Rio Narcea Gold Mines, Ltd.

Rio Narcea Gold Mines, Ltd.

March 29, 2005 20:25 ET

Rio Narcea Reports 2004 Financial Results




MARCH 29, 2005 - 20:25 ET

Rio Narcea Reports 2004 Financial Results

TORONTO, ONTARIO--(CCNMatthews - March 29, 2005) - Rio Narcea Gold
Mines, Ltd. (TSX:RNG)(AMEX:RNO) -

(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 year ended December 31,

2004 Highlights

- Write-down of $28.4 million of the carrying value of the El Valle and
Carles assets.

- Net loss of $44.4 million ($0.36 per share), due to the write-down,
lower production from own operations combined with increased mining
costs and the unfavourable U.S. dollar/Euro exchange rate.

- 2004 operating cash flow of $8.9 million.

- $81.9 million held in cash and cash equivalents at year end.

- Gold production from own operations of 118,580 ounces at a cash
operating cost of $215 per ounce.

- Aguablanca construction completed with commissioning started in

- Acquisition of Defiance Mining Corporation completed. Development of
the Tasiast gold mine underway.

- Acquisition of the Salave gold deposit, containing 1.5 million ounces
of measured and indicated resources. Feasibility study in progress.

- Equity issue raised gross proceeds of $61.0 million (CDN$74.6 million)
in October 2004.

- Listing on the American Stock Exchange.

- Establishment of new Corporate office in Toronto.

In 2004, the Company's gold operations delivered lower production and
cash flow. The operating loss, before a write-down of $28.4 million,
amounted to $17.9 million. In addition to the write-down, the main
factors that contributed to the operating loss were: lower production
from own operations, the increased mining costs because of the
transition to underground operations and the unfavourable effect of the
U.S. dollar/Euro exchange rate. The Company achieved key milestones in
its nickel business by advancing the development of the Aguablanca
nickel project towards production with the commencement of commissioning
in December 2004. With the acquisition of Defiance in September 2004,
the Company obtained the Tasiast gold project in Mauritania, a permitted
open pit gold project with estimated proven and probable reserves of
9,008,000 tonnes averaging 3.06 g/t or 885,000 contained ounces of gold,
and estimated measured and indicated resources (inclusive of reserves)
of 12,069,000 tonnes averaging 3.06 g/t gold or 1,185,000 contained
ounces of gold. In addition, the Tasiast project has estimated inferred
resources of 12,428,000 tonnes averaging 2.25 g/t gold or 899,000
contained ounces of gold.

Fourth Quarter Highlights

In the fourth quarter, Rio Narcea reported a net loss of $31,366,000
($0.21 per share), compared to earnings of $2,759,000 ($0.02 per share)
in the same period in 2003. The loss includes a write-down of $28.4
million of the carrying value of the El Valle and Carles assets.
Revenues were $15,816,000 compared to $15,565,000 in the fourth quarter
of 2002. Cash flow from operations for the quarter was negative
$3,354,000 compared to $6,843,700 in the same period last year. This
decrease for the fourth quarter of 2004 is attributable to making the
transition from open pit to underground mining at both the El Valle and
Carles mines as well as a 10% appreciation of the Euro versus the U.S.

2004 Financial Results

For the fiscal year ended December 31, 2004, Rio Narcea generated net
loss of $44,444,900 ($0.36 per share) compared to net earnings of
$3,206,800 ($0.03 per share) in 2003. The following factors have
affected the results for 2004:

- Gold sales amounted to $67.8 million in 2004, of which approximately
$47.3 million came from gold production at El Valle and Carles and $20.5
million came from gold produced from treatment of the Nalunaq ore. As
such, sales from Carles and El Valle in 2004 were $13.5 million less
than sales in 2003. Furthermore, mine costs were $30.1 million in 2004,
slightly higher than the $28.2 million incurred in 2003 due to the
increased underground mining costs and despite the lower production.

- Variations in the U.S. dollar/Euro exchange ratio had a negative
impact on operating expenses. Most operating expenses are denominated in
Euros (EUR), and average exchange rates for 2004 and 2003 were $1.24/EUR
and $1.13/EUR, respectively, representing an increase of approximately
10% during 2004. By way of example, had the exchange rate in 2004 been
the same as in 2003, the operating expenses would have been $6.2 million
lower in 2004.

- As a result of the lower existing reserves and revised mine plans for
El Valle and Carles, which were implemented in December 2004, and are
currently under optimization, a $28.4 million write-down of those assets
was recorded in the Consolidated Statement of Operations for the year
ended December 31, 2004.

While the Company's 2004 total consolidated gold revenues, inclusive of
the gold produced from the Nalunaq ore, increased to $67,787,600 in 2004
compared to $60,818,100 in 2003, revenues from the El Valle and Carles
operations were $47.3 million in 2004 as compared to $60.8 million in
2003. In 2003, all gold revenues were from the El Valle and Carles
operations of the Company. In 2004, gold sales were from the El Valle
and Carles operations ($47.3 million) and from treatment of Nalunaq ore
(approximately $20.5 million).

The average realized gold price, including the effects of gold and
foreign exchange hedging, was $408 per ounce in 2004, up from $356 per
ounce in 2003. The effect of the higher gold price on sales from the El
Valle and Carles operations amounted to approximately $6.2 million. The
average spot gold price in 2004 was $410 per ounce versus $363 per ounce
in 2003.

Cash flow generated from operating activities was $8,877,600 in 2004
compared to $21,117,700 in 2003. Reduction in operating cash flow was
primarily due to increased underground mining costs, the effect of the
exchange rate and lower head grades, compared to 2003, and was partially
offset by higher than expected gold prices and gold production from the
Company's own operations. Before changes in working capital items,
operating cash flow amounted to $10,139,300 in 2004 compared to
$22,829,700 in 2003.

The Company's liquidity improved markedly during 2004. Even though the
investing activities consumed larger amounts of cash than the past few
years, mainly for the construction and development of its Aguablanca
nickel mine; cash generated by operations and new equity more than
compensated these expenditures leaving the Company with a cash balance
of $81,888,800 at year end 2004, up from $32,861,600 in 2003.

The following table sets forth the Company's capital expenditures on
mineral properties, excluding the acquisition of EMC ($5,000,000) and
Defiance (positive effect on cash of $2,648,000):

(in millions) 2004 2003 2002
El Valle mine development $ 8.4 $ 7.1 $ 4.6
Carles mine development 0.3 2.9 -
Aguablanca project and purchase of
equipment 41.5 28.8 1.2
Tasiast 2.0 - -
Total $ 52.2 $ 38.8 $ 5.8

The Company's working capital increased at the end of 2004 to $82.6
million compared to $29.7 million at the end of 2003, due mainly to the
increase in cash, largely the result of the equity raising in October
2004, and government grants receivable, offset by a significant increase
in accounts payable, which were mostly related to the construction of
the Aguablanca mine.

Long-term debt was $31,109,000 at December 31, 2004, compared to
$6,706,000 at the end of 2003. The increase is almost entirely related
to the draw down of $30.0 million under the credit facility granted by
Investec and Macquarie to finance the Aguablanca project and the EUR 5.0
million (approximately $6.8 million) subsidized loan also drawn down in
respect of the Aguablanca project, partially offset by repayments of the
facilities granted by Deutsche Bank for the El Valle project.

Financial Highlights
Three Months Twelve Months
Ended Dec. 31 Ended Dec. 31
($000 except where stated) 2004 2003 2004 2003
Financial Results
Revenue 15,816 15,565 67,788 60,818
Net income (loss) (31,366) 2,759 (44,445) 3,207
Cash flow from operations (3,354) 6,844 8,878 21,118
Net income (loss) per share (0.21) 0.02 (0.36) 0.03
Weighted average shares outstanding -
basic (million) 150.6 99.4 124.3 98.7

December 31, September 30, December 31,
2004 2004 2003
Financial Position
Cash and cash equivalents 81,889 30,003 32,862
Working capital 82,575 38,062 29,702
Total assets 281,910 240,212 162,390
Shareholders' equity 191,320 156,056 121,358
Long-term debt 31,109 31,960 6,706

Production Highlights

Gold production from the Company's own operations in 2004 was 118,580
ounces compared to 174,175 ounces in 2003. In addition, the Company
treated 93,780 tonnes of Nalunaq ore (13% of plant capacity). Tonnage
from the Nalunaq mine was less than anticipated under the terms of the
existing treatment agreement with Nalunaq Gold Mine A/S ("Nalunaq"). The
lower year-over-year production from Carles and El Valle was due to a
16% reduction in head grade (from 7.6 grams per tonne in 2003 to 6.4
grams per tonne in 2004), combined with 20% less tonnes of ore processed
from own ore, basically as a result of the processing of Nalunaq ore
under the Nalunaq agreement. Cash operating cost for the Carles and El
Valle operations was $215 per ounce, compared to $146 in 2003. The
increase was primarily due to the transition from open pit to
underground operations at both the El Valle and Carles mines, together
with an appreciation of the Euro versus the U.S. dollar of approximately
10%, which negatively affected operating costs.

2004 2003
Rio Rio
Narcea's Nalunaq Narcea's
operations ore (a) Total operations
Operating Data
Gold production (oz) 118,580 50,297 168,877 174,175
Plant throughput (tonnes) 606,713 93,780 700,493 761,631
Head grade (g/t) 6.4 17.1 7.8 7.6
Recovery (%) 95.0% 97.3% 95.6% 94.1%

Gold Production Costs ($/oz)
Cash operating cost ($/oz)(b) 215 397 269 146

(a) There was no processing of Nalunaq ore in 2003.

(b) Cash operating costs include deferred stripping and other mining
expenses, plant expenses, smelting, refining and transportation and sale
of by-products.

Mining Operations and Development Projects Review

El Valle Mine

The El Valle mine is the Company's main operating gold mine situated in
northern Spain. At year end 2004, proven and probable gold reserves
declined to 149,000 ounces of gold from 219,000 as at December 31, 2003.
In addition, the mineral reserves as at December 31, 2004 contain 17.6
million pounds of copper. All mineral reserves are within the
underground operations, except for the estimated 47,000 ounces of gold
included in the 193,000 tonnes of stockpiled ore.

In 2004, the mine made the transition from an open pit to an underground
operation. Open pit mining was completed in August 2004, and the Company
is now implementing a plan for the pit to be used as the future tailings
containment area. Underground mine production reached 8,000 tonnes per
month during the fourth quarter of 2004, with 20,000 tonnes per month
expected for 2005.

In December 2004, revised mine plans for the El Valle and Carles mines
were developed, and are currently being optimized. A significant
increase in mining costs is expected, due to the lower mining rate
because of the difficult ground conditions at Boinas East zone of the El
Valle mine, coupled with the ore being lower grade. The Company
evaluated for impairment the book value of the El Valle mine, the Carles
mine and the El Valle plant, which processes ore from both the El Valle
and Carles mines, and based on the current reserves and operating costs,
determined that a write-down of $28.4 million was appropriate. The gold
production at the El Valle and Carles mines for 2005 is expected to be
approximately 70,000 ounces at a cash operating cost of $385 per ounce.

Underground infill drilling at El Valle concentrated on the Monica zone,
northeast of and below the Boinas East pit, and within two zones of
mineralization between the El Valle and Boinas East pits. Drilling has
extended the known mineralization to the east. Additional drilling was
completed to evaluate the North Black Skarn zone south of the El Valle
pit and the high-grade Charnela South zone. Additional underground
infill drilling at El Valle is planned for 2005.

Carles Mine

The Carles mine accounted for approximately 12% of the total production
in 2004. The Company started underground mining at Carles East in
mid-2003. Open pit production at Carles was completed in May 2004.
Underground mine production reached 11,000 tonnes per month during the
fourth quarter of 2004, and is planned to increase to 16,000 tonnes per
month during 2005. Proven and probable underground reserves at year end
2004 amounted to 75,000 ounces of gold and 7.3 million pounds of copper
(103,700 ounces of gold and 9.4 million pounds of copper as at December
31, 2003). During 2005, an underground infill drilling is planned for
the Carles North and East zones.

Milling Agreement

In December 2003, Rio Narcea signed a milling agreement with Nalunaq
Gold Mine A/S ("Nalunaq"), a subsidiary of Crew Gold Corporation, for
the purchase and processing of high-grade ore from the Nalunaq gold mine
in south Greenland. Under the terms of the agreement, Nalunaq was to
sell to Rio Narcea four to five batches per year of high-grade ore for
the selling price of the recovered gold less a milling fee, essentially
a "tolling fee" arrangement. The agreement also provides for an
efficiency fee to Rio Narcea for improved plant recoveries. Either party
may terminate the agreement on three months notice.

In 2004, the El Valle plant processed 93,780 tonnes of ore grading 17.1
g/t gold to produce 50,297 ounces of gold. For 2005, Nalunaq is
projecting four to five shipments of approximately 40,000 tonnes each
for the year, the Company is currently conservatively planning for three
shipments, but will process further shipments as received.

Aguablanca Mine Project

In mid-December 2004, the construction of the Aguablanca open pit
Ni-Cu-PGM mine and its on-site processing facilities was finalized, with
commissioning commencing immediately thereafter. Certain design
modifications that affect the SAG mill and flotation circuit have been
identified and are being implemented at the contractor's cost under the
existing lump-sum turn key contract for he construction of the plant.
Performance tests to be completed by the contractor, Fluor Corporation,
are required prior to handing over the plant facilities to the Company.
The mine plan and process facilities have been designed for annual
production of 18 million pounds of nickel, 11 million pounds of copper
and 20,000 ounces of PGM. Estimaed proven and probable reserves at year
end were unchanged at 15.7 million tonnes grading 0.66% nickel, 0.46%
copper and 0.47 g/t PGM.

In conjunction with commencement of construction of the mine,
construction of a 3 km decline to access the higher grade mineralization
below the Aguablanca open pit also commenced. The decline is designed to
allow early mining of the known higher grade material below the pit and
will also facilitate further exploration at depth. It is advancing at
the scheduled rate. The decline had advanced approximately 1,150 metres
from the portal as at December 31, 2004 and is expected to reach the
higher grade nickel mineralization in the second quarter of 2005 when
infill drilling will commence. It is anticipated that underground mining
of this area will commence in the first half of 2006 at a rate of
approximately 285,000 tonnes per year. The Aguablanca plant has been
designed and constructed to accommodate this additional annual tonnage
with minor variations and without displacing open pit ore.

The capital and other operating expenditures during construction to
construct the Aguablanca mine are EUR 62 million (approximately $85
million). As at December 31, 2004, EUR 55 million (approximately $74
million) of the planned expenditures had been spent. In addition,
working capital and value added tax ("VAT") during construction amounted
to EUR 10 million (approximately $14 million), of which EUR 5 million
has been paid (approximately $6 million).

Development Project Review

Tasiast Gold Project

Rio Narcea announced on June 30, 2004 that it had signed a definitive
agreement with Defiance whereby Rio Narcea, pursuant to a plan of
arrangement, would acquire all of the shares of Defiance. The plan of
arrangement was approved by the shareholders of Defiance and by the
court resulting in the transaction closing on September 3, 2004.

As a result of the Defiance transaction, Rio Narcea now owns 100% of the
Tasiast gold project located in Mauritania, West Africa. The project is
already permitted and a bankable feasibility study was completed in late
April 2004 by SNC-Lavalin Inc. The project contains total measured and
indicated mineral resources of 1,185,000 ounces of gold contained in
12,069,000 tonnes grading 3.06 g/t, which includes 885,000 ounces of
proven and probable mineral reserves contained in 9,008,000 tonnes
grading 3.06 g/t. In addition, the deposit contains an inferred mineral
resource of 12,428,000 tonnes at 2.25 g/t gold for a total of 899,000
ounces, based upon a cut-off grade of 1.0 g/t gold.

In mid-September 2004, Rio Narcea started a 5,000-metre drill program to
test the depth extension of the high-grade zone beneath the main pit
(Piment Central deposit). The drilling was completed in late October
2004 and the high-grade zone was traced to a depth of 300 metres below
surface. While the drill results show continuity and good grades in
places, the width of the mineralization appears to decrease. However,
when combined with the deep holes drilled by Defiance earlier in 2004,
the results suggest there is strong potential to add high grade mineral
resources amenable to underground mining, which would further enhance
project economics. The drill results are being evaluated and detailed
work on the deep mineralization will be undertaken as open pit mining

In early January 2005, Rio Narcea awarded the basic engineering for the
Tasiast project to SENET, an international engineering, design and
project management company based in South Africa. This work is expected
to be completed in early April and the Company will finalize the overall
engineering and construction contracts for the project thereafter.
Meanwhile, other infrastructure work, including surveying for the access
road and process water pipeline, is continuing.

Construction of the project will be financed by the use of a combination
of project debt financing and the Company's projected future operating
cash flow.

Pre-development Project Review

Salave Gold Project

On October 28, 2003, the Company acquired 85% of the shares of
Exploraciones Mineras del Cantabrico, S.L. ("EMC"), a Spanish
exploration company which owns the mineral rights to the Salave gold
deposit located in Asturias, Spain. At the time of the transaction, the
mineral rights were leased to a third party. On March 9, 2004, that
existing lease agreement was terminated, giving the Company, through
EMC, the sole right to develop the deposit. Later in 2004, the Company's
interest in EMC was increased to 93.7% as a result of EMC completing two
equity financings in which the minority shareholders did not participate.

In May 2004, the Company started the work required for a full
feasibility study, including the compilation of previous exploration and
drilling information into a single database and the initiation of a
15,500-metre infill drilling program. The Company also started the
permitting process for the project.

The infill drilling program was approximately two-thirds complete at the
end of December, results from which were released in September and
January. A total of 10,300 metres have been drilled in 48 holes to close
the drill hole spacing to 25 metres. A review of the deposit indicates
that four of the principal zones of mineralization remain open for
possible additions to the current mineral resources. In addition, the
drilling campaign has extended the high-grade Mirayos zone to the
northwest and increased the average grade of the Lagos zone in the south
central sector of the deposit. Completion of the analysis of the
drilling data from all of the holes of the program is anticipated early
in the second quarter of 2005.

During 2004, a technical resource report compliant with National
Instrument 43-101 for the Salave deposit was filed. The report was based
on all available information and drill data from previous work on the
project and included the first 15 holes from the current infill drill
program. The study estimates the Salave project contains a measured and
indicated mineral resource of 1.5 million ounces of gold in 15,195,000
tonnes grading 3.0 g/t gold using a cut-off grade of 1.0 g/t gold. An
additional 0.2 million ounces of gold is estimated to be contained in
2,813,000 tonnes grading 2.5 g/t gold is in the inferred mineral
resource category. The mineral resource estimate is summarized in the
table below:

Salave Project - Mineral Resources (@1 g/t gold cut-off)

Tonnes Grade Contained Ounces
(000's) (g/t) Gold

Measured resources 354 2.70 30,730
Indicated resources 14,841 3.00 1,431,446
Total 15,195 2.99 1,462,176

Inferred resources 2,813 2.47 223,387

The mineralization at Salave is refractory in nature. Metallurgical
testwork has been done by Ausenco Ltd. of Australia to confirm the good
flotation characteristics of the ore. Feasibility study plant design
will also be done by Ausenco using pressure oxidation treatment ("POX")
of a flotation concentrate as part of the process. The requisite permit
applications, metallurgical and hydrological work, and other activities
in addition to the infill drilling required for a bankable feasibility
study are continuing.

Review of Exploration Properties

Ossa Morena Regional Exploration

Rio Narcea continued a regional exploration program on its 4,600 km2
Ossa Morena Belt properties in 2004 to identify exploration targets for
drilling. The program identified numerous, mafic-ultramafic intrusives
with potential for nickel sulphide mineralization. In addition,
exploration was initiated to assess the region's potential for iron
oxide copper-gold ("IOCG") mineralization.

Nickel-PGM Exploration

The nickel sulphide exploration program included geological mapping,
soil geochemical surveys and surface geophysical surveys to define
targets for drilling. In Spain, several targets with coincident
geochemical and geophysical anomalies were drilled; while in Portugal
drilling was completed to test nickel and PGM targets in the southern
Beja block and in the northern Campo Mayor area. A deep hole at Cabeco
de Vide was in progress at year-end to test a large, highly conductive
geophysical anomaly.

Although the 2004 drilling generated encouraging results, the nickel
mineralization identified thus far has been sub-economic. Further
evaluation of these results is underway to gain better understanding of
the mineralizing processes and rock types to direct future exploration
in the region.

IOGC Exploration

The Ossa Morena region was once considered an important iron-producing
district in the Iberian Peninsula but the copper and gold content of
these occurrences has never been systematically investigated. As part of
Rio Narcea's regional reconnaissance program, many old iron mines and
occurrences were investigated for copper and gold mineralization and
many samples taken contained highly anomalous copper and gold values.
Follow-up soil geochemical surveys defined large areas of anomalous
mineralization and alteration that forms a 100 km-long belt of copper
and gold occurrences, with a significant IOCG potential.

Mineral Reserves and Resources

At year-end the Company had proven and probable reserves of 1,109,000
ounces of gold based on a gold price of $400 per ounce at El Valle and
Carles and $370 at Tasiast. The exchange rate used at El Valle and
Carles was $1.23/EUR in 2004, thus resulting in a gold price of EUR 325
per ounce in 2004. The above mineral reserves contain significant
copper, amounting to 24.9 million pounds, which will contribute
significantly to the revenue stream through copper concentrate sales.

In addition to proven and probable reserves, measured and indicated
resources for the Company's gold operations and projects amounted to
3,546,000 ounces of gold. Inferred resources totaled 1,931,000 ounces of

On the nickel business side, proven and probable reserves were unchanged
at 15.7 million tonnes grading 0.66% nickel, 0.46% copper and 0.47 g/t

Mineral reserves and resources are summarized in the table appended to
this press release.

2005 Outlook

For Rio Narcea, 2005 is expected to be a key year. With the commencement
of commercial production at its Aguablanca Ni-Cu-PGM mine in Spain,
commencement of construction of its Tasiast gold project in Mauritania,
the scheduled completion of a bankable feasibility study on the Salave
gold project in Spain, Rio Narcea is well positioned to benefit from a
resurgent metals market. Over the last decade, the Company has proven
its ability to permit and develop mines within the European Union, while
adhering to the highest standards of environmental and social practice.
Based on this valuable experience, Rio Narcea will continue to seek out
and evaluate acquisition and growth opportunities in acceptable
geographic and political locations, both within and outside the Iberian

In 2005, gold production from its existing operations is expected to
decrease to approximately 70,000 ounces at a cash cost of $385 per ounce
as these operations are now entirely underground mines, with lower
tonnages and lower grades. Rio Narcea is planning to continue to treat
ore from the Nalunaq gold mine as received, which will assist in keeping
the plant at El Valle running at or near full capacity, thus defraying
some of its operating costs. There are no major capital expenditures
budgeted at the existing gold operations during 2005, other than the
continuation of the underground development at both the El Valle and
Carles mines; however, the development of the Tasiast open pit gold
mine, which is underway, is expected to require capital expenditures in
the order of $36 million during 2005.

In 2005, the Company plans to complete a bankable feasibility study and
pursue the permitting process for the Salave gold project in Spain,
which will include the completion of a 15,500-metre infill drilling
program on the Salave deposit and metallurgical testwork.

The completion of the commissioning of the Aguablanca nickel project is
expected in the second quarter of 2005. Currently, the plant has
achieved 72% of the design throughput and 55% of the design nickel grade
in concentrate, 100% of the design copper grade in concentrate, 70% of
the design nickel recovery and 100% of the design copper recovery.
Aguablanca is projected to generate significant free cash flow over its
mine life, and the opportunity exists to increase returns through the
successful development of an underground mine below the open pit portion
of the deposit. The construction of a 3,000 metre production decline is
progressing on schedule, with approximately 1,500 metres completed as at
February 28, 2005. This decline will be used for detailed infill
drilling at depth, which should commence in the second quarter of 2005,
and future underground production of higher grade material.

Rio Narcea is looking forward to unlocking the nickel sulphide and IOCG
potential of its large landholdings in the Ossa Morena region by
continuing to investigate the numerous targets identified by the recent
geophysical and geochemical regional programs. Rio Narcea will also seek
suitable joint venture partners to advance the exploration of and share
the exploration risk on a large part of its 4,600 km2 concession.

Conference Call

The Company will host a conference call on March 30, 2005 at 11:00 AM
E.T. In order to join the conference call, please call (416) 695-9725 or
1-888-334-9269. The conference call will be broadcast live and recorded
on the web at In order to access this
service, you will need to have Windows Media Player installed on your
computer (visit for instructions on how
to download the software free). Replay of the call is available until
April 6, 2005 by dialing (416) 695-5275 or 1-888-509-0081 Passcode: Rio
Narcea 2004. If you would like to listen to our conference call on the
web, go to the home page on and click on the link
under Investor Centre - Events & Webcast.

Rio Narcea is a growing mineral resource company with operations,
development projects and exploration activities in Spain and Portugal.
The Company is producing gold at its 100%-owned El Valle and Carles
mines. With the commencement of commercial production at its Aguablanca
Ni-Cu-PGM mine in Spain, commencement of construction of its Tasiast
gold project in Mauritania, the scheduled completion of a bankable
feasibility study on the Salave gold project in Spain, Rio Narcea is
well positioned to benefit from a resurgent metals market.

Forward-Looking Statements

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.

(as of December 31, 2004)

AU-bearing CU-bearing
Category Tonnes Au Tonnes
GOLD (000s) (g/t) (000s)
El Valle Underground Proven 445 3.72 417
Probable 278 5.50 232
Total 723 4.40 649
Carles Underground Proven 106 4.49 106
Probable 428 4.30 428
Total 534 4.34 534
Tasiast(6) Open pit Proven 618 3.76 -
Probable 8,390 3.01 -
Total 9,008 3.06 -
El Valle Mill Stockpiles Proven 193 7.58 193
Total 193 7.58 193
Total reserves 10,459 3.30 1,376
El Valle Measured 1,111 5.55 1,061
Indicated 1,046 5.89 926
Total 2,157 5.72 1,987
Inferred 1,734 7.49 1,040
Carles Measured 232 5.16 188
Indicated 661 5.03 660
Total 893 5.07 847
Inferred 788 5.10 575
Tasiast Measured 628 3.92 -
Indicated 11,441 3.01 -
Total 12,069 3.06 -
Inferred 12,428 2.25 -
Salave(7) Measured 354 2.70 -
Indicated 14,841 3.00 -
Total 15,195 2.99 -
Inferred 2,813 2.47 -
Corcoesto Measured 3,648 1.46 -
Indicated 4,024 1.44 -
Total 7,672 1.45 -
Inferred 1,573 1.56 -
Godan Inferred 464 7.11 -
La Brueva Inferred 898 2.69 -
Total measured and indicated 37,987 2.90 2,834
Total inferred 20,698 2.90 1,615


Contained Metal
Category Cu Au Cu
(%) (000- (tonnes)
GOLD ounces)
El Valle Underground Proven 1.00 53 4,175
Probable 1.28 49 2,965
Total 1.10 102 7,140
Carles Underground Proven 0.68 15 721
Probable 0.60 59 2,575
Total 0.62 75 3,296
Tasiast(6) Open pit Proven - 75 -
Probable - 810
Total - 885 -
El Valle Mill Stockpiles Proven 0.45 47 864
Total 0.45 47 864
Total reserves 0.82 1,109 11,300
El Valle Measured 1.11 198 11,814
Indicated 1.21 198 11,155
Total 1.16 396 22,968
Inferred 0.79 418 8,182
Carles Measured 0.81 39 1,514
Indicated 0.67 107 4,421
Total 0.70 145 5,935
Inferred 0.55 129 3,187
Tasiast Measured - 79 -
Indicated - 1,106 -
Total - 1,185 -
Inferred - 899 -
Salave(7) Measured - 31 -
Indicated - 1,431 -
Total - 1,462 -
Inferred - 223 -
Corcoesto Measured - 171 -
Indicated - 186 -
Total - 357 -
Inferred - 79 -
Godan Inferred - 106 -
La Brueva Inferred - 78 -
Total measured and indicated 1.02 3,546 28,903
Total inferred 0.70 1,931 11,369


NICKEL Category Tonnes Ni Cu
(000s) (%) (%)
Aguablanca Open pit Proven 13,600 0.66 0.47
Probable 2,100 0.62 0.44
Total 15,700 0.66 0.46
Aguablanca Measured 15,900 0.67 0.48
Indicated 3,800 0.61 0.48
Total 19,700 0.66 0.48
Inferred 5,950 0.53 0.46

Contained Metal
Combined ---------------
NICKEL Category PGM Au Ni Cu
(g/t) (g/t) (tonnes) (tonnes)
Aguablanca Open pit Proven 0.48 0.13 89,760 63,240
Probable 0.45 0.12 12,999 9,303
Total 0.47 0.13 102,759 72,543
Aguablanca Measured 0.51 0.13 106,053 76,479
Indicated 0.47 0.13 23,028 18,088
Total 0.50 0.13 129,081 94,567
Inferred 0.41 0.13 31,297 27,073

(1) Updated mineral reserves and resources for all projects, as of
December 31, 2004, are stated in accordance with definitions adopted by
the Canadian Institute of Mining, Metallurgy and Petroleum (CIM) on
August 20, 2000. Updates for El Valle and Carles, are prepared by or
under the direction of Alan C. Noble, ORE Reserves Engineering,
Colorado, USA, who is the independent "Qualified Person" for Rio Narcea
as that term is defined in National Instrument 43-101. Salave resources
were prepared by Roscoe Postle & Associates, as reported in the
November, 2004, Technical Report. Tasiast reserves were prepared by
SNC-Lavalin Inc. under the supervision of Mr. Ab Kroon, a Qualified
Person independent of Defiance, and Tasiast resources were prepared by
A.C.A. Howe International Ltd. personnel Eugene Puritch, Associate
Mining Consultant under the supervision of Daniel C. Leroux, P.Geo.,
Associate Consulting Geologist, a Qualified Person independent of

(2) Mineral reserves and resources have been estimated using site
specific appropriate cut-off grades. Reserves and resources at El Valle
and Carles, because of the near-term production of the reserves, have
been based upon a gold price of $400/oz and a copper price of

(3) Mineral resources (of all categories) that are not mineral reserves
do not have demonstrated economic viability. Mineral resources include
mineral reserves.

(4) Contained metal figures are before mill recovery factors are applied.

(5) Mineral reserves reflect the diluted tonnages and grades of the mine

(6) Mineral reserves at Tasiast are based upon the July 2004 Feasibility
Study which used a gold price of $370, and a mining cutoff of 1.03 gpt

(7) Resources at Salave are reported at 100% Rio Narcea.

(8) Mineral reserves for the Aguablanca project are based upon the July
2002 Feasibility Study Report with the following economic parameters:
Exchange rate of $1.00/EUR, nickel price of $6,600/tonne, copper price
of $1,600/tonne, and platinum and palladium prices of $400/oz. Mineral
reserves were calculated using a EUR 8.23/tonne net smelter return
(equal to 0.256% equivalent nickel). Following mine startup and
confirmation of slope parameters and the mineral model, an updated
reserve will be completed, utilizing the higher current commodity prices.

(9) Mineral resources for the Aguablanca project have been estimated
using a 0.2% nickel cut-off grade.

Cautionary Note to US Investors: The United States Securities and
Exchange Commission ("SEC") permits mining companies, in their filing
with the SEC, to disclose only those mineral deposits that a company can
economically and legally extract or produce. We use certain terms in
this annual report, such as "mineral resources," "measured,"
"indicated," and "inferred resources," that the SEC guidelines prohibit
us from including in our filing with the SEC. Investors are urged to
consider closely the disclosure in our Form 40-F, File No. 0-30670,
available from us by contacting the Investor Relations Department.

Rio Narcea Gold Mines, Ltd.

(Stated in U.S. dollars)

As at December 31
2004 2003
$ $

Cash and cash equivalents 81,888,800 32,861,600
Restricted cash 1,637,900 1,305,200
Inventories 7,314,600 4,667,000
Stockpiled ore 8,871,500 4,939,300
Accounts receivable
Government grants 11,288,400 34,700
VAT and other taxes 8,964,900 6,232,100
Trade receivables 1,478,700 3,261,200
Other current assets 3,296,100 3,505,100
Current portion of deferred
derivative loss 1,984,100 -
Total current assets 126,725,000 56,806,200
Mineral properties, net 140,531,400 76,478,400
Deferred stripping costs, net 3,780,300 15,988,000
Other assets 8,533,700 13,117,400
Deferred derivative loss 2,339,200 -
281,909,600 162,390,000
Short-term bank indebtedness and
accrued interest 4,944,400 2,690,700
Accounts payable and accrued
liabilities 31,128,800 19,172,200
Current portion of long-term debt 8,077,100 5,241,000
Total current liabilities 44,150,300 27,103,900
Other long-term liabilities 9,895,000 7,167,300
Long-term debt 31,109,000 6,706,000
Future income tax liabilities 4,804,300 -
Total liabilities 89,958,600 40,977,200

Non-controlling interest 631,200 54,900

Shareholders' equity
Common shares 235,434,700 140,610,500
Employee stock options 7,994,600 6,223,200
Non-employee stock options and
warrants 13,517,500 4,459,800
Common share purchase options 3,628,500 972,900
Deficit (80,545,200) (36,100,300)
Cumulative foreign exchange
translation adjustment 11,289,700 5,191,800
Total shareholders' equity 191,319,800 121,357,900
281,909,600 162,390,000

On behalf of the Board: "signed" "signed

Rupert Pennant-Rea Chris I. von Christierson

Rio Narcea Gold Mines, Ltd.
(Stated in U.S. dollars)

Years ended December 31
2004 2003 2002
$ $ $

Gold sales 47,282,300 60,818,100 55,506,300
Gold sales - Nalunaq ore 20,505,300 - -
67,787,600 60,818,100 55,506,300

Deferred stripping and
other mining expenses (30,069,900) (28,225,900) (19,816,300)
Purchase of gold
ore - Nalunaq ore (18,093,400) - -
Plant expenses (13,912,300) (12,416,100) (9,166,300)
Smelting, refining and
transportation (3,467,400) (2,001,400) (3,598,900)
Sale of by-products 4,182,900 1,461,100 2,638,700
Depreciation and
amortization expenses (10,496,400) (9,640,200) (9,562,500)
Exploration costs (6,639,100) (6,218,100) (2,759,700)
Administrative and
corporate expenses (6,961,300) (5,185,500) (3,742,200)
Other income (expenses) (238,200) (765,000) (1,307,400)
Write-down of mineral
properties (28,387,600) - -
(114,082,700) (62,991,100) (47,314,600)
Operating earnings (loss) (46,295,100) (2,173,000) 8,191,700
Interest income 823,300 452,000 102,600
Foreign currency exchange
gain (loss) 4,506,500 6,593,300 3,810,600
Interest expense and
amortization of
financing fees (1,675,600) (1,747,000) (2,240,500)
Derivatives loss (1,804,000) - -
1,850,200 5,298,300 1,672,700
Income (loss) before
income tax (44,444,900) 3,125,300 9,864,400
Provision for income tax - - -
Net income (loss) before
non-controlling interest (44,444,900) 3,125,300 9,864,400
Non-controlling interest - 81,500 -
Net income (loss) (44,444,900) 3,206,800 9,864,400

Deficit, beginning of year
as originally reported (25,530,500) (29,350,200) (39,047,700)
Cumulative adjustment for
restatement and change
in accounting policies (10,569,800) (9,956,900) (10,123,800)
Deficit, end of year (80,545,200) (36,100,300) (39,307,100)

Net income (loss) per share
- basic (0.36) 0.03 0.14
Net income (loss) per share
- diluted (0.36) 0.03 0.13
Weighted average common shares
outstanding - basic 124,258,207 98,747,244 72,249,367
Weighted average common shares
outstanding - diluted 124,258,207 103,889,131 77,561,447

Rio Narcea Gold Mines, Ltd.
(Stated in U.S. dollars)

Years ended December 31
2004 2003 2002
$ $ $

Net income (loss) (44,444,900) 3,206,800 9,864,400
Add (deduct) items not requiring
Depreciation and amortization 10,496,400 9,640,200 9,562,500
Write-down of mineral
properties 28,387,600 - -
Amortization of deferred
financing fees 1,916,200 387,300 517,500
Other long-term liabilities (268,400) 19,900 413,100
Foreign exchange (6,480,800) (5,704,100) (3,295,100)
Accretion of interest on
long-term debt 187,100 176,200 282,900
Non-cash derivatives
loss (income) 2,386,800 1,282,100 (1,131,600)
Options and shares granted 2,104,600 1,089,800 851,900
Loss on disposal of
capital assets 116,400 - 18,200
Amortization of deferred
stripping costs 17,333,600 21,975,200 17,059,500
Non-controlling interest - (81,500) -
Deferred stripping expenditures (1,595,300) (6,306,100)(12,241,300)
Purchase premium of the
purchased call options - (2,028,500) (1,090,700)
Pre-paid expenses - (827,600) -
Changes in components of working
Inventories (618,600) (1,681,600) 93,100
Stockpiled ore (3,669,300) 744,600 (1,192,900)
VAT and other taxes (589,900) (119,100) 552,000
Trade receivables 1,821,100 (698,900) 129,200
Other current assets (533,700) 88,400 (500,900)
Accounts payable and accrued
liabilities 2,328,700 (45,400) (5,753,500)
Cash provided by operating
activities 8,877,600 21,117,700 14,138,300
Expenditures on mineral
properties (52,238,000) (38,837,200) (5,757,500)
Acquisition of the Salave
deposit (5,000,000) (3,676,000) -
Acquisition of Defiance 2,648,000 - -
Grant received (reimbursed) 67,500 (792,600) 1,966,700
Restricted cash (210,200) (858,300) 103,500
Long-term deposits and
restricted investments (476,900) 480,300 (23,100)
Cash used in investing
activities (55,209,600) (43,683,800) (3,710,400)
Proceeds from issue of
common shares 1,298,200 2,426,700 4,304,700
Proceeds from issue of special
warrants and units 61,021,600 50,589,700 4,548,800
Financing fees on issue of
special warrants and units (2,746,000) (2,910,000) (446,900)
Proceeds from bank loans and
other long-term liabilities 42,743,700 3,000,400 1,401,200
Financing fees on bank loans (1,206,400) (2,507,000) (197,700)
Repayment of bank loans (12,197,800) (6,523,600)(13,706,500)
Cash provided by (used in)
financing activities 88,913,300 44,076,200 (4,096,400)
Foreign exchange gain
(loss) on cash held
in foreign currency 6,445,900 3,615,000 (400,100)
Net increase in cash during the
year 49,027,200 25,125,100 5,931,400
Cash and cash equivalents,
beginning of year 32,861,600 7,736,500 1,805,100
Cash and cash equivalents,
end of year 81,888,800 32,861,600 7,736,500

Supplemental cash flow
Interest paid in cash 1,596,900 1,237,000 1,685,900
Income taxes paid in cash - - -


Contact Information

    Rio Narcea Gold Mines, Ltd.
    John W. W. Hick
    Chief Executive Officer
    (416) 956-7470
    (416) 956-7471 (FAX)
    Rio Narcea Gold Mines, Ltd.
    Steve Dawson
    Manager, Investor Relations
    (416) 956-7470
    (416) 956-7471 (FAX)
    Or visit: