Minera IRL eyes near-term growth

Lima-based Minera IRL (TSX: IRL; LSE: MIRL) has exited 2013 on an upbeat note, and says it is on track to grow its gold production over the next two years.

In the fourth quarter of 2013, Minera IRL delivered 6,446 oz. gold, bringing its full-year output to 25,223 oz. That’s above the expected 24,000 oz. thanks to higher grade and more tonnes mined than scheduled from the Corihuarmi gold mine in Peru. Cash-operating costs for Corihuarmi, the company’s single producing mine, should come in below US$760 per oz.

Revenue for the year was US$35.7 million from the sale of 25,200 oz. gold at an average realized price of US$1,412 per oz.

This year, Corihuarmi should produce 21,000 oz., which is 5% above the company’s previous forecast, but below last year’s gold count. Operating costs are estimated at US$885 per oz.

The multi-pit Corihuarmi project lies within the Andes mountain range of central Peru, at an altitude of nearly 5,000 metres. It hosts an epithermal, high-sulphidation, disseminated gold system.

Minera IRL, which has been heap-leaching material from the project’s Diana and Susan deposits since 2008 and 2009, is exploring nearby targets, notably the Ely and Cayhua Ridge prospects, to extend the mine life beyond 2016. It plans to complete a 1,600-metre exploratory drill program at those prospects by July.

“We see 2014 as a pivotal year that is the launching point for our next generation of mines,” said Courtney Chamberlain, the company’s executive chairman, in a statement.

Apart from Corihuarmi, the company owns two advanced gold projects: Don Nicolas in Argentina’s Santa Cruz province, and Ollachea in southern Peru.

Last year the company scored an US$80-million funding package with Argentine company Compania Inversora en Minas to start building the Don Nicolas mine. As part of the funding, it gave up a minority stake in its wholly owned asset, and currently owns 51% of the asset.

Providing an update on the construction activities, Minera IRL says detailed engineering of the treatment plant is underway. It adds that site work is progressing, with workers preparing the pads and roads for the plant and camp.

The Latin American firm is also completing metallurgical testing for a heap-leach feasibility study for Don Nicolas. “A future heap-leaching facility, designed to treat low-grade mineralization, is envisioned to operate in parallel to the milling operation currently being developed” to boost the project’s economics, the company says. The study is due out by year-end, delayed by almost a year from the previous 2013 date.

Minera IRL intends to begin plant commissioning by year-end, but has slightly pushed back first production from Don Nicolas to early 2015 from late 2014. The company’s share of the mine’s first year of production is expected to be 25,000 oz.

The gold miner is also pushing its flagship Ollachea project towards production. It is working on lining up financings and permits for the US$178-million project. Minera IRL anticipates bringing Ollachea online as an underground mine in late 2015. The mine is slated to produce 100,000 oz. gold a year over its initial nine-year life.

“The company expects the Ollachea construction permit to be issued in second quarter of 2014 and the financing agreement to be reached within the same time frame,” Canaccord London-based analysts Dmitry Kalachev and Peter Mallin-Jones wrote in a note. “We estimate the company currently has US$25 million in debt due July 2014. This means that the Ollachea project funding will need to come with the debt refinancing.”

While the analysts believe Minera IRL is capable of closing large financing deals in a low gold-price environment, they say the company “will need to again be creative to complete this within the set time frame.”

The miner ended 2013 with US$3 million in cash, and has US$5 million in undrawn debt.

Minera IRL also made some minor changes to its board and management team. Daryl Hodges, a founding partner of Jennings Capital, has joined as a non-executive director, while director Graeme Ross has resigned. The company’s chief financial officer Brad Boland has also taken on the company’s secretary role, previously held by Tim Miller. Jeremy Link will direct investor relations, previously taken care of by Trish Kent.