TORONTO (miningweekly.com) – Latin America-focused gold junior Minera IRL has clinched an agreement with Rio Tinto Mining and Exploration to defer the payment dates for the final amount owed for the Ollachea gold project, in Peru, resulting in more financial flexibility for the company.

Under the revised agreement, Minera will repay Rio Tinto the outstanding $21.5-million in two instalments, the first of which, $7.3-million, is now due on January 11, 2014, rather than on October 11, 2013.

The companies also agreed to merge the second and third instalments into one final payment of $14.2-million, which is due on July 1, 2016. Originally, the second and third instalments of $7.1-million each were due in July 2014 and July 2015.

Minera said that at its discretion, it could choose to pay for up to 80% of the principal amount in ordinary shares. The company also has the right to settle all the amounts in cash, at any time.

Both instalments carry a coupon rate of 7%, to be paid in cash. The first instalment’s interest payment is due on January 11, 2014 and the final instalment’s interest payments are due on the first day of July in 2014, 2015 and 2016.

“The deferral of the first instalment provides the company with additional financial flexibility over the near term. The deferred payment [of the second instalment] also creates an opportunity for Minera IRL to potentially pay the outstanding amount out of cash flow from the Ollachea mine, which we plan to bring into production in 2015,” executive chairperson Courtney Chamberlain said.

Minera acquired the project from Rio Tinto in 2006. In 2007, the company entered into an agreement with Rio Tinto for the transfer of the Ollachea mining claims, which included provisions for payments based upon achieving certain milestones, including the delivery of a positive feasibility study.

In the third quarter, Minera agreed to pay the final amount to Rio Tinto based on the results of the November 2012 feasibility study, which concluded that the $177.5-million Ollachea could be a “long-life, robust project” with production of over 920 000 oz. Based on a gold price of $1 300/oz, the study returned a life-of-mine post-tax cash flow of $325-million, an after-tax net present value of $155-million and an internal rate of return of 22.1% and a payback period of 3.7 years.