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Minera IRL confounds sceptics with US$80mln local financing deal for gold project

Published: 06:20 19 Aug 2013 EDT

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Who said it is all over for gold miners in Argentina? Minera IRL (LON:MIRL, TSE:IRL) has shown that it is possible to get financing for the right project – and not just that, it has found local backing for the Don Nicolas property down there in Patagonia.

Its US$80mln financing deal belies the difficult political backdrop that has put the kibosh on interest in what was one of the most exciting emerging postcodes for the precious metal.

That Minera is now little over a year from first gold (Don Nicolas is slated to produce 50,000 ounces of the yellow metal a year), appears to have injected a little life into the share price.

At 11.30am, the stock was changing hands for 15.45 pence for a rise of around 11%.

For Canaccord, which values Minera at 40 pence a share, the key word is dilution – or lack of it – which is a huge boon for existing investors.

Meanwhile, John Meyer, of resources boutique SP Angel, reckons finding Argentinean backers is significant.

“This is a good project but investment appetite is likely to be limited given the political risk in Argentina where the likelihood of assets being seized is high,” he said.

“Finding a local investor with the capital is a smart move.”

The cash is being stumped up by investment company Compania Inversora en Minas, or CIMINAS for short.

It will pay US$45mln for a 45% share in the local subsidiary MIRL Patagonia and 9.1mln shares in London and Toronto-listed Minera.

A 4% stake in MIRL Patagonia is being issued to the arrangers of the finance, leaving Minera with 51% and control of Don Nicolas.

In addition, CIMINAS will provide the US$35mln of bridging finance required to get the mine into operation.

Don Nicolas can be up and producing by late next year. It is fully permitted and the consortium of contractors who will build the project has been chosen.

Broker Daniel Stewart, said: “Minera’s financing with CIMINAS is innovative in that it minimises the immediate dilution for shareholders.

“The Don Nicolas project has low technical risk and sound economics, and as such we feel Minera should be a core stock in a gold portfolio.”

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