Rio Narcea stuck in the red

Rio Narcea Gold Mines (RNG-T) continued to be mired in red ink during the second quarter of 2001.

During the three months ended June 30, the company lost US$474,500 (0.7 per share) on revenue of US$7.1 million, compared with a year-ago loss of US $2.8 million (4.3 per share) on US$4.6 million in revenue. Cash flow from operations (after changes to non-cash working capital items) was US$2.1 million, well of the US$6 million generated in the same period of 2000.

For the first half 2001, the company’s loss amounts to US$47,600 (0.1 per share), compared with a loss of US$3.3 million the previous year. Revenues between the two periods rose to US$16.1 million from US$11.3 million. Cash flow operations totalled US$3 million, down from US$4.8 million.

Second-quarter gold production tallied 26,802 oz. at a cash cost of US$192 per oz. nearly double the year-ago 14,161 oz. produced at US$286 per oz. The processing plant ran through 135,733 tonnes of ore averaging 6.6 grams per tonne. A year earlier, 182,722 tonnes running 2.7 grams were processed. The company realized an average of US$267 per oz. for its second-quarter production.

So far this year, production totals 61,297 oz. at a cash cost of US$182 per oz. The company still expects to meet its 2001 gold production target of 125,000 oz. at US$190 per oz.

In mid-July, Rio exercised an option to acquire the Aquablanca nickel-copper-platinum group metals project in southwestern Spain, from Atlantic Copper and the Spanish government after completing a due diligence review that included metallurgical tests, drilling, geotechnical studies, and the re-logging and re-assaying of considerable core.

Rio Narcea also examined a mine plan based on a 10-to-12-year, open-pit operation producing about 7,000 tonnes of nickel per year, with copper and platinum-group-metal byproducts. The company now plans to carry out an infill and deep drilling program to support a bankable feasibility study, scheduled for completion in early 2002. If results are positive, commercial production could begin as early as 2003. The work program and feasibility study will be funded by a $4-million debenture arranged with Deutsche Bank.

The company remains tight on cash, and in July drew down the remaining US$500,000 of its US$1.5-million working capital facility with Deutsche Bank.

At the end of June, Rio Narcea had US$1.7 million in cash and cash equivalents and a net working capital deficiency of US$6.7 million thanks to an increase in the short-term debt.

The company’s foreign currency contracts chipped in a loss of $535,500 Second-quarter financial expenses were up US$148,700 to US$706,300 owing to higher interest rates and debt level. Long-term debt stands at US$20.3 million.