Intrepid to Refocus on Growth After Difficult Merger

SPECIAL TO THE NORTHERN MINER

Toronto-based Intrepid Mines (IAU-T, IAUFF-O) is leaving behind the corporate restructuring that dominated 2006 to focus on implementing its growth strategy for the Casposo gold-silver project in Argentina, said president Laurie Curtis in a recent conference call that outlined the company’s first-quarter results.

Meanwhile, operations appear to be “back on track” at the company’s Paulsens gold mine in Australia. Gold production was up 19% and cash costs down 20% from the previous quarter, after Intrepid implemented some recommendations to improve ore delineation and control dilution at the mine.

Intrepid merged with Australia’s NuStar Mining last year in order to secure Paulsens and use the resulting cash flow to fund exploration and development at Casposo and other projects. But the merger was tainted by resource downgrades, falling production, and increased costs at the gold mine in the final quarter of 2006.

Investors punished Intrepid for its decision to restructure. By the end of April 2007, the stock was trading at 50, down from more than a dollar last July, when the merger was completed, and from its peak of about $1.60 earlier in 2006.

“We’re very disappointed (with the share price),” Curtis told analysts on the call. “We paid a price for the issues surrounding the events of last year and, unfortunately, we haven’t rebounded from that.”

In response to poor mine to mill reconciliation of minus 27% in the final quarter of 2006, Intrepid launched a review of operations to identify the cause of the grade variance. The review determined that the mine required better delineation of ore boundaries in the Upper Zone and better control of dilution.

Implementing some of the resulting recommendations resulted in record stope production and improved gold production to 17,494 oz., or 98% of mine plan, in the first quarter of 2007. Cash costs dropped to US$361 per oz., or 99% of mine plan, during the same period.

Intrepid also succeeded in increasing reserves and resources, adding 77,000 oz. in the measured and indicated category for a new resource of 380,000 oz.

With Paulsens on the road to recovery and the corporate restructuring complete, Intrepid can turn more of its attention to Casposo in Argentina’s San Juan province, where the real growth potential lies.

Intrepid received a final feasibility report for the wholly owned Casposo in March, including the first ore reserve estimate for the project. According to the feasibility study, Casposo contains indicated resources of 2.2 million tonnes grading 4.46 grams per tonne gold and 116 grams silver, or 313,278 oz. gold and 8.2 million oz. silver. Within this resource, there is a reserve of 1.8 million tonnes grading 4.9 grams gold and 114 grams silver, or 270,089 oz. gold and 6.5 million oz. silver.

Based on these numbers, Casposo is expected to produce about 50,500 oz. gold and 1.1 million oz. silver (68,500 oz. gold equivalent) per year for five years from a hybrid open-pit/underground operation.

But Curtis expects these figures to improve considerably as a result of a new drilling campaign at Kamila, the first deposit slated for development.

The campaign is testing deep pit and underground vein targets at the Kamila and the Kamila Southeast Extension (SEXT), based on the exploration model for the Pajingo deposit in Australia. Exploration at Pajingo outlined 3.5 million oz. gold with 300,000 metres of drilling.

“There are enough targets on (Casposo) to keep us drilling for a significant amount of time,” Curtis said. “Based on the statistics to date, if we put in another 40,000 metres, I wouldn’t be surprised to see us double the resource.”

The program will initially target the Inca and B-veins of the Kamila deposit. Last year, step-out holes on the Inca vein tested the mineralized structure to the east of a dyke that transects the Kamila deposit. The new campaign will increase the drilling density along the structure to allow resource evaluation and test the extent of the mineralization to the southeast.

The drilling will also test a vein structure parallel to and below the Kamila Southeast Extension zone discovered last year. Hole CA-06-179, drilled 100 metres downdip from the SEXT discovery hole, returned values of 1.9 grams gold per tonne and 677 grams silver over 6.3 metres and constitutes a new underground target.

“The near-term goal for exploration at Casposo, from my perspective and the bank’s perspective, is to add at least another year to Kamila that’s accessible from the open pit,” Curtis said. “Then we will move further into underground targets beyond that and eventually up to three of four kilometres away at Julieta, where we have about thirty holes.”

Intrepid’s other goals for the next quarter are to have the recently completed Environmental Impact Assessment (EIA) for Casposo approved by the province of San Juan, produce a bankable feasibility study for the deposit, recruit a development team, and allow senior management to focus less on merger-related administration and more on implementing the company’s growth strategy, including drilling on its newly acquired Taviche silver project in Mexico.

— The author is a freelance writer specializing in mining issues, and principal of Toronto-based GeoPen Communications. (www.geopen.com).