Lima (UPI) Oct 21, 2010
Peru is fast-tracking production at its Inmaculada gold and silver mine following agreements signed between International Minerals Corp. and Hochschild Mining plc, the two international companies involved with the project.
The deal between the investors signaled renewed international interest in the Peruvian economy after many years of financier hesitation, partly because of the country's role in the cocaine trail to North America, drug-related violence and resulting insecurity.
International Minerals Corp., also known as IMZ, said it signed a binding framework agreement with Hochschild Mining plc to fast-track development and commencement of production at their jointly owned Inmaculada mine. The site is 15 miles south of the Pallancata silver mine, which is jointly owned by IMZ and Hochschild.
Production of gold, silver and copper in Peru increased in 2009 but the increased income hasn't filtered down to the bulk of the country's population 29.5 million, which remains poor.
Gold production increased 1.41 percent to 6.4 million ounces, while silver production increased 4.56 percent to 136 million ounces, the Ministry of Energy and Mines said.
Peru is the world's top producer of silver and ranks as the third largest copper producer and sixth largest gold producer.
The expansion of Peruvian mining industry has driven the government to seek means of increasing energy production. Wind energy projects are among renewable energy sources being explored by the government.
IMZ controls a 70 percent interest in Inmaculada through its 51 percent direct ownership and its right to earn an additional 19 percent interest by completing a feasibility study before September 2013 and by issuing 200,000 shares to Hochschild.
Based on the terms of the agreement, IMZ would own a 40 percent interest in
Inmaculada and Hochschild would hold the balance of 60 percent. The transaction remains subject to regulatory approvals and definitive documentation which will be expedited, IMZ said.
Hochschild specializes in building and operating low-cost underground precious metal mines in difficult terrains in the high Andes.
IMZ's President and Chief Executive Officer Stephen Kay emphasized the purpose of the deal was to fast-track production. The deal, he said, would allow IMZ to focus its own efforts on expediting production at its 100 percent-owned Goldfield project in Nevada.
The company says it is "aggressively drilling" at the U.S. site and plans to complete a feasibility study by the end of next year. Production is expected to start in 2014.
The Inmaculada deal is structured in a similar way to the successful Pallancata mine deal in 2006, where production was significantly accelerated and IMZ has already received about $24 million of free cash flow on an original investment by IMZ of only $5.5 million.
Pallancata is set to become the world's fifth largest primary silver mine in 2010 after only three years of production.
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