Ecuador court rejects INV Metals’ referendum request on Loma Larga

Ecuador’s Constitutional Court has struck down a request for a referendum on mining activities at INV Metal’s (TSX: INV) Loma Larga underground mine project in Azuay province’s Cuenca canton, the company says.

The referendum request, submitted on Aug. 3 by the prefect of Azuay, was the prefect’s third referendum request, all of which have been rejected by the country’s top court.

“We have been advised by our legal counsel that this and other previous rulings have set a precedent that any future referendum requests related to mining activities should not impact our legally granted mining concessions within Ecuador, and the related potential future exploration, development and mining activities on such concessions,” the company stated in a press release on Aug. 31.

“If future referendum requests which meet the criteria previously set by the Constitutional Court are allowed to proceed, the potential impact should be related to future mineral rights not yet granted based on legally valid laws, rules and regulations.”

INV Metals’ Loma Larga gold project in Ecuador. Photo by Trish Saywell.

On Sept. 2, the company notified shareholders that yet another referendum request had been approved by the Council of the City of Cuenca on Sept. 1, and that it planned to submit it to the Constitutional Court — this one related to mining activities in Cuenca water sources at the request of a group known as the Cabildo Popular Por El Agua de Cuenca. INV Metals said it was advised by its legal counsel that the request was unconstitutional, and, like the other previously denied requests, does not meet all the criteria and standards for approval by the Constitutional Court. “We expect that this new request will also be rejected by the Constitutional Court,” the company stated in a press release.

At the end of August, the company announced that it had completed the project’s Environmental Impact Study and  is working with the Ministry of Environment and Water to submit the EIS for review and comment. INV Metals hopes to start development of the mine in 2021 and is in discussions for financing, including with debt and stream providers, it said.

Candace MacGibbon, INV Metals’ president and CEO, noted that the company has designed the underground mine and related infrastructure with a project footprint of less than 0.65 sq. km, and that the site “is not near any lakes or rivers” and “will not discharge any water within the canton of Cuenca.”

“Treated water will meet stringent Ecuadorian standards, and the company expects the treated water to be of better quality than the water currently found downstream of the discharge point,” MacGibbon stated, adding that “the mine is designed to produce concentrates which do not use cyanide for processing, and about 55% of the tailings will be placed underground using the paste backfill method.”

The remainder of the tailings, she said, “will be filtered and pressed to remove water to be treated and recycled within the processing facilities and will be placed on geo-technically stable lined tailings facility, which will be covered and revegetated upon closure.”

An updated prefeasibility study released in March outlines a production rate of about 3,000 tonnes per day in the early years, reaching 3,400 tonnes per day in year five, resulting in average annual production of 203,000 oz. gold-equivalent over an initial projected mine life of about 12 years. All-in sustaining costs (AISCs) over the life of mine were pegged at US$627 per ounce.

The study estimates an initial pre-production capex of US$316 million, sustaining capital costs of US$71 million and closure costs of US$22 million. At US$1,400 per oz. gold, US$18 per oz. silver and US$3 per lb. copper, capex would be paid off in two and a half years, and the project would generate an after-tax net present value of US$454 million and an internal rate of return of 28.3%.

Loma Larga has measured and indicated resources, including reserves, of 24.1 million tonnes grading 3.76 grams gold per tonne, 24.8 grams silver per tonne and 0.22% copper for 3.38 million oz. gold-equivalent, which include 2.92 million oz. gold, 19.2 million oz. silver, and 116.6 million lb. copper. Inferred resources measure 6.2 million tonnes averaging 2.03 grams gold, 25.6 grams silver and 0.12% copper.

The project is in southern Ecuador, 30 km southwest of the city of Cuenca.