www.minera-irl.com
Minera IRL Limited together with its subsidiaries (the "Group") is a Latin American precious metals mining, development and exploration company. Managed by a team of experienced mining executives, the Group's business was privately funded from inception in 2000 until listing on the London AIM Market in April 2007. Minera IRL Limited is currently quoted on the Toronto Stock Exchange (TSX:IRL), AIM London (AIM:MIRL) and the BVL, Lima, Peru (BVL:MIRL) stock exchanges.
The Group operates the Corihuarmi Gold Mine, is exploring the Ollachea Project, both of which are in Peru, and is also undertaking a feasibility study at the Don Nicolas gold project in Patagonia, Argentina.
Collins Stewart hails Minera IRL as an ‘outstanding value proposition’ after Ollachea prefeasibility study
Minera IRL (LON:MIRL, TSE:IRL) is an ‘outstanding value proposition’ in the gold junior sector, according to Collins Stewart analyst John Mcgloin.
The analyst repeated a ‘buy’ recommendation on the South American gold stock, targeting 130p a share, after Minera announced the completion of the Ollachea project’s prefeasibility study this morning.
The study, which was completed by international engineering firm AMEC (LON:AMEC) and Coffey Mining, confirmed that Ollachea could produce 117,000 ounces of gold a year from 2014 onwards.
"We are delighted with the results of the prefeasibility study which gives strong credence to a substantial, economically robust, long-life gold project at Ollachea." said chairman Courtney Chamberlain.
He added: “We are now embarking upon a Bankable Feasibility Study and final consideration is underway to commence an exploration drive into the ore-body."
The study, which assumed a US$1,100 an ounce gold price, estimated Ollachea’s pre-tax net present value (NPV) between US$170 million and US$271 million, and put post-tax NPV between US$91 million and US$167 million. The study estimated the internal rate of return (IRR) at 28.1 per cent (pre-tax) and 20.5 per cent (post tax).
AMEC estimates an up-front capital cost of US$170 million, and life-of-mine cash operating costs of US$436 an ounce.
In a note to clients Collins Stewart analyst Mcgloin emphasised the project’s low cost credentials.
“The cost of mining (Ollachea) is lower than for narrow vein underground mines in the region, which require higher cost conventional mining for the narrow veins of thicknesses under 1 metre,” the analyst said.
“Peruvian underground miners such as Hochschild Mining and Fortuna Silver mine the narrow vein deposits at around $50-55 per tonne, thus $47 a tonne is a realistic and achievable figure.”
He added: “Peru is one of the lowest cost countries globally for underground mining, due to an ample supply of highly qualified, low cost labour force.”
Looking ahead to upcoming share price catalysts Mcgloin said: “With further resource upgrade for Ollachea scheduled for the third quarter, there is a lot of positive news to come from the company for the remainder of this year.
“As well as Ollachea, Minera IRL has a small, but profitable Corihuarmi mine in Peru, Don Nicholas development project in Santa Cruz, with a feasibility study due in the fourth quarter of this year and the third largest exploration package in the highly prospective Santa Cruz region of Argentina.”
Mcgloin emphasised the robust economics demonstrated by the study and highlighted that the findings were in-line with his expectations so there was almost no change to the brokers valuation.
The study was also on the radar of Fox-Davies analyst Peter Rose, who similarly noted that results were not that different to his assumptions.
Rose does note, however, that start of production will be three months later than he had expected and that costs will be marginally higher than he initially assumed.
On the positive side, though, Rose points out that the mine’s throughput will be 10 percent higher than he expected and one year has been added to the initial mine life.
He repeated a ‘buy’ recommendation and upped his price target slightly from 123p to 126p a share.
“The ore body is open along strike in both directions and down dip and we are confident that the mine life will be extended,” he added.
Minera is now getting started on the bankable feasibility study (BFS), which is being pencilled in for completion in the third quarter of 2012. As part of that it expects to publish a maiden Inferred Resource estimate for another part of Olleachea, the Concurayoc Zone, later in the third quarter of this year.
The prefeasibility study is based on the projects NI43-101 indicated resource which has 1.4 million ounces of contained gold, from 10.6 million tonnes grading 4 grams per tonne gold. From this resource AMEC came up with a mine design that had a probable mineral reserve with 1.1 million ounces of gold.
Minera confirmed that the underground mine will be accessed by a 1.3 kilometres tunnel. It also confirmed AMEC’s findings which showed that conventional metallurgical processing could extract 91 percent of the mine’s gold.
Over the initial nine year mine life Minera said that 1.1 million tonnes of ore will be mined and treated each year, to produce 117,000 ounces of gold.
Importantly, Minera point out that there is still much to be done in terms of exploration and Ollachea’s scope goes beyond that of the prefeasibility study. The group now plans to step-up exploration on the project.
"We believe that this Orogenic type system, still open ended along strike in both directions and down dip after more than 2 1/2 years of continuous drilling, offers outstanding exploration potential to extend the mine life,” Chamberlain said.
