Minera IRL has its eye on the mid-tier prize

Minera IRL (IRL-T, MIRL-L) wants to become a mid-tier gold producer, and it’s looking to the gold wealth of South America to get it there.

The company, which currently has a small operating open pit mine in Peru, has a three phase plan that it believes will get it close to being a 200,000 oz. producer by 2014.

To get there the company will have to first optimize and extend the life of its current mine, Corihuarmi, then push its Don Nicolas project in Argentina into production by 2012, and then follow that up two years later with production from an underground mine at Ollachea in southern Peru.

It’s an ambitious schedule to be sure, but the shear prospectiveness of the projects in a high gold price environment is driving Minera IRL to get there.

Currently the company’s only source of cashflows come from Corihuarmi, which produced 15,169 oz. of gold in the first half of 2010 at a cost of US$396 per oz. – enough to bring in $10 million worth of revenue from an average realized gold price of US$1,157.00 per oz.

The optimization plan for the mine calls mining more ore – specifically, it will incorporate 3.8 million tonnes grading 0.5 gram gold of scree material into the mine plan- as well as increasing treatment to 2 million tonnes per year while it looks at the possibility of building a satellite heap leach pad at the nearby Bethania zone.

Corihuarmi went into production in 2008 and produced a 33,000 of gold in 2009. And while those types of production numbers aren’t enough to fund the construction of two new mines, they certainly help keep the company’s coffers full enough to fund drill campaigns at Don Nicolas and Ollachea.

As of the end of June, Minera IRL had $6.6 million in cash to go along with a debt of $2.5 million

With solid recent drilling results from near Don Nicholas, the Argentinian project will get its share of exploration dollars in the near future.

The first round of drilling at Escondida, which is just south of Don Nicholas, hit upon a new gold and silver discovery with intercepts of 100 metres grading 1.19 grams gold and 7.77 grams silver and 120.4 metres grading 0.65 grams gold and 5.7 grams silver.

Minera believes the results come from a zone which is likely the extension of Minera’s neighbor Mariana Resource’s (MARL-L) Calandria Sur discovery.

The combined strike length of the Escondido and Calandria Sur mineralized breccia system controlled by the two companies is over 1 km long.

Minera plans to launch an expanded drill program at Escondida before the end of the year with metallurgical test work getting underway shortly.

Both Escondida and Don Nicolas lie in Patagonia’s Deseado Massif region, which has gained notoriety lately thanks to Andean Resources Cerro Negro project.

As for Don Nicolas itself the project currently has an indicated resource of 1.08 million tonnes grading 5.8 grams gold for 201,000 oz. of gold and inferred resources of 1.075 million tonnes grading 4.6 grams gold for 158,000 oz. of gold.

Minera wants to turn the project into 60,000 oz. gold per year producer by late 2012.

If it succeeds, it won’t have much time to relish the accomplishment.

That’s because the final step of the company’s master plan is to bring an underground mine at Ollachea online by 2014.

Ollachea sits in southern Peru, roughly 250 km north of Lake Titicaca and the project currently has an inferred resource of 13.5 million tonnes grading 3.62 grams gold for 1.57 million oz. of gold.

A scoping study done on the project envisioned a 1 million tonne per year mining rate over a 9 year mine life with an average production of 117,000 oz. per year at cash operating cost of under US$400 oz.

The study estimated that it will cost Minera US$156 million to build the mine.