Fox-Davies Capital issued a note on Minera IRL (AIM, BVL: MIRL, TSX: IRL) in the wake of drilling results from the Concurayoc Zone at the Ollachea gold project in Peru. The group said the findings warrant a major follow-up drilling program in this zone.
The release reported five drill intersections over a length of 500 metres; only 300 metres along strike from the Minapampa zone which is currently subject to a pre-feasibility study.
The broker called he latest news an interesting development which confirms its thoughts that Ollachea will be much bigger than the original 1.3 million oz resource that was announced last year.
“It is not the gold grades than impress us, although there are some higher grade zones within the intersections released, but the widths. The effective true width of mineralized intersections as reported are expected to range between 90 and 97 percent of the width indicated, depending on the variation of the angle of incidence between the Concurayoc exploration drill-holes and the drilled mineralized horizons. These are wide intersections and suggest that low cost bulk mining methods will be applicable,” FD Capital said.
It believes that Ollachea has the potential to become significantly bigger than the current 1.3 million oz. In theory this should allow for higher production than the conceptual 117,000 oz per annum and over a longer mine life. The major advantage with this is that a modest increase in plant capacity would not increase the capital requirements significantly but bring economies of scale, the broker said.
“In our last note on 4 May 2010, we stated that we believed the eastward extension to the Minapampa zone had the potential to add 350,000 oz to the resources, and remains open to the east. Now with the new Concurayoc zone, we would be surprised if the resources do not grow to greater than 2 million oz,” it concluded.