International Minerals boosts reserves 187% at Pallancata in Peru

The Pallancata silver-gold mine in southern Peru has 187% more proven and probable reserves than initially thought, International Minerals (IMZ-T, IMZLF-O) reports.

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

The silver-gold mine, which is jointly owned by International Minerals (40%) and London-listed mine operator Hochschild Mining (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 per tonne silver and 1.2 grams per tonne gold, for a total of about 13.2 million contained oz. silver and 57,000 oz. gold.

The reserve estimate was reported at a cut-off grade of 148 grams per tonne silver equivalent, 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 per tonne silver and 1.5 grams per tonne 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 per tonne silver and 1.4 grams per tonne 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 in excess of 750 tonnes per day, but plans are underway to ramp up that production to 2,250 tonnes per day by the end of this year, notes Wendy Yang, a Denver-based spokeswoman for the company. Yang says that will mean “growing cash flow this year and next.”

Sixty-five km northeast of Pallancata, International Minerals holds a 51% stake in the Antabamba silver project. Antabamba is made up of 11 concessions covering 95 sq km.

The Scottsdale-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 drilling exploration stage.

Outside of Peru, International Minerals owns properties 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.

On Feb. 11 International Minerals released a resource estimate for Gaby indicating measured and indicated resources of about 308 million tonnes at an average grade of 0.63 grams per tonne gold and 0.1% copper, containing about 6.2 million oz. gold and 284,000 tonnes of 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 releases a new mining law, Yang says. 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 under the country’s new left-leaning president, Rafael Correa, brought in a 70% windfall profits tax on the mining industry.

That 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.

On the Toronto Stock Exchange, International Minerals has a 52-week trading range of $4.90 to $6.65 per share. It is currently trading at about $6.33.