Rio Narcea sees red

Lower grades from a transition zone at the Boinas East pit took a bite out of Rio Narcea Gold Mines‘ (RNG-T) gold production and led the company to incur a loss of US$850,700 (or1.3 per share) for the three months ended Sept. 30.

During the same period of 2000, the company earned US$1 million (1.6 per share). Revenue for the recent quarter was US$7.6 million, down from US$8.3 million a year earlier. Cash flow from operations was US$2 million, up from US$1.8 million.

For the first three quarters of the year, the company’s loss piled up to US$898,300 (1.4 per share), compared with a year-ago loss of US$2.3 million (3.5 per share). Revenue climbed to US$23.7 million from US$19.7 million. Cash flow slipped US$1.5 million to US$5.1 million.

Third-quarter gold production fell to 28,523 oz. at a total cash cost of US229 per oz., from the 29,060 oz. poured a year earlier at US233 apiece. Gold production suffered in June and July as complex ore with higher than normal levels of impurities was encountered in a transition zone at the Boinas East pit. As a result, grades and recovery rates fell, and processing costs for copper concentrates climbed in July and August. Since mid-September, the quality of the concentrates and gold recoveries have returned to normal.

With a lack of lower grade copper ore for blending, about 100,000 tonnes of ore running 7 to 8 grams gold per tonne and up to 3% copper was stockpiled. This ore will be processed during 2002.

During the third quarter, Rio Narcea averaged US$277 per oz. for its production.

For the first nine months of the year, production was 89,820 oz., at US$220 per oz., up from 67,680 oz. produced at US$264 per oz. the previous year.

Mining at Boinas East pit is expected to wind up by year-end. Underground development at Boinas East is on schedule with the ramp progressing to 1,124 metres. A initial nine-hole infill drill program below the Boinas East pit was completed in August and returned expected grade thicknesses. The holes were aimed at confirming the continuity of mineralization. Definition drilling will resume in early next year. The Company also completed four underground holes to test the extension of the North Black Skarn on 100-metre centres. The Skarn’s southern limit has been defined; the zone remains open in the three other directions.

Meanwhile, waste removal continues at the El Valle pit and mining on the main portion of the high-grade Charnela zone is expected to begin in early 2002.

At Carls, about 33,900 tonnes of ore were mined from the Carls North pit and transported to the El Valle plant.

In late June, Rio completed a US$4-million debenture facility with Deutsche Bank. The funds are earmarked for an infill-drilling program and bankable feasibility study of the Aguablanca nickel-copper-platinum-group-metal project in southwestern Spain. The results of the study are in the second quarter of 2002. Three drill rigs are currently focussed on an infill-drilling program on a 25-metre grid to estimate the reserves for the first three years of production. Also underway is program of resurveying of about 20,000 meters of existing drill holes. Deep drilling is also in progress at Aguablanca to test a high-grade zone below the planned open pit.

Exploration programs elsewhere have been temporarily suspended to accelerate the completion of 9,000 metres of infill and deep drilling as part of the Aguablanca feasibility study.

Looking ahead, Rio expects to produce 125,000 oz. at US$190 per oz. this year.

At the end of Sept., the had US$1.8 million in cash and equivalents and a net working capital deficiency of $9.1 million.