Minera eyes mid-tier prize

Minera IRL (IRL-T, MIRL-X, MIRL-L) wants to become a mid-tier gold producer, and it’s looking to South America’s gold wealth to reach that goal.

The company, which currently has a small operating open-pit gold 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 gold project in Argentina’s Santa Cruz province into production by 2012, and then follow that up two years later with production from an underground mine at its Ollachea gold project in southern Peru.

It’s an ambitious schedule, but the prospectiveness of the projects in a high gold price environment keeps driving Minera.

Currently, the company’s only source of cash flow is from Corihuarmi, which produced 15,169 oz. gold in the first half of 2010 at a cost of US$396 per oz. — enough to bring in $10 million of revenue from an average realized gold price of US$1,157 per oz.

The optimized mine plan calls for mining more ore — specifically, it will include 3.8 million tonnes grading 0.5 gram gold of scree material — 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 started production in 2008 and churned out 33,000 oz. gold in 2009. And while those types of production numbers aren’t enough to fund the building 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 had $6.6 million in cash to go along with a debt of $2.5 million.

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

The first round of drilling at Escondida, which is south of Don Nicolas, 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 of 0.65 gram gold and 5.7 grams silver.

Minera believes the results come from a zone that is likely the extension of neighbouring Mariana Resources’ (MARL-L) Calandria Sur discovery.

The combined strike length of the Escondida and Calandria Sur mineralized breccia system controlled by the two companies is more than 1 km.

Minera plans to expand the drill program at Escondida before the year-end, with metallurgical test-work getting underway shortly.

Both Escondida and Don Nicolas lie in Patagonia’s Deseado Massif region, which has gained renown lately thanks to Andean Resources’ (AND-T, AND-X) Cerro Negro gold project.

As for Don Nicolas, the project has an indicated resource of 1.08 million tonnes grading 5.8 grams gold for 201,000 oz. gold and inferred resources of 1.07 million tonnes grading 4.6 grams gold for 158,000 oz. gold.

Minera wants the project to produce 60,000 oz. gold per year 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, roughly 250 km north of Lake Titicaca, currently has an inferred resource of 13.5 million tonnes grading 3.62 grams gold for 1.57 million oz. 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. gold per year at a cash operating cost of under US$400 per oz.

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