Rio Narcea eyes $6.4 million for coffers

Rio Narcea Gold Mines (RNG-T) has inked a deal to have Haywood Securities act as for an offering of 8 million special warrants at 80 apiece for aggregate proceeds of $6.4 million.

One special warrant allows the holder to acquire, without further payment, one common share. The Agent has the option, at any time prior to closing, to increase the size of the offering by up to 1 million special warrants. Subject to regulatory approval, the offering is slated to close by Mar. 27, 2002. Proceeds will go toward working capital.

At the end of September 2001, the company had about $1.8 million in cash and equivalents and a net working capital deficiency of $9. 1million.

Rio Narcea produces gold from the wholly owned El Valle and Carles mines in Spain. In the first nine months of the year, the two cranked out just fewer than 90,000 oz. at a total cost of US$220 per oz. Nevertheless, the company incurred a net loss of US$898,300 (or 1.4 per share) during the period.

Rio Narcea is also examining the feasibility of advancing to production the Aguablanca nickel-copper-platinum-group-metals project in southwestern Spain. Results of the study are expected to be available in the second quarter.

The study at Aguablanca is expected to wrap up in June, with a production decision to follow. About two-thirds of a 10,000-metre program of infill core drilling has been completed, closing the hole spacing to 25 metres. If approved, Rio plans to fast-track the project with an eye toward beginning production as soon as mid-2003.

Aguablanca hosts a resource of 30 million tonnes grading 0.7% nickel, 0.5% copper, 0.3 gram platinum, 0.3 gram palladium and 0.3 gram gold. A prefeasibility study on a 17-million-tonne deposit grading 0.73% nickel, 0.51% copper and 0.6 gram platinum group metals at a 3.5:1 stripping ratio indicates a net present value, discounted at 10%, of US$59 million. The estimate is based on current metal prices. Capital costs are pegged at US$60 million, and the deposit is amenable to open-pit mining.