Minsur seeking to develop Brazil's Pitinga tin mine, boost Peru reserves

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Thursday, April 3, 2014

Minsur (BVL: MINSURI1), Peru's only tin miner, is seeking to develop its Pitinga mine in Brazil and boost reserves at its San Rafael operation in Peru after higher costs eroded profits last year.

Minsur, which has seven years of combined reserves and resources, seeks to replenish a year's worth of tin reserves, Lima-based Credicorp Capital said.

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"We find this announcement to be relevant because recent 2013 cost hikes respond to higher exploration efforts and because the low reserve base of San Rafael (three years) was hindering investor interest in this stock," Credicorp analyst Héctor Collantes wrote in a report Thursday.

Work at the company's Pitinga mine is slated to reach an area below the alluvial tin that previous owner Paranapanema extracted in the 1990s, said Collantes, who rates the stock 'buy'. This will allow the mine to become profitable in the near term, he said.

Tin producers association ITRI believes Pitinga, with resources for 420,000t plus rare earths such as niobium and tantalum, is the world's largest undeveloped tin mine.

Minsur, which sold US$450mn in 10-year bonds in January, is working on a prefeasibility study to treat up to 8,000t/y of tin from tailings at San Rafael by 2017. Work is also ongoing to develop the Mina Justa copper deposit, which has 3.3Mt in reserves, with partners Korea Resources and LG Nikko by 2020.

Minsur's profits fell 9% to US$239mn last year on higher costs and a US$36.9mn mining tax, while annual sales rose 18% to US$756mn. Costs rose to US$302mn in 2013 on the startup of the company's US$90mn Pucamarca gold mine, while exploration spending doubled to US$13.7mn, the company said.

Refined tin production at the San Rafael mine fell 3% to 24,132t last year, while Pucamarca produced 116,665oz gold.

In addition to the San Rafael and Pucamarca mines in Puno region, Minsur operates the Funsur smelter and refinery in Ica region. The miner is controlled by local holding Grupo Brescia.