Editorial: Corporate chaos ensnarls Minera IRL

With Minera IRL shareholders only two days away from possibly voting out the company’s entire board of directors, the saga of the ill-fated, Lima-based junior gold miner is a reminder of just how quickly things can turn sour working in a developing country like Peru.

Founded in 2000 by Newcrest Mining alumnus Courtney Chamberlain, Minera IRL started 2015 on top of the world, despite the prolonged downturn in gold prices. In previous years it had advanced and sold a gold discovery in Argentina’s Patagonia region, ingeniously extended the life of the small but profitable Corihuarmi heap-leach gold mine in central Peru and used cash flow from the mine to drill and develop the much larger and highly promising Ollachea gold project in southeastern Peru beside the artisanal mining town of Ollachea, high in the Andes near the western edge of the Peruvian jungle.

The epitome of the best in Australian mining, the gentlemanly Chamberlain was the heart and soul of the company. As executive chairman and CEO he brought all he learned as a top manager at Newcrest, and applied it to his creation Minera IRL, which he insisted be based in Lima, and have most of its management team living there to forge close relationships with Peruvians, and be near the company’s operations. Minera IRL had its shares traded in London, Toronto and Lima, and had an experienced, international management team.

But Chamberlain’s passing after an illness, announced on April 20, 2015, showed just how critical he was to keeping the company on track.

The financially savvy Canadian mining executive Daryl Hodges — who joined Minera IRL’s board in February 2014, presumably for his skills in helping to obtain financing for Ollachea — was unexpectedly tossed into the executive chairman role at Mineral IRL in March 2015, as Chamberlain’s illness forced his withdrawal from the company.

May 5, 2015, was another milestone, with Peruvian lawyer Diego Benavides, the executive president of Minera IRL Ltd.’s Peruvian subsidiary Minera IRL S.A., being appointed interim CEO of the parent company Minera IRL Ltd.

On June 8, with Hodges as chairman and Benavides as interim CEO, Minera IRL Ltd. announced a US$70-million bridge loan structured by the Peruvian state-owned development and promotion bank Corporación Financiera de Desarrollo S.A. (better known as “Cofide”), and syndicated through Goldman Sachs Bank USA. The loan had been pitched as “the first step towards a senior project credit finance facility of up to US$240 million.”

At that point, a civil war effectively engulfed Minera IRL Ltd., with the board and management team running the parent company pitched against an insurgent group led by Benavides, who tightened control over the Peruvian subsidiary Minera IRL S.A., and agitated much of the local Ollachea community against the parent company.

If you want a glimpse into how nasty the battle has become, have a look at Minera IRL Ltd.’s string of press releases at http://www.minera-irl.com/ versus the ones from Minera IRL S.A., which are posted at www.minerairlshareholders.com.

Aug. 24 was another fateful day, with Minera IRL Ltd.’s board voting unanimously to remove Benavides as interim CEO of Minera IRL Ltd., and announcing the company was “investigating allegations of impropriety received through its recently implemented and independently managed Whistleblower hotline.” Indeed, doubts were then raised about the terms of the entire US$70-million financing.

Three days later Hodges was the next casualty, by not winning re-election to his chairman role at the company’s annual general meeting.

Flash forward to today, and Minera IRL Ltd. trades on no exchange, work has a stopped at Ollachea and the company has a new chairman in the form of respected Peruvian lawyer Jaime Pinto. But the parent company has lost financial control over the Peruvian operations to the Benavides-led local subsidiary, which has its hands on both the cash flow from the mine and the bridge loan sitting in the bank. Tellingly, Pinto has never been to Ollachea. Worse, the local subsidiary is benefitting from the increasing lack of transparency, as Minera IRL devolves further and further away from being a publicly traded company run to international standards, and morphs into a private fiefdom of a few well-connected Peruvians.

The extraordinary general meeting to be held in Toronto on Nov. 26 is the last chance for Minera IRL Ltd. to be rescued as a viable public company by its current slate of directors. If the Benavides-led group wins the day, Minera IRL Ltd. will quietly disappear into Peru’s mountains and jungles as the potential riches of the Ollachea gold project are squandered, and the town of Ollachea will ineluctably return to its centuries-long roots as a small-minded artisanal mining community, rather than an emerging modern mining camp.