Rio Narcea Gold Mines, Ltd.: First Quarter 2005 Financial Results.TORONTO Toronto (tərŏn`tō), city (1998 est pop. 2,400,000), provincial capital, S Ont., Canada, on Lake Ontario. Toronto is the largest city in Canada and since the 1970s has been one of the fastest-changing cities in North America, experiencing -- Rio See RapidIO and MP3. Narcea
The Narcea is a river of Asturias. External links
TSX Transfer from Stack Pointer to Index TSX True Space Extension :RNG See RELAX NG. )(AMEX AMEX See: American Stock Exchange :RNO RNO Russian National Orchestra RNO Race National Origin (EEO) RNO Radio Network Optimization RNO Rosettanet Object RNO Resident Naval Officer RNO Recipient Network Operator (mobile communications operator) ) (All figures are reported in U.S. dollars except otherwise indicated) Rio Narcea Gold Mines, Ltd. ("Rio Narcea" or the "Company") announces the financial results of the Company for the first quarter ended March 31, 2005. The Company reported a net loss for the first quarter of 2005 of $16,127,800 or $0.10 per share compared to a loss of $6,411,800 and $0.06 per share in the same period of 2004. This net loss included a foreign currency exchange loss of $4,424,200 due to the effect of the stronger U.S. Dollar / Euro exchange rate during the quarter and a derivatives derivatives In finance, contracts whose value is derived from another asset, which can include stocks, bonds, currencies, interest rates, commodities, and related indexes. Purchasers of derivatives are essentially wagering on the future performance of that asset. loss of $5,335,000 mainly due to the higher copper prices that resulted in a lower fair value of the forward contracts required for project debt. Revenues, all of which were from gold sales, were $8,919,900 for the first quarter of 2005 compared to $18,838,000 (of which $5,044,800 were sales from Nalunaq ore; there were no sales of Nalunaq ore during the first quarter of 2005) in the same period last year. Although the Company is producing concentrate from its Aguablanca nickel nickel, metallic chemical element; symbol Ni; at. no. 28; at. wt. 58.69; m.p. about 1,453°C;; b.p. about 2,732°C;; sp. gr. 8.902 at 25°C;; valence 0, +1, +2, +3, or +4. mine as part of the commissioning process, which began in December December: see month. 2004 and is ongoing, no sales of concentrate occurred in the period. During the first quarter of 2005, the market value of the concentrate produced during the commissioning process was higher than the operating costs operating costs npl → gastos mpl operacionales incurred. The operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. at Aguablanca in the first quarter contributed to operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. being negative $11,074,900 for the quarter compared to positive $4,920,100 in the prior year period. During the first quarter, the Company incurred an operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. of $5,425,800 compared to $1,765,500 in the same period of 2004. The operating loss for the quarter was mainly attributable to the following factors: underground gold operations in a ramp-up process with, as expected, higher mine costs; higher exploration costs, mainly as a result of the infill in·fill n. 1. The use of vacant land and property within a built-up area for further construction or development, especially as part of a neighborhood preservation or limited growth program. 2. drilling at the Salave gold deposit; and higher administrative and corporate expenses as a result of the new corporate office in Toronto. Subsequent to the end of the first quarter of 2005, the Company expects to make a shipment of Aguablanca concentrates in May. These concentrates were produced during the first quarter and the first weeks of April 2005, during the commissioning. This will result in net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). to the Company of approximately $7 million, which are in excess of the costs of their production. Since the start of commissioning in late December 2004, the Aguablanca operation has seen a steady improvement in plant throughput The speed with which a computer processes data. It is a combination of internal processing speed, peripheral speeds (I/O) and the efficiency of the operating system and other system software all working together. 1. , nickel and copper recoveries and concentrate grades. Improvements are continuing as commissioning progresses. First Quarter Highlights - Revenues of $8,919,900. - Net loss of $16,127,800. - Cash used in operating activities of $11,074,900. - $62 million held in cash and cash equivalents. - Gold production from the Company's operations of 23,435 ounces at a cash cost of $443 per ounce ounce, in zoology ounce, in zoology: see leopard. ounce, unit of measurement ounce: see English units of measurement. . - Aguablanca mine commissioning underway, with results improving towards design criteria Noun 1. design criteria - criteria that designers should meet in designing some system or device; "the job specifications summarized the design criteria" criterion, standard - the ideal in terms of which something can be judged; "they live by the standards of their and saleable sale·a·ble adj. Variant of salable. saleable or US salable Adjective fit for selling or capable of being sold saleability or US concentrate being produced.
Summary of Results
($000 except where stated)
Three Months
Ended March 31,
2005 2004
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Revenues 8,920 18,838
Cash flow provided by (used in)
operating activities (11,075) 4,920
Net loss (16,128) (6,412)
Net loss per share - basic (0.10) (0.06)
Weighted average shares outstanding -
basic (in millions) 157.5 113.3
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March 31, December 31,
($000) 2005 2004
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Cash and cash equivalents 61,994 81,889
Long-term debt, excluding current portion 22,718 31,109
Shareholders' equity 172,089 191,320
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Summary of Quarterly Results
($000 except where stated)
2005 2004 2003
1Q 4Q 3Q 2Q 1Q 4Q 3Q 2Q
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Operating
revenues 8,920 15,816 19,234 13,900 18,838 15,565 14,880 14,798
Net
income
(loss) (16,128)(31,366)(6,379) (288) (6,412) 2,759 321 (555)
Net
income
(loss)
per
share
- basic (0.10) (0.21) (0.05) (0.00) (0.06) 0.02 0.00 (0.01)
Net
income
(loss)
per
share
- diluted (0.10) (0.21) (0.05) (0.00) (0.06) 0.02 0.00 (0.01)
Cash
flow
provided
by
operating
activ-
ities (11,075) (3,354) 4,610 2,702 4,920 6,844 6,618 3,578
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Review of Mining Operations - Nickel Aguablanca Nickel Mine During the first quarter of 2005, as part of the commissioning process, the Aguablanca nickel mine produced 16,300 dry tonnes of concentrate containing 708 tonnes of nickel (and 800 tonnes of copper) from processing 179,445 tonnes of ore at average nickel and copper head grades of 0.69% and 0.57%, respectively. Nickel and copper recoveries achieved during the period were 58.4% and 82.1%, respectively. Mine head grades are reconciling well to the ore block model for the open pit. While nickel concentrate grades and recoveries are below budget, improvements are continuing as the commissioning progresses.
Operating Results
Three
Months
Ended
March 31,
2005
-----------------------------------------
Ore milled (tonnes) 179,445
Nickel head grade (%) 0.69
Copper head grade (%) 0.57
Nickel recovery (%) 58.4
Copper recovery (%) 82.1
Concentrate (tonnes) 16,300
Nickel production (tonnes) 708
Copper production (tonnes) 800
-----------------------------------------
-----------------------------------------
No sales of concentrates were made in the first quarter; however, subsequent to the end of the quarter in May, a shipment of 20,000 wet tonnes of concentrate grading approximately 4.7% nickel and 5.7% copper is planned to be made, which will generate net proceeds of approximately $7 million. In mid-December 2004, the construction of the Aguablanca open pit Nickel mine and its on-site processing facilities was finalized See finalization. with the installation and energizing energizing, adj giving energy to; revitalizing; rejuvenating. of the high voltage The term high voltage characterizes electrical circuits, in which the voltage used is the cause of particular safety concerns and insulation requirements. High voltage is used in electrical power distribution, in cathode ray tubes, to generate X-rays and particle beams, to power line by the third party power company. Commissioning of the Aguablanca plant commenced immediately thereafter. Certain design problems affecting the SAG (1) A momentary drop in voltage from the power source. Contrast with spike. (2) (SAG) (SQL Access Group) See CLI. mill and flotation flotation or froth flotation Most widely used process for extracting many minerals from their ores. The method separates and concentrates ores by altering their surfaces so that they are either repelled or attracted by water. circuit were identified and are being corrected with new replacement parts at the contractor's cost under the existing lump-sum turn key contract for the construction of the plant. Engineering Performance tests to be completed by the contractor, Fluor Corporation, are contractually required to be met prior to the handing over of the plant facilities to the Company. Underground development at the Aguablanca mine is proceeding as planned with the access ramp now completed to approximately 1,645 m from the portal. It is anticipated that an underground infill drill program from the access ramp will commence in May. The purpose of this program is to convert known higher grade mineralization Mineralization The process by which the body uses minerals to build bone structure. Mentioned in: Rickets mineralization, n the bioprecipitation of an inorganic substance. , previously drilled from surface, into resources and subsequently, reserves. These underground reserves would then be mined commencing in early 2006 to augment aug·ment v. aug·ment·ed, aug·ment·ing, aug·ments v.tr. 1. To make (something already developed or well under way) greater, as in size, extent, or quantity: open pit production. In addition, the access ramp will be used as a base for future exploration of deeper targets. Review of Mining Operations - Gold During the first quarter of 2005, the Company's own underground gold operations produced 23,435 ounces of gold at a cash cost of $443 per ounce as compared with 31,688 ounces of gold at a cash cost of $213 per ounce in the same period of 2004. The budgeted cash cost for the first quarter of 2005 was $440 per ounce, higher than the budgeted figure for the rest of the year of $370 per ounce as a result of the underground mine ramp-up process. The El Valle plant processed 145,117 tonnes of the Company's own ore at an average gold grade of 5.5 g/t, compared with 141,562 tonnes with an average grade of 7.3 g/t gold in the prior year period. Recoveries averaged 91.9% in the first quarter of 2005 compared to 94.9% a year earlier. No ore was treated under the agreement with Nalunaq during the first quarter of 2005. In the first quarter of 2004, 26,274 tonnes of Nalunaq ore, averaging 14.7 g/t gold were treated in the El Valle plant. At the end of March 2005, 27,400 tonnes of Nalunaq ore were delivered to the El Valle plant, which were processed in April 2005. A new shipment of Nalunaq ore is expected in June 2005. The purchase and treatment of the Nalunaq ore generates revenues and enables the El Valle plant to operate at approximately full capacity and, therefore, more efficiently and cost effectively.
Operating Results
Three Months Ended March 31
2005 2004
Rio Rio
Narcea's Nalunaq Narcea's Nalunaq
operations ore Total operations ore Total
---------------------------------------------------------------------
Tonnes of
ore milled 145,117 - 145,117 141,562 26,274 167,836
Grade (g/t) 5.5 - 5.5 7.3 14.7 8.5
Recovery (%) 91.9 - 91.9 94.9 97.8 95.7
Gold
production (oz) 23,435 - 23,435 31,688 12,149 43,837
Cash cost ($/oz) 443 - 443 213 391 263
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El Valle Mine The Boinas zone within the El Valle operation produced 31,126 tonnes of underground ore grading 3.02 g/t gold during the quarter, which was lower than planned as problems with ground control were encountered in the early part of the period. Improvements in the mined tonnage TONNAGE, mar. law. The capacity of a ship or vessel. 2. The act of congress of March 2, 1799, s. 64, 1 Story's L. U. S. 630, directs that to ascertain the tonnage of any ship or vessel, the surveyor, &c. per month are being made as the new mine plan is fully implemented. Mined production is now approaching forecast tonnage. The geology geology, science of the earth's history, composition, and structure, and the associated processes. It draws upon chemistry, biology, physics, astronomy, and mathematics (notably statistics) for support of its formulations. of the Monica zone, within the El Valle mine, has now been re-interpreted and mining will now be undertaken using cut and fill methods in conjunction with sub-level stoping. In addition, dewatering Dewatering (dē′wöd·ər·iŋ) is the removal of water from solid material or soil by wet classification, centrifugation, filtration, or similar solid-liquid separation processes. of the lower Monica zone and the Charnela zone will enable ore extraction from the lower Monica zone and allow development of an exploration cross-cut to access the Charnela zone for better interpretation. Carles Mine At the Carles mine, 33,282 tonnes of underground ore grading 5.33 g/t gold were mined from the Carles East deposit. Development drilling at the Carles North zone has outlined a resource of 150,000 tonnes averaging 7 g/t and 0.45% copper which could be mined in 2006. Review of Development and Feasibility Stage Gold Projects Tasiast Gold Project The basic engineering study for the Tasiast gold project in Mauritania, West Africa West Africa A region of western Africa between the Sahara Desert and the Gulf of Guinea. It was largely controlled by colonial powers until the 20th century. West African adj. & n. commenced in January 2005 and was completed as planned towards the end of the first quarter. The purpose of the study is to review and update parameters of the feasibility completed in April 2004 by SNC SNC St Norbert College (De Pere, Wisconsin) SNC Sistema Nervioso Central SNC Société en Nom Collectif (French: Partnership) SNC Système Nerveux Central (French: central nervous system) Lavalin. SENET SENET Scientific and Engineering Network , the engineering contractor selected for this study, has provided preliminary results which are currently being reviewed by the Company. Salave Gold Project The major infill drilling program initiated in the fall of 2004 as part of the feasibility study The analysis of a problem to determine if it can be solved effectively. The operational (will it work?), economical (costs and benefits) and technical (can it be built?) aspects are part of the study. Results of the study determine whether the solution should be implemented. of the project has been completed. In total, 14,900 m of drilling in 70 holes was completed during the course of the program. Efforts were also focused on defining the limits of the mineralization at the northern end of the deposit in the Mirayos zone and to the south in the Lagos zone. The results of the final one-third of the 14,900 meter infill drilling program at Salave, with favourable assay results from 30 holes, were reported in a press release dated May 11, 2005. Hole RN 70 intersected high-grade High-grade Credit quality of AAA or AA. high-grade Of, relating to, or being a bond with little risk of default on the part of the issuer. High-grade is usually reserved for bonds rated AAA or AA by the rating services. mineralization in two zones that assayed 29.3 g/t gold over 18.15 meters beginning at a depth of 252.2 meters and 37.7 g/t gold over 21.65 meters beginning at a depth of 281.0 meters. This hole was vertical and offset 25 meters from existing holes on the project. The hole was 20 meters south of hole L9705, which previously intersected a grade thickness of approximately 1,000 g/t x m. Efforts have also been directed towards completing various studies that will form part of the feasibility study. To date, hydrological hy·drol·o·gy n. The scientific study of the properties, distribution, and effects of water on the earth's surface, in the soil and underlying rocks, and in the atmosphere. , archaeological, geotechnical and environmental baseline The horizontal line to which the bottoms of lowercase characters (without descenders) are aligned. See typeface. baseline - released version studies, required to support the bankable bank·a·ble adj. 1. Acceptable to or at a bank: bankable funds. 2. Guaranteed to bring profit: a bankable movie star. feasibility study, have either been initiated or completed. Final site restoration plans are expected to be submitted for comment during the second quarter. Permitting work and preliminary applications are underway in parallel with the feasibility study work. Review of Exploration Projects Ossa Morena Regional Exploration Rio Narcea continues to explore its large, 4,800 km(2) Ossa Morena property for both nickel sulphide sulphide: see sulfide. and iron oxide The material used to coat the surfaces of magnetic tapes and lower-capacity disks. copper-gold ("IOGC IOGC Indian Oil and Gas Canada (Canada) ") targets. Airborne airborne /air·borne/ (ar´born) suspended in, transported by, or spread by air. airborne, adj carried through the air. In health care settings, viruses or bacteria may become airborne, e.g. geophysical surveys Geophysical survey refers to the systematic collection of geophysical data for spatial studies. Geophysical surveys may use a great variety of sensing instruments, and data may be collected from above or below the Earth's surface or from aerial or marine platforms. have identified numerous nickel sulphide and IOGC targets. Several of these preliminary targets are now being followed up with detailed mapping, sampling and drilling. During the quarter Rio Narcea completed more than 1,300 meters of drilling. Nickel Sulphide Exploration One deep exploration drill hole in the Cabeco de Vide area of Portugal is testing a very large and highly conductive conductive having the quality of readily conducting electric current. conductive flooring flooring or floor covering made specially conductive to electrical current, usually by the inclusion of copper wiring that is earthed geophysical ge·o·phys·ics n. (used with a sing. verb) The physics of the earth and its environment, including the physics of fields such as meteorology, oceanography, and seismology. anomaly Abnormality or deviation. Pronounced "uh-nom-uh-lee," it is a favorite word among computer people when complex systems produce output that is inexplicable. See software conflict and anomaly detection. . Elsewhere in southern Portugal an exposure with up to 50% sulphides has been identified in a quarry Quarry Cerynean stag captured by Hercules as third Labor. [Gk. and Rom. Myth.: Hall, 149] Cretan bull savage bull caught by Hercules as seventh Labor. [Gk. on the Company's Beja property in southern Portugal. A soil geochemical survey in the area has delineated de·lin·e·ate tr.v. de·lin·e·at·ed, de·lin·e·at·ing, de·lin·e·ates 1. To draw or trace the outline of; sketch out. 2. To represent pictorially; depict. 3. anomalous a·nom·a·lous adj. 1. Deviating from the normal or common order, form, or rule. 2. Equivocal, as in classification or nature. Cu and Ni values along a favourable 3.5 km trend that may correlate to the unit that hosts the mineralization. Assays of the first samples taken from this occurrence have returned up to 0.9% Ni and 0.8% Cu. Iron Oxide Copper Gold ("IOCG IOCG Iron Oxide Copper Gold IOCG International Organization for Crystal Growth ") Exploration A drilling program to explore the Las Herrerias target (100 km northwest of Aguablanca) completed 1,048 meters in 10 holes during the quarter with encouraging initial results. The program encountered volcanogenic vol·ca·no·gen·ic adj. Of volcanic origin. massive sulfide sulfide, chemical compound containing sulfur and one other element or sulfur and a radical. Sulfides may be salts or esters of hydrogen sulfide, H2S, or may be formed directly, e.g., by heating a metal with sulfur. mineralization along a 1.5 km strike length with an IOCG overprint o·ver·print tr.v. o·ver·print·ed, o·ver·print·ing, o·ver·prints To imprint over with something more, especially to print over with another color. n. 1. A mark or impression made by overprinting. along east-west trending structures in the northern end of the target exhibiting volcanogenic massive sulphide gold-bearing mineralization. Additional work is continuing in the Alandroal and Barrancos Barrancos (pron. IPA: [bɐ'ʁɐ̃kuʃ]) is a municipality in Portugal with a total area of 168.3 km² and a total population of 1,825 inhabitants. permit areas of Portugal. Rio Narcea Gold Belt On March 15, 2005, the Company signed a definitive agreement with Compania de Minas Minas may refer to:
BVN Bolsa de Valores Nacional, SA (Guatemala) BvN Birkhoff-Von Neumann Decomposition BVN Bureau Voucher Number BVN Broadband Virtual Network "), under which BVN has the option to earn up to a 70% interest in all of the Company's exploration stage properties within the Rio Narcea Gold Belt in northern Spain, with the exception of the El Valle and Carles mines and the related infrastructure. To earn a first 51% interest, BVN must make expenditures totalling EUR EUR In currencies, this is the abbreviation for the Euro. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 2.2 million (approximately $2.9 million) within two years to fund an underground exploration and development program on the Santa Marina Santa Marina can refer to:
tr.v. in·curred, in·cur·ring, in·curs 1. To acquire or come into (something usually undesirable); sustain: incurred substantial losses during the stock market crash. 2. a further EUR 2.4 million (approximately $3.1 million) of exploration expenses at Santa Marina. Capital Resources and Liquidity The Company ended the quarter with $61,994,100 of cash and cash equivalents and $55,863,400 of working capital. There has been a reduction of cash and cash equivalents of $19,894,700 during the quarter, a significant portion of which was due to the cash used in operating activities, including Aguablanca, and the negative translation effect of the U.S. dollar / Euro exchange rate on the cash and cash equivalents held in Euros. In addition, the working capital was also affected by the reclassification Reclassification The process of changing the class of mutual funds once certain requirements have been met. These requirements are generally placed on load mutual funds. Reclassification is not considered to be a taxable event. from long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. to current of $8.0 million due to Investec Bank Investec (JSE: INL) is an international, specialist banking group that caters to the high-end market, providing a diverse range of financial products and services. History (UK) Ltd. and Macquarie Bank Macquarie Bank Limited is an Australian merchant bank and financial services group, providing a broad range of products and services to investors, corporations and government. Its global headquarters is in Sydney, and it is listed on the Australian Stock Exchange (ASX). Ltd. ("Investec and Macquarie") in March 2006. Cash flow used in operating activities amounted to $11,074,900 in the first quarter of 2005 compared to cash flow provided by operating activities of $4,920,100 in the same period of 2004, as a result of the factors referred to in page 1 of this Report. Before working capital adjustments, cash flow used in operating activities was $4,163,500 compared with positive $5,974,500 in the same period of 2004. Gold and nickel operations consumed con·sume v. con·sumed, con·sum·ing, con·sumes v.tr. 1. To take in as food; eat or drink up. See Synonyms at eat. 2. a. $2.9 million and $7.6 million, respectively, of operating cash flows while corporate activities consumed $0.6 million. Effective January 1, 2005, the Aguablanca project is considered and accounted for as an "operating activity" instead of an "investing activity", since, among other factors, the market value of the concentrate produced is higher than the costs incurred to produce it. However, there have been no sales of concentrates from the Aguablanca project during the first quarter of 2005, although 708 tonnes of contained nickel were produced and trucked to the Huelva port ready to be shipped. During the first quarter of 2005, investing activities consumed $6,499,300 of cash, including capital expenditures on mineral properties of $7,037,800. In the first quarter of 2004, investing activities used $26,963,700. The expenditures in respect of Aguablanca include the payment of existing invoices for the construction of the plant, which came due for payment in the first quarter and ongoing expenditures in respect of the underground ramp. The following table sets forth the Company's capital expenditures on mineral properties:
Three months ended
March 31,
($ Million) 2005 2004
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El Valle and Carles 2.1 2.1
Aguablanca 3.2 13.1
Acquisition of Salave - 5.0
Tasiast 0.7 -
Other 1.0 -
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Total 7.0 20.2
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Subsequent to the end of the first quarter, on April 1, 2005, the Company collected a first tranche Tranche One of several related securities offered at the same time. Tranches from the same offering usually have different risk, reward, and/or maturity characteristics. tranche A class of bonds. of EUR 5.7 million (approximately $7.3 million) from the subsidy subsidy, financial assistance granted by a government or philanthropic foundation to a person or association for the purpose of promoting an enterprise considered beneficial to the public welfare. that had been granted on July 21, 2003 and amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. on January 14, 2004 by the Ministry of the Economy for the construction of the Aguablanca project. The balance of the grant (approximately $3.4 million) is expected to be collected during 2005. For the first quarter of 2005, cash provided by financing activities amounted to net $2,293,700, which includes an additional drawdown Drawdown The peak to trough decline during a specific record period of an investment or fund. It is usually quoted as the percentage between the peak to the trough. Notes: of EUR 1.1 million (approximately $1.4 million) under the Barclays credit related to the VAT VAT See: Value-added tax VAT See value-added tax (VAT). on the Aguablanca project, and $0.6 million as a result of the exercise by HSBC HSBC Hongkong and Shanghai Banking Corporation HSBC Humane Society of Broward County (Florida) HSBC Humane Society of Bay County (Bay County, Michigan) Investment Bank plc. of 1,000,000 options that otherwise would have expired ex·pire v. ex·pired, ex·pir·ing, ex·pires v.intr. 1. To come to an end; terminate: My membership in the club has expired. 2. . For the first quarter of 2004, proceeds from bank loans totaled $38,222,000. On March 25, 2004, the Company executed a drawdown of $30 million from the Investec and Macquarie debt facility with certain copper and exchange rate hedging requirements to complete the construction of the Aguablanca project. The Company drew down an additional $1,951,100 from the Barclays VAT facility and a subsidized sub·si·dize tr.v. sub·si·dized, sub·si·diz·ing, sub·si·diz·es 1. To assist or support with a subsidy. 2. To secure the assistance of by granting a subsidy. loan of EUR 5 million (approximately $6.3 million). Financing fees on bank loans relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the Aguablanca project amounted to $985,300. Repayments of bank loans during the quarter totaled $3,942,100, which included prepayments Prepayments Payments made in excess of scheduled mortgage principal repayments. , in respect of the loan facility with Deutsche Bank Deutsche Bank AG (IPA: /'dɔɪ.tʃə/[1]) (ISIN: DE0005140008, NYSE: DB) (English: German Bank , of $2,375,000. Operating Results Gold sales from own operations in the first quarter were $8,919,900 from the production of 23,435 ounces compared to $13,793,200 from the production of 31,688 ounces in the corresponding 2004 period. Rio Narcea reported a net loss of $16,127,800 ($(0.10) per share) for the first quarter of 2005 compared to a net loss of $6,411,800 ($(0.06) per share) during the same period last year. The loss in the first quarter was mainly due to the factors described on page 1 of this Report. Rio Narcea realized an average gold price of $450 per ounce in the first quarter of 2005 versus $426 per ounce in the same period of 2004. The average spot price in the first quarter of 2005 was $427 per ounce versus $409 per ounce for the same period in 2004. A reconciliation of gold sales, before giving effect to hedging transactions and to gold sales in the consolidated statements of operations and deficit, follows:
Three Months Ended
March 31,
2005 2004
$000 $/oz $000 $/oz
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Gold sales 8,920 432 18,838 420
Deferred derivatives loss 365 18 269 6
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Realized gold sales 9,285 450 19,107 426
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Average spot price 427 409
Sales (oz) 20,643 44,856
Production (oz) 23,435 43,837
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Operating expenses in the first quarter of 2005 decreased to $14,345,700 compared to $20,603,500 (including cost of sales of Nalunaq ore of $4,749,500) for the same period last year. The reason for the higher operating expenses was mainly due to the factors referred to on page 1 of this Report. Depreciation and amortization expenses for the first quarter were $1,135,700 compared to $2,590,800 for the first quarter of 2004. The reduction in amortization expenses is due to the combination of a much lower amortization from gold operations as a result of the write-down Write-Down Reducing the book value of an asset because it is overvalued compared to the market value. Notes: This is usually reflected in the company's income statement as an expense, thereby reducing net income. of the El Valle and Carles assets recorded in 2004, offset by the amortization from nickel operations that commenced in January 2005. Exploration costs amounted to $1,960,000 in the first quarter of 2005, of which $1.1 million were related to the bankable feasibility study underway for the Salave gold project, compared to $1,353,200 during the same period in 2004. Administrative and corporate expenses amounted to $2,175,300 in the first quarter, higher than the $1,163,300 incurred during the corresponding period of 2004, due to the new corporate office set up in Toronto. Financial revenues and expenses amounted to net expenses of $10,702,000 in the first quarter of 2005 compared to net expenses of $4,695,000 for the corresponding period in 2004. The impact of a stronger U.S. dollar during the first quarter of 2005 resulted in translation losses of $4,424,200 on foreign currency exchange as the majority of the Company's loans are denominated in U.S. dollars and most of the cash and cash equivalents are denominated in Euros. In the first quarter of 2004, the Company had realized a foreign currency exchange loss of $943,000, also as a result of a stronger U.S. dollar. As a result of adopting the amendments to CICA's Accounting Guideline guideline Medtalk A series of recommendations by a body of experts in a particular discipline. See Cancer screening guidelines, Cardiac profile guidelines, Gatekeeper guidelines, Harvard guidelines, Transfusion guidelines. AcG-13 ("Hedging Relationships") on January 1, 2004, the Company marks-to-market its derivative derivative: see calculus. derivative In mathematics, a fundamental concept of differential calculus representing the instantaneous rate of change of a function. financial instruments. The change in the mark-to-market Mark-to-market Adjustment of the book value or collateral value of a security to reflect current market value. (fair value) of all derivative instruments Derivative instruments Contracts such as options and futures whose price is derived from the price of an underlying financial asset. during the three months period ended March 31, 2005 was negative $4,452,600, primarily due to the increase in copper prices during the quarter, which affect negatively the fair value of the derivatives. In addition, the Company recorded losses of $882,400 upon maturity of derivative financial instruments during the same period. Net income (loss) amounted to ($3.1) million, ($9.6) million and ($3.4) million for the gold, nickel and corporate segments, respectively, in the first quarter of 2005; and ($1.5) million, ($3.8) million and ($1.2) million for the gold, nickel and corporate segments, respectively, in the same period of 2004. Outlook With the first shipment of concentrate scheduled for delivery in the second quarter, Aguablanca has now become a producing operation. It is anticipated that improvements in mill throughput and nickel grades and recoveries will continue and the production levels contemplated in the bankable feasibility study will be achieved. Elsewhere at the Company's gold operations, optimization optimization Field of applied mathematics whose principles and methods are used to solve quantitative problems in disciplines including physics, biology, engineering, and economics. of the new mine plan is continuing. While production for the first quarter was lower than budgeted, the Company still forecasts production of 70,000 ounces at a cash cost of $385 per ounce for 2005. In addition, treatment of Nalunaq ore will commence during the second quarter as the first shipment of 27,400 tonnes has been delivered to the El Valle plant. Selective exploration of prospective nickel sulphide and IOGC targets will continue for the remainder of the year. As part of the Company's strategy to fully evaluate the potential of the region, Rio Narcea may consider joint venturing part of this property to senior partners that can offer expertise and financial resources. Forward-looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. : Some statements in this press release contain forward-looking information. These statements address future events and conditions and, as such, involve inherent risks and uncertainties. Actual results could be significantly different from those projected.
Rio Narcea Gold Mines, Ltd.
CONSOLIDATED BALANCE SHEETS
(unaudited)
March 31, December 31,
2005 2004
(stated in U.S. dollars) $ $
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ASSETS
Current
Cash and cash equivalents 61,994,100 81,888,800
Restricted cash 1,326,200 1,637,900
Inventories 12,717,100 7,314,600
Stockpiled ore 12,386,000 8,871,500
Accounts receivable
Government grants 10,743,900 11,288,400
VAT and other taxes 12,308,200 8,964,900
Trade receivables 2,632,700 1,478,700
Other current assets 1,869,900 3,296,100
Current portion of deferred
derivative loss 1,968,600 1,984,100
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Total current assets 117,946,700 126,725,000
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Mineral properties, net 143,914,900 140,531,400
Deferred stripping costs, net 3,555,200 3,780,300
Other assets 6,232,900 8,533,700
Deferred derivative loss 1,989,300 2,339,200
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273,639,000 281,909,600
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Short-term bank indebtedness and
accrued interest 6,526,500 4,944,400
Accounts payable and accrued liabilities 39,477,300 31,128,800
Current portion of long-term debt 16,079,500 8,077,100
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Total current liabilities 62,083,300 44,150,300
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Other long-term liabilities 11,275,900 9,895,000
Long-term debt 22,717,600 31,109,000
Future income tax liabilities 4,804,300 4,804,300
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Total liabilities 100,881,100 89,958,600
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Non-controlling interest 668,900 631,200
Shareholders' equity
Common shares 237,083,100 235,434,700
Employee stock options 7,920,300 7,994,600
Non-employee stock options and warrants 10,386,700 11,080,300
Defiance warrants 2,437,200 2,437,200
Common share purchase options 3,626,000 3,628,500
Deficit (96,673,000) (80,545,200)
Cumulative foreign exchange
translation adjustment 7,308,700 11,289,700
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Total shareholders' equity 172,089,000 191,319,800
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273,639,000 281,909,600
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On behalf of the Board:
Rupert Pennant-Rea Chris I. von Christierson
Rio Narcea Gold Mines, Ltd.
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
(unaudited)
Three months ended
March 31,
---------------------------------------------------------------------
2005 2004
(stated in U.S. dollars) $ $
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OPERATING REVENUES
Gold sales 8,919,900 13,793,200
Gold sales - Nalunaq ore - 5,044,800
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8,919,900 18,838,000
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OPERATING EXPENSES
Cost of gold sales (9,476,800) (10,639,700)
Cost of gold sales - Nalunaq ore - (4,749,500)
Depreciation and amortization expenses (1,135,700) (2,590,800)
Exploration costs (1,960,000) (1,353,200)
Administrative and corporate expenses (2,175,300) (1,163,300)
Other income (expenses) 402,100 (107,000)
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(14,345,700) (20,603,500)
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Operating loss (5,425,800) (1,765,500)
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FINANCIAL REVENUES AND EXPENSES
Interest income 321,900 231,600
Foreign currency exchange loss (4,424,200) (943,000)
Interest expense and amortization
of financing fees (1,264,700) (461,200)
Derivatives loss (5,335,000) (3,522,400)
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(10,702,000) (4,695,000)
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Loss before income tax (16,127,800) (6,460,500)
Provision for income tax - -
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Net loss before non-controlling
interest (16,127,800) (6,460,500)
Non-controlling interest - 48,700
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Net loss (16,127,800) (6,411,800)
Deficit, beginning of period (80,545,200) (36,100,300)
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Deficit, end of period (96,673,000) (42,512,100)
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Net loss per share - basic (0.10) (0.06)
Net loss per share - diluted (0.10) (0.06)
Weighted average common shares
outstanding - basic 157,460,315 113,282,268
Weighted average common shares
outstanding - diluted 157,460,315 113,282,268
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Rio Narcea Gold Mines, Ltd.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three months ended
March 31,
---------------------------------------------------------------------
2005 2004
(stated in U.S. dollars) $ $
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OPERATING ACTIVITIES
Net income (loss) (16,127,800) (6,411,800)
Add (deduct) items not requiring cash
Depreciation and amortization 1,135,700 2,590,800
Amortization of deferred financing
fees 449,600 143,400
Reclamation liability accrual and
other long-term liabilities 59,000 158,300
Foreign exchange 5,251,100 1,578,900
Accretion of interest on
long-term debt 170,300 46,800
Non-cash derivatives loss 4,818,000 3,791,600
Options and shares granted 233,500 526,200
Amortization of deferred stripping
costs - 4,403,600
Non-controlling interest - (48,700)
Deferred stripping expenditures - (804,600)
Restoration expenditures (152,900) -
Changes in components of working capital
Inventories (5,816,900) (573,200)
Stockpiled ore (5,886,300) 19,800
VAT and other taxes (3,807,100) (1,257,400)
Trade receivables (1,238,100) 1,763,900
Other current assets 857,100 (809,000)
Accounts payable and accrued liabilities 8,979,900 (198,500)
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Cash provided by (used in)
operating activities (11,074,900) 4,920,100
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INVESTING ACTIVITIES
Expenditures on mineral properties (7,037,800) (15,243,900)
Acquisition of Salave deposit - (5,000,000)
Grants received - 34,400
Restricted cash 235,500 (6,220,900)
Long-term deposits and restricted
investments 303,000 (533,300)
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Cash used in investing activities (6,499,300) (26,963,700)
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FINANCING ACTIVITIES
Proceeds from issue of common shares 644,500 691,200
Proceeds from bank loans and other
long-term liabilities 1,906,000 38,222,000
Financing fees on bank loans (30,100) (985,300)
Repayment of bank loans (226,700) (3,942,100)
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Cash provided by financing activities 2,293,700 33,985,800
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Foreign exchange gain (loss) on
cash and cash equivalents
held in foreign currency (4,614,200) 59,200
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Net increase (decrease) in cash
during the period (19,894,700) 12,001,400
Cash and cash equivalents,
beginning of period 81,888,800 32,861,600
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Cash and cash equivalents, end of
period 61,994,100 44,863,000
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Supplemental cash flow information
Interest paid in cash 339,600 110,400
Income taxes paid in cash - -
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Rio Narcea Gold Mines, Ltd. (TSX:RNG) (AMEX:RNO) |
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