In less than a month, Minera IRL (TSX: IRL; LSE: MIRL) has lost community support for its Ollachea gold project in Peru, dismissed its interim CEO, and most recently, shown its executive chairman Daryl Hodges the door.
The issues appear to have started after Minera IRL’s cofounder, executive chairman and CEO Courtney Chamberlain stepped down for health reasons in March. Hodges, who joined as director in February 2014, took over Chamberlain’s board duties.
In April, Chamberlain, who spearheaded strong ties with the Ollachea community, passed away. A month after mourning his loss, Minera IRL appointed co-founder Diego Benavides as interim CEO. Benavides — a Peruvian lawyer and honorary member of the Ollachea community — previously held executive positions at two of the firm’s subsidiaries. He also played a role in establishing the publicly traded company, which has been producing from its Corihuarmi gold mine in Peru since early 2008.
Everything seemed on track, with the miner announcing in June that it had lined up a US$70-million bridge loan from the Peruvian state-owned development bank Corporacion Financiera de Desarrollo. The bridge loan would have been the first component of a senior debt facility of up to US$240 million, structured by the bank to develop the Ollachea project.
Optimized mine studies last year pegged Ollachea’s start-up costs at US$165 million and total costs at US$220 million. Annual production would average 100,000 oz. gold over at least nine years.
But community relations turned sour in August. Juan Luis Valeriano, the president of the Ollachea community, notified Minera IRL in a letter that the community was withdrawing project support until it made management changes.
The Peruvian media noted that the community had asked why Benavides was only “interim” CEO and why Hodges had taken over Chamberlain’s position after his sudden death, implying that Benavides should have taken the top job.
Without local support, the company had to halt activities at Ollachea, including a planned 5,000-metre exploration drill program that was set to start in August, and finalizing an engineering, procurement and construction management contract. Minera IRL says the delay puts the project’s financing at risk.
The breakdown of communications is a major blow to the gold miner, which has spent eight years fostering community relations, plus more than US$100 million advancing the Ollachea project, including spending US$25 million on community initiatives.
Brad Boland, the company’s chief financial officer, said that Minera IRL is working to re-establish relations, but didn’t provide specifics on what went wrong: “It is a priority for the company to mend that relationship for sure.”
Adding to the chaos, on Aug. 24, Minera IRL’s board unanimously voted to remove Benavides from his interim CEO role, explaining it was investigating allegations of impropriety from its whistleblower hotline.
The drama continued as Minera IRL’s shareholders in the Aug. 27 annual general meeting voted against four resolutions, including re-electing Hodges as chairman and a 10-for-1 share consolidation.
With Hodges out of the picture, the company’s remaining two directors — Doug Jones and Robin Fryer — quickly appointed Jaime Pinto as a new director. Pinto, a veteran Peruvian lawyer, is the principal partner of Pinto & Abogados law firm in Lima. He’s also a director for Peru’s largest oil refinery, Refineria la Pampilla.
Minera IRL’s board is looking for a new CEO. The company says it has enough management resources in place to continue its daily activities.
The miner closed Aug. 28 down 14% at 9¢, after doubling to 10¢ a day earlier.