Digging Into Rio Narcea Gold Mines

Apr. 3.07 | About: Rhino Resource (RNO)

Rio Narcea Gold Mines (NYSE:RNO) is listed in Toronto however its mining activities take place in Spain, Mauritania and Portugal. Their main gold prospect is the Tasiast gold project in Mauritania, West Africa, which is now under construction with production expected this year. Gold reserves at Tasiast have been increased by 18% to 1,040,000 ounces. Rio Narcea also has an interest in Chariot Resources, which gives them exposure to the Marcona copper project in southern Peru. The company is also currently producing nickel and copper at its Aguablanca mine in southern Spain. Production from Aguablanca in 2006 was 14.1 million pounds of nickel and 14.6 million pounds of copper

Chris von Christierson, a Chairman and CEO who has over 35 years of business experience in the resources industry leads the management team. He has been instrumental in establishing Rio Narcea as the European Union’s largest gold mining company. His qualifications are top class and include a Bachelor of Commerce degree from Rhodes University, an MA from Cambridge University and OPM at Harvard Business School.

Taking a look at the financial aspects we can see that Rio Narcea has a Market Capitalization $654 million, a P/E of 56, the stock price trades at around $3.98, and average volume is now in excess of 1.0 million shares traded per day which reflects the recent interest the company has generated in the market place.

For the year ending 2006 the company reported Net Income of $70.7 million, which was an increase of 763% over 2005 with Record revenues of $225.7 million, a 114% increase over 2005. The El Valle and CarlTs mines closed in December 2006 with minimum liabilities after producing 50,300 ounces of gold in 2006.

Rio Narcea Gold Mines has recently reported that Aguablanca’s operating performance and the development of Tasiast continue to make progress as planned with an expected EPS for 2007 of around $0.59.

kirtley 1

The chart shows that the stock price has been on an incredible run reflecting the market's confidence in the way that the company is progressing. Technical indicators are toppy so take care with it, timing your entry point is extremely important to the success of any investment

Conclusion

The company has made excellent progress and should be monitored going forward in order to detect a suitable entry level. The chart suggests that it is fully priced at the moment and we should wait until some of the froth has subsided.

Rio Narcea Gold Mines Limited trades on the TSX as RNG and on the AMEX as RNO.

Footnote: One of our team, Joe Kirtley, entered the Junior Stock Picking Contest with Rio Narcea occupying all ten of his selections. As you can see from this screen shot he is doing very well with it. Here at Gold-prices we have held a small position in Rio Narcea for some time but did not expect it to perform as well as it has done.

kirtley 2

Disclosure: We may or may not hold a position in these securities at any given time and reserve the right to buy and sell as we think fit.