RNC boosts gold reserves (May 31, 2004)

Toronto-based RNC Gold (RNC-T), owner and operator of most of Greenstone Resources’ old gold assets in Central America, has expanded its reserves and resources at the La Libertad and Bonanza mines in Nicaragua and the Cerro Quema project in Panama.

The wholly owned La Libertad, an open-pit, heap-leach operation 115 km east of Managua, is slated to produce 80,000 oz. annually over the next decade at a cash cost of US$208 per oz., making it Nicaragua’s largest gold mine.

Based on a gold price of US$375 per oz., reserves at La Libertad at the end of 2003 stood at 8.6 million tonnes grading 2.14 grams gold per tonne (or 588,600 contained oz.), divided equally between the proven and probable categories. A further 26.6 million tonnes of 1.45 grams gold (1.2 million oz.) are defined as measured and indicated resources.

RNC controls 183 sq. km around the mine and intends to carry out further exploration both close to it and at the Santo Domingo concession, 6 km away.

At the wholly owned Bonanza-Hemco concessions, in northeastern Nicaragua, reserves total 300,000 tonnes grading 6.99 grams gold (67,000 oz.). There is also a resource of 3.9 million tonnes grading 3.78 grams gold (474,000 oz.), as well as 25.1 million tonnes of inferred material at 1.19 grams gold.

At Bonanza-Hemco, RNC has the capacity to mine 31,000 oz. gold annually at a cash cost of US$250 per oz., from both underground and surface operations. The property has seen continuous production since 1940.

Also, the concessions are being explored in the hope of outlining bulk-minable deposits similar to those found at La Libertad.

(RNC recently bought out the remaining 20% of the Bonanza-Hemco concessions it did not already own.)

At Cerro Quema, 190 km southwest of Panama City, reserves are pegged at 6.6 million tonnes grading 1.13 grams gold (240,000 oz.). Measured and indicated resources, including reserves, stand at 15.9 million tonnes of 0.91 gram gold, or 465,000 oz.

The project is the subject of a US$14-million feasibility study, which proposes an open-pit, heap-leach mine. RNC hopes to begin construction later this year, with startup slated for the fourth quarter of 2005.

At full swing, the mine could produce 48,000 oz. annually at a cost of US$190 per oz.

The company holds a 60% interest in the project and can boost this to 100%.

RNC’s remaining major gold asset is an option to acquire a 25% interest in the San Andres gold mine in western Honduras. The company is also exploring the Picachos gold-silver property in Mexico.

RNC Gold, which went public last December via a reverse-takeover of Tango Mineral Resources, is now Nicaragua’s biggest gold producer.

In the first quarter of 2004, the company produced 20,412 oz. gold at a total cash cost of US$286 per oz. and a total production cost of US$359 per oz., but lost US$800,000 (4 per share) on revenue of US$7.8 million.

RNC sold its gold at an average of US$405 per oz. but lost US$39 per oz. on option contracts, for a net realized price of US$366 per oz.

In late April, RNC raised C$20 million by placing 10.1 million units priced at C$2 per unit. A unit comprises a share and half a warrant, with a whole warrant entitling the holder to buy another share for C$2.50 within two years. The placement was sold by a syndicate led by Canaccord Capital and including Jennings Capital.

Proceeds will be used to repay debt, explore, and acquire properties.

A couple of months earlier, another US$1.1 million came into company coffers via the exercise of 681,000 share-purchase warrants.

At last count, the company had 18.7 million shares outstanding and a market capitalization of C$34.7 million.

Shareholders have taken a beating since RNC shares went public in December watching their shares drop from the C$3.50 range to their present value of around C$1.80. The stock touched an all-time low of $1.57 in early May and has been steadily recovering since then.