86,791 oz. were produced, and the company has boosted 2002 production targets to more than 160,000 oz. at a cash operating cost below US$150 per oz.