Steady profits for Rio Narcea

Rio Narcea Gold Mines () says lower stripping costs helped boost cash flow by almost 40% to more than US$6.8 million during the last three months of 2003.

During that time, the company earned US$2.7 million (or 3 per share) — little-changed from the year-earlier period. Similarly, revenue between the two periods climbed by just 2% to US$15.6 million.

Rio’s fourth-quarter gold production totalled 39,510 oz. at a cash operating cost of US$190 per oz., compared with the 42,105 oz. produced at US$143 per oz. during the corresponding period of 2002. The latest fourth quarter saw the El Valle plant in Spain process 182,065 tonnes of ore averaging 7.12 grams gold per tonne; gold recovery averaged 94.9%.

For all of 2003, Rio saw its earnings fall 60% to US$3.8 million (4 per share), owing mostly to a stronger euro and exploration expenses that were almost doubled to US$6.1 million. Still, a higher realized gold price helped revenue climb by US$5.3 million, to US$60.8 million. Cash flow from operations jumped by US$7 million, to US$21.1 million, thanks to improved gold prices and higher-than-expected production and recoveries.

During the year, Rio produced 174,175 oz. gold, down from 177,225 oz. in 2002 but 12% better than planned. Cash costs were also higher than planned, at US$146 per oz., but just US$3 per oz. higher than in 2002. Mill throughput increased slightly, while the head grade (7.6 grams gold per tonne) and the recovery rate (94.1%) did just the opposite.

Rio realized an average of US$356 for each ounce produced in 2003, up from US$307 per oz. in 2002. The year’s average spot price was US$363 per oz., up from US$310 per oz. in 2002.

At year-end, the company had working capital of US$29.7 million, up from US$9.1 million at the end of 2002; long-term debt fell to US$6.7 million from US$13.6 million.

Looking ahead, the company expects production from its existing operations to fall to around 90,000 oz. at a cash cost of US$240 per oz. during 2004 as the company shifts to underground mining at El Valle.

The company also expects to produce 120,000 oz. from Crew Gold‘s (CRU-T) Nalunaq gold mine in Greenland. Under a deal inked in December 2003, Rio Narcea will buy four to five 35,000-to-40,000-tonne batches of high-grade Nalunaq ore per year (averaging around 31 grams gold per tonne). Rio will pay an undisclosed price, less a milling fee.