Agnico joining Miranda in Colombia

Prospect-generating company Miranda Gold (MAD-V) has enticed mid-tier gold miner Agnico-Eagle Mines  (AEM-T, AEM-N) to help out in its efforts to explore for gold in Colombia.

The junior says the new alliance, outlined in a letter of intent in late July, would reduce its operating costs in Colombia, where it has worked for nearly three years.

Miranda’s CEO Kenneth Cunningham estimates the partnership could lower his company’s burn rate from $2.8 million to around $2.2 million a year by covering its overhead costs in Colombia, where it houses an exploration office in Medellin with three local geologists and support staff, and owns two projects that are under option agreements with Red Eagle Mining (RD-V).  

Under the terms announced, Miranda and Agnico struck a three-year commitment, where at least US$1 million would be spent each year on prospect generation, with Agnico picking up 70% of the costs and operator Miranda pitching in the rest of the money.

For Agnico the partnership would allow greenfield exploration in a resource-rich country where it has yet to branch out, Cunningham says.  

“[Agnico] saw the opportunity by providing a little bit of cash to hit the ground running, and not have to staff an office themselves, or go out and find people and oversee it with their people from Vancouver or Toronto. I think it was really a perfect fit for both companies.”

Agnico will have 60 days to exercise its right to earn into any prospect that Miranda generates. If it likes what it sees, it could pay Miranda to earn up to 70% of a project, or complete a feasibility study. The minimum level it could earn into is 51%, Cunningham says.

If Agnico is not interested in the project, Miranda would be able to look for another partner for it after the 60-day period.

Cunningham says Miranda is on track to pen a definite agreement with Agnico at the end of August, or by mid-September.

Asked how the junior was able to attract the senior producer, Cunningham says Agnico recognized the company’s exploration talents after working with his staff in Nevada and in Alaska.

In 2010 Agnico signed an option agreement to earn a 51% stake in Miranda’s Ester Dome project in Alaska by spending $4 million over five years, after which it could increase to 70% by funding exploration costs or completing a feasibility study. Results from Agnico’s 2012 drilling at Ester Dome are expected out soon.  

Miranda has been discussing the alliance with Agnico for two years. During that time, Cunningham says the major became more comfortable with Colombia’s politics and business environment, with the government continuing to restore the country’s previously tarnished image.  

Meanwhile, Miranda’s CEO says it is in final negotiations to acquire a third property in Colombia that it will place into a joint venture with another junior outside of the alliance.
With the Agnico partnership in the works and its most active drill season planned to date, Miranda hopes it will make a discovery that wows the market.

“This is turning out to be a good year for us,” Cunningham says. He notes the alliance will cut down Miranda’s Colombian costs and that its other partners are to spend $5 million to $7 million, and drill at least seven of its nine optioned-out projects this year.

“So really what we need is a drill hole that turns around the company and gets everybody excited about a particular project. I’ve been hoping to see that come out of our Red Hill [project in Nevada]. We know that’s elephant country.”

Miranda’s Red Hill is near Barrick Gold’s (ABX-T, ABX-N) Cortez mine, and is optioned to NuLegacy Gold (NUG-V).

So far only one intriguing hole — returning 13.7 metres of 8.12 grams gold per tonne — has been tagged at the project, which was drilled by Barrick in 2006.

Miranda’s other partners in Nevada include Montezuma Mines, a subsidiary of CMQ Resources (NV-V), and Australian-based gold miner Ramelius Resources (RMS-A).

Miranda recently closed at 30¢, within a 52-week range of 24¢ to 50¢.