Rio Narcea’s earnings edge higher

Rio Narcea Gold Mines (RNG-T) says that lower stripping costs helped boost cash flow by almost 40% to more than US$6.8 million during the final 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, earnings fell 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 revenues climb by US$5.3 million to US$60.8 million. Cash flow 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. of gold, down from 177,225 oz. in 2002, but 12% better than planned. Cash costs too were higher than planned at US$146 per oz., but just US$3 per oz. higher than in 2002. Mill throughput increased slightly, while head grade (7.6 grams gold) 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 about 120,000 oz. from Crew Gold>‘s (CRU-T) the Nanulaq gold mine in Greenland. Under a deal inked in December, Rio Narcea will buy four to five 35,000-40,000 tonne batches of high-grade (averaging around 31 grams gold per tonne) Nalunaq ore per year. Rio will pay an undisclosed price, less a milling fee, and will