Press Release Source: Rio Narcea Gold Mines, Ltd.
Rio Narcea Gold Mines Reports First Quarter 2006 Results and Details Conference Call/Webcast Information
Monday May 15, 8:30 am ET
TORONTO, ONTARIO--(MARKET WIRE)--May 15, 2006 -- Net Income of $2.9 million on Revenues of $47.4 million
(All amounts are reported in U.S. dollars unless otherwise indicated)
Rio Narcea Gold Mines, Ltd. ("Rio Narcea" or "the Company") (TSX:RNG.TO - News)(AMEX:RNO - News) today announced its results for the first quarter ended March 31, 2006.
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First Quarter Highlights
- Revenues of $47.4 million, of which $27.2 million were from nickel operations.
- Net income of $2.9 million, after a derivatives loss of $9.7 million, arising from project debt arrangements.
- Cash provided by operating activities of $1.8 million, including $6.3 million provided by nickel operations and $4.3 million used in gold operations. Cash provided by operating activities before changes in working capital of $12.1 million (a).
- $34.7 million held in cash and cash equivalents.
- Production from Aguablanca of 3.5 million pounds of nickel and 3.4 million pounds of copper. Sales during the quarter of 3.9 million pounds of nickel at a cash cost(a) of $2.86 per pound.
- Construction of Tasiast project continues on time and on budget.
(a)Refer to Non-GAAP measures section of the MD&A.
A complete set of Rio Narcea's Quarterly Report to Shareholders with Management Discussion and Analysis for the first quarter-ended March 31, 2006 is posted on our website at
www.rionarcea.com and has been filed with Sedar at
www.sedar.com.
"The positive net income of $2.9 million for the quarter is the first of what we anticipate will be increasingly profitable and cash generative quarters ahead of us this year," said Chris von Christierson, Chairman and Chief Executive Officer. "Our Aguablanca nickel mine is generating strong cash flow, a portion of which will be utilized towards the cost of construction of our Tasiast gold project in Mauritania, which continues on time and on budget. While our current gold operations in northern Spain are slated for closure by the end of 2006, we are still anticipating production of some 50,000 ounces of gold from these mines in 2006. Furthermore, we have commenced legal proceedings against the Regional Government of Asturias seeking reversal of its decision to prevent development of the Salave gold deposit, or significant monetary compensation. We are also actively pursuing new gold and other metal opportunities and are continuing exploration on our large mineral holdings on the Iberian Peninsula and in Mauritania in our quest to enhance long-term shareholder value," he said.
Financial Results
For the first quarter ended March 31, 2006, Rio Narcea reported a net income of $2.9 million or $0.02 per share on total revenues of $47.4 million. This compares to a net loss of $15.3 million and $0.10 per share on revenues of $9.0 million in the same period in 2005.
Revenues from nickel operations totalled $27.2 million for the first quarter of 2006. There were no revenues from nickel operations in the same period of 2005 as Aguablanca was not yet in commercial production. Revenues from gold operations for the first quarter of 2006 were $20.2 million, of which $13.1 million were sales from Nalunaq ore, compared to $9.0 million in the same period last year. There were no sales of Nalunaq ore during the first quarter of 2005.
Net income for the first quarter of 2006 includes a derivative loss of $9.7 million, mainly as a result of the effect of the higher copper prices on the fair value of the copper forwards entered into by the Company in connection with the project finance of the Aguablanca project.
The Aguablanca nickel operation enabled the Company to report a positive operating cash flow of $1.8 million in the first quarter of 2006, compared with a negative $10.6 million in the same period of the prior year.
Selected Quarterly Information
($000 except where stated)
Three Months
Ended March 31, (a)
2006 2005
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Revenues 47,401 9,030
Net income (loss) 2,906 (15,329)
Net income (loss) per share - basic 0.02 (0.10)
Net income (loss) per share - diluted 0.02 (0.10)
Cash flow provided by (used in)
operating activities 1,832 (10,591)
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(a) Includes the effect on sales and net income (loss) of the
treatment of Nalunaq ore.
March 31, December 31,
2006 2005
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Cash and cash equivalents 34,742 53,624
Total assets 265,872 249,217
Long-term debt 12,107 15,982
Dividends declared per share - -
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Review of Operations
Aguablanca nickel operation
Aguablanca produced 3.5 million pounds of nickel and 3.4 million pounds of copper during the first quarter of 2006, from processing 314,730 tonnes of ore. This represents a 15% improvement in throughput. Head grades during the first quarter were 0.68% and 0.54% for nickel and copper, respectively, with recoveries of 75.4% and 90.9%, respectively. Mine head grades continued to reconcile to the ore block model for the open pit, which has an average grade of 0.66% nickel and 0.46% copper for the life of mine.
Production during the fourth quarter of 2005 was 4.1 million pounds of nickel and 3.2 million pounds of copper from processing 274,434 tonnes of ore. Head grades were uncharacteristically higher at 0.86% nickel and 0.59% copper with metal recoveries of 78.8% and 90.7% for nickel and copper, respectively.
During the first quarter of 2005, as part of the commissioning process, the Aguablanca nickel mine produced 1.6 million pounds of nickel and 1.8 million pounds of copper, from processing 179,445 tonnes of ore.
Operating Results
Three Three
Months Months
Ended Ended
March 31, March 31,
2006 2005
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Ore milled (tonnes) 314,730 179,445
Nickel head grade (%) 0.68 0.69
Copper head grade (%) 0.54 0.57
Nickel recovery (%) 75.4 58.4
Copper recovery (%) 90.9 82.1
Nickel production (000 lb) 3,541 1,561
Copper production (000 lb) 3,412 1,763
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Since January 1, 2006, the plant has been treating an average of approximately 180 tonnes per hour ("Tn/h"), which corresponds to annual throughput of approximately 1.5 million tonnes. Further increases up to 235 Tn/h should be achievable during the year. Grades of nickel and copper in the bulk concentrate during the first quarter of 2006 were 7.2% nickel and 6.8% copper, compared to 6.6% nickel and 5.2% copper during the fourth quarter of 2005.
Tasiast gold project
The Company announced, in August 2005, its decision to proceed with the construction of the Tasiast project and, in November 2005, construction commenced. A Lump-Sum Turn-Key contract was finalized in January 2006 with SENET for the construction of the plant and the camp and related facilities.
Procurement for the project is 84% completed, including all major and critical equipment.
Construction of the project continues to be on time and on budget and it is expected to be completed during the first half of 2007, with first gold production expected in 2007.
The project will be financed by a combination of project debt, the Company's existing cash and projected future operating cash flow. In November 2005, Rio Narcea signed a mandate letter with Macquarie Bank Ltd. to provide a $45.0 million debt facility for the construction of the project.
El Valle and Carles gold operations
During the first quarter of 2006, the Rio Narcea's gold operations produced 13,467 ounces of gold at a cash cost of $539 per ounce as compared with 23,435 ounces of gold at a cash cost of $443 per ounce in the same period of 2005 (refer to Non-GAAP measures section of the MD&A). The El Valle plant processed 87,354 tonnes of Rio Narcea's ore at an average gold grade of 5.2 g/t, compared with 145,117 tonnes with an average grade of 5.5 g/t gold in the prior year period. Recoveries averaged 92.3% in the first quarter of 2006 compared to 91.9% a year earlier.
In addition to processing the Company's ore, the plant processed 33,993 tonnes of Nalunaq ore during the first quarter of 2006 (28% of plant capacity). No Nalunaq ore had been treated during the same period of 2005. On March 9, 2006, the Company gave notice to Nalunaq that the existing agreement will terminate on September 30, 2006. The Company expects that two additional shipments of Nalunaq ore will be processed during 2006.
In February 2006, after a thorough performance review of the El Valle and Carles operations, the Company decided to close these operations. As a result, an orderly mine closure procedure will commence as soon as practicable, with the ultimate cessation of production and the closure of both the El Valle and Carles mines being completed no later than the end of 2006. As a result of this decision, mining during 2006 will be concentrated in already developed areas with better rock conditions and higher grades. There will be no further investment in underground development.
In reaching this decision, the Company has been significantly influenced by the decision of the Regional Authorities of Asturias, not to approve the "change of land use" required to develop the Salave gold project located some 70 km west of the El Valle. The concentrates that were planned to be produced from Salave were expected to be processed at the El Valle plant, with improved economics.
Summary of El Valle and Carles Gold Operations
Three Months Ended March 31
2006 2005
Rio Rio
Narcea's Nalunaq Narcea's Nalunaq ore
operations ore Total operations (b) Total
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Tonnes
of ore
milled 87,354 33,993 121,347 145,117 - 145,117
Grade
(g/t) 5.2 21.7 9.8 5.5 - 5.5
Recovery
(%) 92.3 96.2 93.4 91.9 - 91.9
Gold
production
(oz) 13,467 22,798 36,265 23,435 - 23,435
Cash
cost ($/oz)
(a) 539 525 530 443 - 443
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(a) Refer to Non-GAAP measures section of the MD&A
(b) There was no processing of Nalunaq ore in the
first quarter of 2005.
