Pallancata sees 187% reserve boost

International Minerals (IMZ-T, IMZLF-O) has boosted proven and probable reserves by 187% at its Pallancata silver-gold mine, in southern Peru.

An updated estimate reveals that the mine has reserves of 3.5 million tonnes at an average grade of 289 grams silver per tonne and 1.2 grams gold.

The silver-gold mine, which is jointly owned by International Minerals (40%) and London-listed mine operator Hochschild Mining (HCHDF-O, HOC-L) (60%), contains proven and probable reserves of 32.9 million oz. silver and 142,000 oz. gold.

International Minerals’ share of the proven and probable reserves is estimated at about 1.41 million tonnes grading 289 grams silver and 1.2 grams gold, for a total of about 13.2 million contained ounces silver and 57,000 oz. gold.

The reserve estimate was reported at a cutoff grade of 148 grams silver equivalent per tonne, and according to the company, reflects the most recent operating cost estimates and metal prices of US$10.50 per oz. silver and US$600 per oz. gold.

Including the proven and probable reserves, Pallancata has a total measured and indicated resource of 3.2 million tonnes grading 342 grams silver and 1.5 grams gold for a total of 35.3 million oz. silver and 150,000 oz. gold.

In addition, Pallancata has an inferred resource of 2.2 million tonnes grading 479 grams silver and 1.4 grams gold for a total of 33.1 million oz. silver and 93,000 oz. gold.

Underground production at Pallancata, 520 km southeast of Lima, began in September 2007 at an initial rate of 500 tonnes per day.

Currently, the mine is producing more than 750 tonnes per day, but it expects to ramp up production to 2,250 tonnes per day by the end of this year, notes Wendy Yang, a Denver, Colo.-based spokeswoman for the company. Yang says that will mean “growing cash flow this year and next.”

Also in Peru, 65 km northeast of its Pallancata mine, International Minerals has a 51% stake in the Antabamba silver project. Antabamba is made up of 11 concessions covering 95 sq. km.

The Scottsdale, Ariz.-based company also holds a 51% stake in the Urbaque project, a 28-sq.-km gold project adjacent to the Pallancata mine and about 10 km southeast of Hochschild’s Selene silver-gold mine. Urbaque is in an advanced exploration drilling stage.

International Minerals also holds in Ecuador, where it has been active since the early 1990s.

The company holds about a 75% stake in the Gaby gold property, 130 km south of the industrial port and Ecuador’s largest city, Guayaquil.

In February, it released a resource estimate that pegged measured and indicated resources at Gaby at about 308 million tonnes grading 0.63 gram gold per tonne and 0.1% copper, containing about 6.2 million oz. gold and 284,000 tonnes copper.

International Minerals also owns a 100% stake in the Rio Blanco gold-silver development project on the western flank of the Western Cordillera, in southwestern Ecuador.

The company has started the permitting process and hopes to be in production by 2010.

“Hopefully this all comes together where we get our permits and we can begin construction on Rio Blanco by year-end,” Yang says.

But permits depend on when the government introduces a new mining law. Ecuador is in the midst of drafting the new law, which is expected to be completed in May.

Foreign miners in the country have expressed uncertainty over the future of their projects since reform of the tax law late last year.

The new legislation, brought in by the country’s new left-leaning president, Rafael Correa, introproperties duced a 70% windfall profits tax on the mining industry.

The uncertainty was raised another notch on Jan. 25, when the government declared it would revoke hundreds of mining concessions because companies had failed to pay fees or committed other infractions.

The moves have been seen as part of efforts by the Andean nation to boost its control over the industry, as well as to increase the impoverished country’s revenues from resource extraction industries such as oil and mining.

International Minerals has a 52- week trading range of $4.90-6.65 per share. It is currently trading at about $6.33.