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Mr_Nice

Rio Narcea

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Have'nt been posting for a while, have been lazy and getting a free ride from everyone elses effort!

 

A stock that does'nt seem to be on many peoples radar is Rio Narcea Gold Mines TSX: RNG.

 

The salient points are that is producing a miminium of 18 Million Pounds of nickel at a cash cost of $2 (net of copper, PGM credits). Now given a Nickel price of $15 that equates to 18000000 * (15-2) = 234 Million cash flow!

 

If thats not enough it has several other mines and a significant gold project coming on producing 100k gold @ $240 oz.

 

So ignoring the smaller projects you have additional cash flow of 100,000 * 400 = 40 Million Cash Flow

 

It has an MCAP of c450 M so could be on a p/e of less than 2 next year. Thats why I bought a stake last week @ 2.70 Cdn.

 

In addition with the bulk of revenue in Europe there is limited political risk and exploration upside.

 

My only regret so far is that I have'nt bought enough of these. Will rectify that this week.

 

Any comments......

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had look at the dever gold show webcast

http://events.onlinebroadcasting.com/denve...92506/index.php

i was puzzled about them saying towards the end they were looking to buy more assets with the cash flow and yet earlier they said they wnated to jv teh exploration of the mauretanean properties

 

how prospective is their land? this was hardly mentioned and the website isnt very helpful(i havnt got round to plodding through the sedatr reports)

 

another thing qwhich wasnt clear; 2007 production cost for agua were put at $3.55/lb; presumably this is per lb ni after cu credits ?

 

you might be interested in ms davidsons comments on ni

http://www.mclwebcasts.com/nickel-31-10-06.htm

broadband needed

she sees 6$/lb as a floor till 2011 and expects a correction from the current high prices though how big is uncertain

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i presume aquiring assets rfers to this

http://www.rionarcea.com/s/NewsReleases.as...ariot-Resources

................which brings Rio Narcea's total shareholding in Chariot to 16.4% of common shares of Chariot and 17.4% of the common shares and warrants outstanding of Chariot......................

& minsite comment

http://www.minesite.com/minews/singlenews/...Hash=c1bf70b0f2

......Minews. The question that has to be asked is if Rio Narcea has a clue what it is doing.........

 

some negative comment on sockhouse

http://www.stockhouse.com/bullboards/viewm...p;navd=fwd&

 

and the reply

http://www.stockhouse.com/bullboards/viewm...p;navd=fwd&

 

inote in later posts mr strom jr appears to have bought!!!!!!

 

 

hmmmm.......................rather a bleak article

http://www.minesite.com/minews/singlenews/...Hash=92aa9ff199

 

June 12, 06

Rio Narcea Gold Mines Continues Its Run Of Bad Luck

concludes with

 

........In fishing, when a captain is considered unlucky through accidents or low levels of catch he finds it difficult to retain a crew. The usual answer is that the captain goes and the fishing boat sails on with a new crew. Maybe this would finally bring the run of bad luck to an end for Rio Narcea.

 

i note that there is no explorationist on the board

 

jun 30, 2006 Rio Narcea Completes Financing Arrangement for Tasiast Gold Project

http://www.rionarcea.com/s/NewsReleases.as...st-Gold-Project

 

................$42.5 million loan facility repayable in quarterly instalments, from September 2007 to December 2011, with normal project debt conditions. It also includes a gold hedging facility under which the Company has contracted to cover 280,000 ounces of gold production until March 31, 2012 by way of a zero-cost put-call collar structure with a put strike gold price of $600 per ounce and a call strike price of $795 per ounce.

 

The Tasiast project is expected to be in production in mid-2007. The operation is forecast to produce an average of approximately 105,000 ounces of gold annually over the life of the open pit, at an average cash cost of approximately $240 per ounce (refer to Non-GAAP measures section of the MD&A). The current 8 year open pit mine life is based on mineable reserves calculated at a gold price of $370 per ounce, with a total measured and indicated mineral resources of 1,185,000 ounces of gold contained in 12.1 million tonnes grading 3.06 g/t. In addition, the deposit currently contains an inferred resource of approximately 900,000 ounces of gold. The Company is currently performing a geological model rebuild and pit design rerun using $500/ounce instead of $370/ounce...........

 

Oct 12, 2006 Rio Narcea Announces Increased Mineral Reserve Estimate for its Tasiast Gold Project

http://www.rionarcea.com/s/NewsReleases.as...s-Tasiast-Gol...

 

.......The new estimate included use of a revised gold price and revised unit cost inputs, which together have increased the mineral reserve. The new diluted open pit mineral reserve is estimated at 1,040,000 ounces of gold contained in 11,984,000 tonnes grading 2.70 g/t. This estimate was based on a gold price of US$491 per ounce of gold. The previous reserve estimate, calculated at a gold price of US$370 per ounce, was 885,000 ounces of gold contained in 8,939,000 tonnes grading 3.08 g/t.

Projected capital expenditures for Tasiast are US$73 million.......

 

..........we look forward to the results of the 5,000-meter exploration drilling program we have embarked upon adjacent to the planned pits and below where higher grade mineralization is open at depth. We believe Tasiast holds a great deal of potential and our 16,000 km² land position on one of Africa's least explored archean greenstone belts should occupy our gold exploration team for quite some time," said Chris von Christierson, Chairman and CEO

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Up 15% in the week since I bought. I see no reason given the problems with new nickel projects that this won't double in the next twelve months.

 

No doubt I have just cursed myself now. lol.

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RNO management has recommended selling out to Lundin on the cheap. See the attached article by Toby Hansen (known as "Tobinator" online.) Toby got me interested in RNO in august of last year and it was my largest holding for a while.

 

http://montyhigh.typepad.com/world_of_wall...elProducers.pdf

 

I'm not quite as bullish as Toby is on RNO's future prospects, but I agree with him that we should have gotten a better takeover premium. Anyone have any idea why management would sell out so cheaply?

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Lundin hasn't got the tenders and is extending their offer. They'll have to raise the bid to get enough tenders. Well over 100% of outstanding shares have traded since the offer, most of which traded above the offer price.

 

http://www.kitco.com/pr/1267/article_05292007173246.pdf

 

The question is: will they raise the bid or will they continually extend the offer in an attempt to wear shareholders down (similar to Barrick's unsuccessful bid for Novagold)? I'm content to wait it out. Most of my shares were purchased in August thru October of last year. The stock price has a floor now, and I'd rather not pay short term capital gains taxes on my 130% gains. And I am having difficulty finding new opportunities to meet my criteria (share price trading at 40% discount to calculated intrinsic value). I looked at Semafo (SMF) pretty hard over the weekend, but DD revealed it needs to fall some more before I'll get interested.

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