Miranda, Agnico to team up in Colombia

The prospect-generating company, Miranda Gold (MAD-V), has recently attracted major gold miner, Agnico-Eagle Mines (AEM-T, AEM-N), to form a potential alliance to continue exploration in Colombia.

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

Miranda’s CEO Kenneth Cunningham estimates the potential partnership would lower its 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, both companies agreed on 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.

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

“They [Agnico] saw the opportunity by providing a little bit of cash to being able 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 choose to either exercise its right to earn into any prospect that Miranda generates. If it likes what it sees, it will either pay Miranda to earn up to 70% of a project or complete a feasibility study. The minimum level it could earn into is 51%, says Cunningham.

If Agnico is not interested in the potential project, Miranda would be able to look for another party that is 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 previously in Nevada and now 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 can increase to 70% by either 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 political climate and business environment as the government continued 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 the most active drill season planned to date, Miranda is hopeful it’ll soon make a discovery that will entice the market.

“This is turning out to be a good year for us,” remarks Cunningham, noting the alliance will cut down its Colombian costs and that its other partners have planned to invest $5 million to $7 million to 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 sits near Barrick Gold’s (ABX-T, ABX-N) Cortez mine and is optioned out to NuLegacy Gold (NUG-V). So far, only one intriguing hole has been tagged at that project, which returned 13.7 metres of 8.12 grams gold per tonne.

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

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