JUNIOR MINING

Minera IRL's Don Nicolas gold/silver mine draws nearer

The latest agreement with local communities suggests that Minera IRL's Don Nicolas gold/silver project in Argentina is proceeding nicely towards initial production late next year.

LONDON - 

The latest brief announcement from Latin America-focused junior gold miner, Minera IRL, quoted on the Toronto, London AIM and Lima exchanges, indicates that it is set on proceeding with its Don Nicolas gold/silver project in Argentina. Despite problems seen by some commentators regarding the Argentina Government's, and some provincial governments' attitudes to mining, and to precious metals mining in particular, the Don Nicolas project is located in Patagonia's Deseado Massif in mining-friendly Santa Cruz province where gold and silver mining has been under way for some time, with a number of other new mine developments in progress, or planned.  The most recent move in this respect is Yamana's proposed friendly takeover of Extorre Gold with its well advanced Cerro Moro project not far away from Don Nicolas as well as a number of other exploration prospects in the region. One doubts a savvy company like Yamana would enter into such an agreement if it had any doubts about adverse effects of political interference in the area.

Indeed this area of Patagonia is sparsely populated, windswept and has little agricultural significance, and mining is proving to be a great boost to the local economy and, unlike in some parts of Latin America the small local towns seem to be totally in favour of mining developments which bring much needed employment into the region.

Minera IRL's latest announcement relates to the signing of a Social License Agreement a period of 10 years with the nearby communities of Jaramillo and Fitz Roy relating to the development of Don Nicolas. The objectives of the agreement are to jointly develop policies for local training, jobs and sustainable health programs as well as to establish supply companies to complement and diversify the provision of goods and services required by the future Don Nicolas mine which the company is planning to bring on stream as a relatively small scale gold and silver producer by late 2013 assuming all permitting is received. The permitting process has been under way since May. This is hoped to be completed by the year-end with construction to start immediately thereafter and to take 12 months to build the initial mine and plant.

While Minera IRL is looking at a low capex (US$55.5 million) project with only an initial three-year life, the payback is still impressive, and the exploration potential for extending life through other discoveries in the main project area within trucking distance of the proposed mill, and also perhaps from the nearby Escondido exploration project which has shown some interesting values and which borders Mariana's interesting Las Calandrias discovery, is considered strong. Minera IRL, with its now mined out Corihuarmi gold mine and its current Ollachea mine, both in Peru, has a proven, and successful, track record of starting small and very profitably extending mine life to well beyond initial estimates.

The Don Nicolas project came about through the acquisition of Hidefield Gold in late 2009.

This transaction enabled Minera IRL to acquire the project area and an extensive exploration tenement package totalling some 2,700 sq km of highly prospective ground located in Santa Cruz Province.

Geologically, the assets of its local operating subsidiary, Minera IRL Patagonia S.A., are situated in the Deseado Massif; a plateau consisting of Middle to Upper Jurassic age volcanic rocks that host economically important, fracture controlled, low sulphidation epithermal gold-silver mineralization. The company considers the Patagonia region as an emerging world class, yet under explored, precious metals province. (See a prior overview of Patagonia's precious mining potential here on Mineweb (Patagonian gold and silver rush under way and growing).

For the Don Nicolas project, the Measured and Indicated Resource in the combined High and Low Grade category is 5,638,100 tonnes grading 2.1 g/t Au for 381,400 ounces gold representing an 89% increase in these categories compared to the original Hidefield resource published in 2009. An additional 3,068,500 tonnes grading 1.5 g/t Au for 144,800 ounces gold is contained in the Inferred Resources category.  A feasibility study on the project was completed in February this year by Tetra Tech, while the resource estimate was produced by Coffey Mining. The high grade mineralization formed the basis of the feasibility study, while the low grade resource will be subject to future metallurgical test work to develop a low grade treatment process such as heap leaching.

The reported resource consists of nine steeply dipping quartzadularia epithermal veins located within the La Paloma and Martinetas gold fields. The NI43-101 compliant Measured and Indicated Resource in the High Grade category (above 1.6g/t gold lower cut-off grade) is 1,461,000 tonnes grading 6.0g/t gold and 13.4g/t silver for 280,000 ounces gold and 639,000 ounces silver. High Grade represents 74% of the total Measured and Indicated Resource

Measured and Indicated Resource in the Low Grade category (grades between 0.3g/t and 1.6g/t gold) is an additional 4,178,000 tonnes grading 0.8g/t gold and 3.9g/t silver for 102,000 ounces gold and 516,000 ounces silver.

Supplementing this is 3,069,000 tonnes grading 1.5g/t gold and 3.5g/t silver for 143,000 ounces gold and 347,000 ounces silver in the Inferred Resource category.

Based on a gold price of US$1,250 per ounce and silver at $25 an ounce, the study showed an NPV @ 5% real of US$44.7 million (pre-tax) and US$25.1 million (post tax); and IRR of 34.6% (pre tax) and 22.8% (post tax). At a higher gold price of US$1,500 per ounce, but silver still at $25 an ounce, the NPV @ 5% real improves substantially to US$82.2 million (pre-tax) and US$48.0 million (post tax); and IRR of 56.3% (pre-tax) and 38.1% (post tax).

The proposed mine design and production scheduling has resulted in Proven and Probable Mineral Reserves of 1.2 million tonnes grading 5.1g/t gold and 10g/t silver containing 197,000 ounces gold and 401,100 ounces silver (contained within the reported Measured and Indicated Resource).

A multi-open pit mining scenario (similar to some other operations in the region working narrow vein deposits - notably Cerro Vanguardia -  is outlined with ore production estimated at 350,000 tonnes per annum. A conventional crush, grind and carbon-in-leach (CIL) treatment plant will produce an average of 52,400 ounces gold and 56,000 ounces silver over an initial 3.6 year mine life, at an operating cost of US$528 per ounce gold after silver credits. From the reserves outlined to date, peak production is scheduled to occur in Year 2 of operation at 63,800 ounces of gold and 92,200 ounces of silver.

But the real key is Minera IRL's belief that there are excellent opportunities to extend the mine life through brownfields exploration, later development of deeper, underground resources and defining of newly discovered high grade veins which crisscross the area. This is very much the pattern, albeit on a larger scale, of the largest gold mine in the area, AngloGold's Cerro Vanguardia operation, where reserves now are still almost as big as they were when the mine started up back in 1998.

Although the area is sparsely populated, the infrastructure is excellent with a main highway running close to the site and the terrain is relatively flat making for easy access.  Water exploration has shown more than sufficient available and should the mine life be substantially extended through future exploration there is the prospect of bringing grid power into the site to further reduce costs.

iPad Version: Picture Gold bars are pictured at the Austrian Gold and Silver Separating Plant 'Oegussa' in Vienna: Lisi Niesner / Reuters