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Mariana Resources turns attention to Peru in strategic shift

Last updated: 02:11 01 Feb 2013 AEDT, First published: 03:11 01 Feb 2013 AEDT

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South American miner Mariana Resources (LON:MARL, TSE:MRY) has revealed it will be focusing its efforts on Peru in a strategic change of direction.

In a comprehensive exploration update, Mariana said it had started a review of its projects in the Santa Cruz gold region of Argentina.

The group said the “outcomes” of the review are likely to include joint-ventures which could potentially result in “and/or asset sales”.

Major shareholder AngloGold Ashanti (LON:AGD) has a first right of refusal.

Chief financial officer (CFO) Glen Parsons says that if an asset sale similar to the recently announced Coeur d’Alene/Mirasol transaction became a possibility, then it would certainly “make sense” to do so.

Mirasol recently sold its 49% interest in the Joaquin silver-gold project in Santa Cruz to Coeur for US$60mln.

“What we’re trying to do is focus where we’re actually going to get some leverage,” Parsons said.

“We’ve still got good assets producing excellent exploration potential in Argentina, but whatever we do there we don’t seem to get the leverage in the share price and we believe that is more to do with investor sentiment towards the country at the moment.

“From our perspective, recognising it and trying to deliver what shareholders would want - being share price leverage - is what we think we can get out of Peru.”

Ever since Spanish oil company Repsol had its Argentinian assets seized, investors have been wary of putting their cash into companies in Argentina.

The CFO is in no doubt as to the potential in Argentina, however, he believes it would be better to look at alternatives in the near-term rather than spend money on drilling there with no rewards in the share price.

“The clever thing to do would be to slow down and get costs down to a minimum but still keep your assets in good standing whilst advancing them to drill-ready status,” he continued.

With that in mind, the plan in Argentina is to keep laying the groundwork to get the properties ready for drilling, by which time Parsons hopes sentiment will have improved and the market will appreciate the work done by Mariana.

“In a sense, Argentina will become a little bit of blue sky and in the shorter-term it’s Peru that’s hopefully going to deliver.”

The company is waiting on the drill permit for its Condor de Oro porphyry gold-silver-copper project in Peru being upgraded so that it can hopefully start drilling within three to six months, which Parsons believes will be a catalyst for the shares.

Today, Mariana also revealed it has been granted a 90-day extension to assess the full potential of the Yuracyacu area, the second option to the north of Condor de Oro.

The round of due diligence is a precursor to an earn-in deal with Canada’s Condor Resources (CVE:CN) that could see Mariana eventually take up to 51% of both options of the project.

Los Cisnes, one of the firm’s less developed Santa Cruz properties, is showing some good early promise with channel sampling of the El Brio prospect returning high grade silver assays.

Los Cisnes is 75 kilometres from Yamana’s (TSE:YMI) Cerro Moro project and 120 kilometres from Mariana’s flagship Las Calandrias property.

Broker RFC Ambrian praised Mariana for getting its priorities in order to “get the most ‘bang for its buck’”.

“Given the current uncertainty surrounding operating in Argentina, the company’s decision to diversify away from the prospective Santa Cruz province is a sensible one for the short term,” said analyst Duncan Hughes.

“Whilst the exploration potential in this prospective gold province is not in question, exploration is still relatively early stage in Santa Cruz and the company is likely to be able to advance the Peruvian assets more swiftly and with less initial expenditure.”

He maintained a ‘speculative buy’ rating, adding that the key to any share price increase lies in exploration success.

Shares lifted 5.9% to 4.5p each.

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