Minera IRL - is it worth hanging on for the bounce?

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Shares in AIM, Canada and Peru listed Minera IRL (LSE:MIRL) commenced 2013 at more than 50p but currently trade down at 43p – capitalising this Latin America focused gold miner at just below £75 million. This has not been one of my greatest tip from my t1ps.com days (I tipped it at 69p) so what to do now.

Click here to read my initial post-t1ps analysis of Minera

The most recent news is that the company has announced that the exploration drive at its Ollachea project in Peru has been completed ahead of schedule and under budget and “indicates that assumptions used in the Definitive Feasibility Study, completed in November 2012, are conservative. This particularly relates to better ground conditions, a much higher advance rate and minimal water infiltration. The focus now turns to the exploration drilling from underground, which commenced early in January”.

Click here to read my analysis of the feasibility study announcement

In February the company raised a net circa £9 million at 45p per share to help fund development at Ollachea and exploration work. However, in a clear sign of how tough the funding environment is for this market sector currently, this sum is less than half of what Minera’s experienced management team had originally aimed for. This means some scaling back of intended works such as further extending the Ollachea exploration tunnel, exploration work and project development work in Argentina.

However, the company continues to generate cash from the producing Corihuarmi mine, also in Peru, and thus is now adequately financed for the time being. Further ahead though significantly more money will be required to bring the company’s development projects into production – it is currently aiming to have permitting and financing in place for Ollachea in the second half of this year. I continue to believe the assets and potential here mean that there is long-term value in the shares – and non-executive director of the company, Napoleon Valdez, would seem to agree having subscribed for £157,500 of the new shares last month. The patient investor may thus be content to hold and wait but positive financing news or a sharp uptick in the gold price is likely needed to spark these shares again.

In the short run there are more attractive bets in the mining sector. I would for instance suggest looking at my analysis of:

Highland Gold – here

Bellzone Mining – here

Medusa Mining – here

Aquarius Platinum – here

Tom Winnifrith has been writing about shares for almost a quarter of a century and now writes for 10 US and UK websites. You can find links to all of his work at his own website www.TomWinnifrith.com and you can follow Tom on twitter @tomWinnifrith

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