Ollachea delivers for Minera IRL in Peru

Lima-based gold miner Mineral IRL (IRL-T, MIRL-L) has completed a definitive feasibility study of its wholly owned Ollachea gold project in southeastern Peru that shows the potential to build a profitable underground mine that could produce 113,000 oz. gold per year at full capacity.

The project is located near the village of Ollachea in Puno region’s Carabaya province.

Probable reserves stand at 9.3 million tonnes grading 3.4 grams gold per tonne, for 1.0 million contained oz. gold. Another 10.6 million tonnes grading 4.0 grams gold for 1.4 million contained oz. gold lie in the indicated resource category.

Engineering consultants AMEC carried out the study, with assistance from Coffey Mining for the resource estimation and the underground mining aspects.

Using a gold price of US$1,300 per oz., the study calculates an after-tax net present value of US$155 million at a 7% discount rate, and an after-tax internal rate of return of 22.1%. (At US$1,600 per oz. gold , that NPV shoots up to US$258 million and the IRR to 30%.)

Up-front capital costs are pegged at US$178 million to build a mine capable of operating at a rate of 1.1 million tonnes per year to produce an average of 113,000 oz. gold per year at full capacity.

Stopes would be accessed via a 1.2-km tunnel that has already been advanced 800 metres by Mineral IRL over the past year. The mining method would be long-hole open stoping with paste backfill.

Cash operating costs are estimated at US$499 per oz. over the life of the mine, which would be at least nine years with  potential for extension many years beyond that, and conventional processing would occur on-site with recovery rates above 90%.

“Ollachea’s DFS confirms that Minera IRL has an economically and technically robust, long life project,” said Mineral IRL executive chairman Courtney Chamberlain in a release. “We are confident of a much longer mine life than the initial nine years defined in this study considering that over one million ounces of inferred resource has already been identified and that the gold bearing structures are open ended along strike and down dip.”

Minera IRL notes that Ollachea is “well served by existing infrastructure” with a highway, power lines, abundant water, and a local workforce all available nearby.

Next up, Minera IRL hopes to submit an environmental impact assessment before year-end, and then move into final permitting with an eye to achieving first production in 2015.

On the TSX, Minera IRL shares were down a nickel to 86 cents on the news today. Shares have traded between 66 cents and $1.12 over the past year, and the company has a market cap of $136 million.