Rio Narcea gets the green thumb at Aguablanca

Rio Narcea Gold Mines (RNG-T) is jumping right into the construction phase at its Aguablanca nickel-copper-platinum-group-metal project in southwestern Spain after receiving a positive declaration of environmental impact from that country’s environment ministry.

Following construction, commissioning is expected by the end of the first quarter of 2004. Capital costs are pegged at US$64.1 million; the net present value is US$106 million at a 5% discount rate and a nickel price of US$2.99 per lb.

Over a projected life of 10.5 years, an open-pit operation would produce 9,080 tonnes nickel annually, along with 6,810 tonnes copper and 25,000 oz. platinum group metals — all in concentrate. The mine plan calls for ore to be processed in an on-site 1.5-million-tonne-per-year conventional nickel sulphide flotation plant.

A bankable feasibility study at Aguablanca places resources at 28.4 million tonnes grading 0.67% nickel and 0.49% copper, plus platinum group elements. The bulk of the material is classified as measured and indicated.

Open-pit reserves are pegged at 15.7 million tonnes grading a diluted 0.66% nickel and 0.46% copper, plus 0.47 gram platinum group metals per tonne. The estimate is based on a nickel price of US$2.99 per lb. and a copper price US73 per lb.

Financing for most of the capital cost (US$61 million) was wrapped up in a joint deal with Investec Bank (UK) and Australia’s Macquarie Bank in late 2002. The loan requires a nickel and copper hedging facility, made up of puts and calls, to cover half the nickel produced during its term.

Under a long-term offtake agreement inked earlier this year, Glencore International will buy all the nickel concentrate produced from Aguablanca until 2010.

Rio Narcea shares were trading 16, or 6.4%, higher at $2.65 in late afternoon trade in Toronto on June 17.