A tailings management leader to close
Rio Narcea Gold Mines, has conducted a thorough performance review of its El Valle/Carles underground gold operations located in the Province of Asturias in northern Spain and has taken the decision to commence the closure of these operations. An orderly mine closure procedure will commence 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. More details will appear in IM’s review of Spanish mining in July.
It is always sad to see good mines disappear, and when it is a great leader it is doubly so. El Valle has been a model of intelligent tailings management. The mine may close but there is a great deal to be learned from what it achieved in tailings disposal in that time.
This decision to close El Valle is due primarily to poor rock conditions in parts of the underground mine, coupled with low grades and high dilution, which have resulted in increasingly higher mining costs with no clear prospect of an improvement. From now until the final closure later in the year, mining will be concentrated in those developed areas which have better rock conditions and higher grades. There will be no further investment in underground development.
The Company is exploring the recently discovered Area 107 mineralization, which is located near the existing underground development at El Valle, in light of its high grades and apparent continuity; however, due to the slow and uncertain nature of the exploration process, it is not expected to change the closure plans.
While relatively better grades and good ground conditions at the Carles underground mine have resulted in positive cash flow when its ore is processed through El Valle’s mill with El Valle and Nanulaq ore, the limited size of the Carles deposit with the current cost structure, would make Carles, as a stand alone project, marginal at best. Henceforth, mining at Carles will be concentrated in developed areas, after which the mine, together with El Valle plant, will be closed.
Total closure costs, including site rehabilitation at El Valle and Carles and statutory employee severance payments, are not expected to exceed $7 million, of which approximately $2.3 million was already accrued for as of September 30, 2006.
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 at the Salave gold project located some 70 km west of El Valle, as the concentrates planned to be produced at Salave were expected to be processed at that plant, with improved economics. The company is engaged in a legal process that, in accordance with Spanish law, is expected to result in the receipt of compensation for the economic damages created by that of the Regional Government.