Rio Narcea pins down Salave resource (November 22, 2004)

About halfway through a 15,000-metre program of infill drilling, Rio Narcea Gold Mines (RNG-T) has tabled a resource estimate for its Salave project in northern Spain.

Roscoe Postle Associates pegs Salave’s measured resources at 354,000 tonnes averaging 2.7 grams gold per tonne. The material is mostly contained in an area extending from surface to a depth of around 30 metres. Another 14.8 million tonnes of indicated material grades 3 grams and extends to a depth of about 200 metres in the western portion of the deposit. In all, the measured and indicated category contains nearly 1.5 million oz. gold.

In the inferred category are 2.8 million tonnes grading 2.5 grams gold. Most of those ounces are found in the eastern part of the deposit, with some lying at depths exceeding 200 metres in the main (western) part of the deposit. All the estimates employ a cutoff grade of 1 gram gold per tonne.

RPA based its calculations on some 40,197 metres worth of historic and current drilling in 219 holes, including the first 2,961 metres from Rio Narcea’s ongoing 15,500-metre program.

Between 1970 and 1997, Charter Consolidated Mining, Anglo American (AAUK-Q), Newmont Mining (NEM-N) and, most recently, Lyndex Explorations tested Salave with 35,000 metres of drilling in 176 holes.

Drilling on the high-grade zone was highlighted by 58.5 metres grading 8.2 grams gold per tonne, 41.7 metres of 8.6 grams gold, 12 metres of 20 grams gold, and 22 metres of 6.6 grams gold. The drilling resulted in a resource projection ranging from 10 million to 20 million tonnes grading between 3 and 5 grams gold per tonne. Those estimates did not conform to National Instrument 43-101 standards.

In September, hole 2 cut a zone of gold mineralization beneath the deposit’s main zone at a down-hole depth of 204.6 metres. The hole yielded 40 metres grading 8.6 grams gold per tonne; the final 1.35 metres of the hole ran 46.8 grams gold.

Other, deeper intersections include 4.6 metres (beginning at 256.5 metres down-hole) grading 30.7 grams gold; 23.9 metres (from 239.5 metres) averaging 18.5 grams gold; 34.7 metres (from 243.8 metres) of 8 grams gold; and 14.5 metres (from 330.7 metres) grading 8 grams gold.

The remaining holes generally returned between 1 and 10 grams gold over widths of 1-50 metres and at depths of generally less than 200 metres. A single hole sunk on the La Muria target, about 2 km south of Salave, failed to return any significant mineralization.

Currently, four rigs are completing a 15,500-metre program of infill drilling in anticipation of a feasibility study, expected in mid-2005. Four mineralized zones remain open for possible augmentation of the current resource.

Salave is an intrusive-related, disseminated deposit hosted in granodiorite below a shallow-dipping, altered but unmineralized roof pendant of quartzites and siltstones. The mineralization is refractory, with the sulphides mainly consisting of pyrite, arsenopyrite and minor molybdenite, plus lesser amounts of sphalerite, stibnite and chalcopyrite.

A preliminary metallurgical scoping study by Australian-based Ausenco confirms that the refractory ore is amenable to treatment by bio-oxidation, pressure oxidation or heap bioleaching. A composite metallurgical sample is being tested to confirm flotation characteristics. Permitting and hydrological work are also under way.

Salave is expected to start producing in mid-2007 at the rate of 150,000 oz. per year.

Rio ended the recent third quarter with a net loss of US$6.4 million (or 5 per share) on revenue of US$19.2 million, compared with year-earlier net earnings of US$321,300 (nil per share) on US$14.9 million. The loss is attributed to higher operating costs and lower production as mining shifted to underground methods at two of the company’s mines.

During the quarter, the El Valle plant ran through 133,564 tonnes of ore averaging 6.1 grams gold, and produced 24866 oz. gold for an average recovery rate of 95.6%. Cash operating costs rang in at US$225 per oz. The plant also treated 39,547 tonnes of ore grading 18.9 grams gold from Crew Gold‘s (cru-t) Nalunaq mine in Greenland; the average recovery rate was 97.6%. A year earlier, production from Rio’s mines totalled 43,403 oz. at US$152 apiece; no ore was processed from Nalunaq in 2003. The higher cash costs reflect the transition to underground from open-pit mining, and the appreciation of the euro.