Rio gets the green for Aguablanca

Rio Narcea Gold Mines (RNG-T) has finalized a US$47-million debt facility to build a mine to exploit the recently licensed Aguablanca nickel sulphide deposit in southwestern Spain.

The facility with Investec Bank (U.K.) and Macquarie Bank includes a 6-year, US$40-million senior loan, a US$5-million convertible loan (at a conversion price of US$1.43), a US$2-million “stand-by,” cost over-run loan, a nickel and copper hedging facility covering half the nickel produced during the loan’s term, and a foreign exchange hedging facility covering two-thirds of euro-denominated operating expenses during the loan’s term.

Thanks to the stronger euro, capital cost for the mine’s construction have risen to US$70 million from an original estimate of around US$64 million. The difference will be covered by a US$6.5-million value-added-tax reimbursement loan and cash on hand (currently around US$28 million).

The company has also been awarded a subsidy equivalent to 2.5% interest on the first US$39 million drawn from the senior loan. The subsidy is subject to certain agreements between the Extremadura Regional Government and the lenders. Additionally, Spain’s regional development department has granted Rio a non-reimbursable US$7.4-million subsidy for the project.

The plan at Aguablanca calls for contract mining to target open-pit reserves totalling 15.7 million tonnes grading 0.66% nickel and 0.46% copper, plus 0.47 gram platinum group metals per tonne (T.N.M., Aug. 18-24). At full steam, production is pegged at 8,200 tonnes of nickel in concentrate annually, equivalent to about half of the European Union’s current annual nickel output. The mine would also churn out around 6,100 tonnes copper and 23,000 oz. platinum group metals in concentrate as byproducts.

Under a long-term offtake agreement inked earlier this year, Switzerland’s Glencore International will buy all the nickel concentrate produced from Aguablanca until 2010.

Mine commissioning is expected by the end of the second quarter of 2004.