International Minerals (TSX: IMZ) (SIX: IMZ) said Wednesday it has signed an agreement with Hochschild Mining to fast-track the development of their jointly-owned Inmaculada property in southeastern Peru, in a deal that will see Hochschild double its stake in the project.
Under the terms of the agreement, Hochschild, who currently has a 30% stake, will pay IMZ US$15 million in cash on closing of the deal for a 60% holding. Hochschild will also invest US$20 million in IMZ by way of a private placement at a price of C$5.25 per share, and will provide 100% of the initial US$100 million of funding required for the planning, development and construction of a mining operation at the Angela Vein deposit at Inmaculada, which is located 25km south of the Pallancata silver mine. Any expenses thereafter would be funded 60% by Hochschild and 40% by IMZ, according to their ownership interests after the deal.
Hochschild, who will be the operator of the project, has agreed to build a mining operation at the Angela Vein deposit with a process capacity of 3,000 tonnes per day within three years of the closing date.
IMZ and Hochschild will as well contribute their respective ownerships in the Pacapausa property to the Inmaculada joint venture. Pacapausa, in which Hochschild has an 80% stake with IMZ holding the remainder, is located adjacent to the Pallancata mine and the Puquiopata property, situated on the edge of Inmaculada.
IMZ, who currently owns up to 70% of the Inmaculada project, is also no longer required to complete a feasibility study at the property, or obligated to issue 200,000 common shares to Hochschild.
The agreement will allow IMZ to focus its efforts on speeding up production at its 100% owned Goldfield project in Nevada, where the company is aggressively drilling and plans to complete a feasibility study by the end of next year, with a targeted production date in 2014.
"The Inmaculada deal is structured in a similar way to the very 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," said IMZ president and CEO Stephen Kay.
According to the company, Pallancata is now the world's fifth largest primary silver mine after only three years of production.
In September, IMZ announced the results of an updated, increased mineral resource estimate and a scoping study for the Angela vein at Inmaculada. The company reported measured and indicated resources of 3.8 million tonnes at an average grade of 4.3g/t gold and 129 g/t silver, respectively, and inferred resources of 4.4 million tonnes at an average grade of 4.6 g/t gold and 200 g/t silver, respectively.
Conceptual mine production for the property was 8.0 million tonnes at an average grade of 3.8 g/t gold and 137 g/t silver or 6.1 g/t gold equivalent. The study also estimated that projected pre-tax cash flows from the project would be $660 million non-discounted and $434 million at a 5% discount rate, with pre-tax IRR estimated at 41%.
An updated NI 43-101 technical report for the Inmaculada project will be filed later this month, said Hochschild.
International Minerals is a silver-gold producer with production from its 40%-owned Pallancata Mine in Peru. Production of approximately 10 million ounces of silver and 33,000 ounces of gold is estimated by IMZ this year. The company also has majority-owned projects in Nevada and Ecuador.
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