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Minera IRL: SQ Production: Surprises on the upside

Contributed by Fox-Davies Capital

Minera IRL has announced its September quarter production figures and financials. For the three months ending 30 September 2012, the Company processed 535,302 tonnes of ore grading 0.47g/t gold and produced 7,660z of gold. Sales amounted to 7,520oz with a realised gold price of $1,667/oz. Site operating costs were $552/oz. This resulted in revenues totalling $12.5M and an EBITDA of $4.8M with net profit after tax of $1.7M.

The tonnes milled figure was broadly in line with our forecast, but we were surprised by the low grade. The main feature however was the recovery. On a straightmirl calculation it was 94.7% and recoveries over the past 12 months have averaged just over 100%. This strongly suggests that much of the material that was put on the heaps historically is still slowly leaching away, hence the high recoveries. The better than expected recoveries, the fact that the scree material does not need crushing, plus the low strip ratio is helping keep the cash costs down. The cash cost for the quarter, $552/oz was the same as for the year to date. If recoveries hold up, then this cash cost can be repeated in the current quarter. Next year the grade of ore processed is expected to drop to 0.42g/t and cash costs will rise, but the mine is expected to yield a very positive cashflow.

At Ollachea the exploration tunnel is proceeding well with 200m being driven in October and the total distance driven was 669m. Ground conditions have been reasonable, especially in the 420m fault zone.

Since the end of the September quarter, on the 2nd of November, the Macquarie bank Finance Facility dated 7 July 2010 was amended to make available the $10M Tranch 2 Facility and extend the Facility Repayment Date from 31 December 2012 to 30 June 2014. The facility is at LIBOR plus 5.0% margin.