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Rio Tinto and Minera IRL strike deal for Ollachea payment

Friday, December 27, 2013 by Ian Lyall - Proactive Investors UK

Rio Tinto and Minera IRL strike deal for Ollachea payment

Latin America-focused gold miner Minera IRL (LON:MIRL) (TSE:IRL) said on Tuesday it will pay the entire first instalment owed to Rio Tinto (ASX:RIO) (NYSE:RIO) for the Ollachea gold mine in shares.

A previous agreement allowed for only 80% of the US$7.3mln first tranche to be satisfied in stock. The equity will be issued between January 7 and 11.

In all, Rio will receive US$21.5mln. The terms of the second instalment, due July 1, 2016, remain unchanged.

Ollachea, in Peru, is expected to be the company-maker. The construction permits are due toward the end of the first quarter of 2014, while the group is currently speaking to potential debt funders of the 100,000 ounce a year underground operation.

Minera also owns the producing Corihuarmi mine in Peru and Don Nicolas in Argentina.

The latter has been financed via US$45mln of investment direct to the project and a US$35mln bridging loan, and will go into construction phase next year, followed by production late 2014 or early 2015.

All-up average cash operating costs of Don Nicolas (US$578 an ounce) and Ollachea (US$583) mean the projects would survive in almost any realistic gold price environment.


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