Stronger euro trims Rio Narcea’s earnings

A stronger euro pushed operating expenses higher, and ate into Rio Narcea Gold Mines (RNG-T) earnings during the three-month period ended Sept. 30.

Still, the company ended the third quarter with net income of US$433,800 (or nil per share) on revenue of US$14.9 million, compared with year-earlier earnings US$2.4 million (or 3 per share) on US$15.5 million. Operating cash flow climbed by US$1.5 million to US$6.6 million.

For the first nine months of the year, earnings came to US$1.1 million (1 per share), well off the US$$7 million earned in the corresponding period of 2002. Revenue climbed by US$5 million to US$45.3 million, and operating cash flow jumped 56% to US$14.3 million.

Third-quarter gold production slipped by about 4,600 oz. to 43,403 oz. The lower production helped cash operating costs climb by US$22 per oz. to US$152 per oz. The El Valle plant processed 3,750 more tonnes of ore at 199,928 tonnes, as average grades slipped 11% to 7.2 grams gold per tonne. Recoveries were higher than expected at 94.4%.

For the first nine months of the year production was little changed at 134,664 oz. Cash cost fell US$10 to US$133 per oz. Mill throughput increased by 15,741 tonnes to 579, 566 tonnes, grades slipped by 2.5% to 7.7 grams, and recoveries were virtually unchanged at 94%.

Rio realized an average of US$352 for each ounce produced during the quarter, up from US$322 per oz. a year earlier, but below the quarter’s average spot price of US$363 per oz. The nine-month average realized price was US$347 per oz., up from US$307 per oz.

The quarter’s production included 24,305 tonnes of ore the Carles mine, which was fed into the plant at a 15% blend with El Valle ore. A reduction in arsenic and bismuth levels in the processing circuit has boosted concentrate production from the blend.

The company says the El Valle and Carles mines in Spain are on pace to produce 170,000 oz. gold at US$135 per for the year.

Mining of the higher-grade Charnela zone wrapped up in mid-August. Mining in the Caolinas satellite pit in the north corner of the El Valle pit is expected to begin before year-end.

Drilling designed to expand resources at Carles East continues. Mining began in July, with production of 10,000 tonnes by October. Ore grades have been better than expected at close to 8 grams gold. Underground development to access the Carles North orebody was completed during the quarter, with definition drilling starting in August.

Elsewhere, construction of the Aguablanca nickel mine began in October. By the end of the third quarter, about US$13 million had been spent on development and construction. The project’s capital cost has been boosted by US$7.5 million to US$70 million thanks to the strengthening euro.

The open-pit mine is expected to produce 18 million lbs. of nickel, 11 million lbs. of copper and 20,000 oz. of platinum group elements over 10.5 years beginning in mid-2004.

Also slated for an early 2004 start-up is the Boinas East underground mine. The upper zones will be mined by mechanized cut-and-fill, the lower zones by benching. The ore will stockpiled until the end of 2004 when it will be processed separately to take advantage of the significantly higher copper values and low impurity levels to produce a clean copper concentrate as well as dor.

At quarter’s end, the company had US$48.4 million in cash and equivalents and US$50.2 million in working capital. Another US$53 million was available under existing credit facilities.