Mineros’ Nicaragua Expansion: Reading the 37.9% IRR Honestly

Nicaragua produced 131,831 ounces of gold for Mineros S.A. in 2025, hitting the top of guidance and contributing roughly 59% of the company’s consolidated 221,608 oz group output. The country has quietly become the engine of the business.

Now the company is spending US$25 million to push that number materially higher, and it is doing so before its most ambitious project in Nicaragua has even broken ground. The plan runs in two stages: a brownfield plant expansion already baked into 2026 guidance, followed by a stand-alone underground project carrying a 37.9% after-tax internal rate of return, proven and probable reserves, an environmental permit already in hand, and detailed engineering underway.

The sequencing is the point. It narrows the gap between what Nicaragua produces now and the step-change output Mineros is targeting, while keeping capital deployment staged rather than concentrated.

Here is what the numbers tell you about whether Mineros can engineer a 300,000-ounce Nicaragua platform, where the economics genuinely hold up, and where the most material variables actually sit.

What the HEMCO platform already delivers, and why the baseline matters

Before you can judge the expansion, you need to understand what it is building on. The HEMCO property in the Bonanza district is not a speculative growth story bolted onto a small base. It is a producing platform with a deep operating history.

In FY2025, HEMCO delivered 131,831 oz, the majority of consolidated group production of 221,608 oz, with Colombia contributing the balance of 89,777 oz. For 2026, Mineros is guiding to 137,000-147,000 oz from Nicaragua out of a consolidated 220,000-240,000 gold-equivalent ounces, meaning Nicaragua remains the dominant contributor to the group’s near-term growth.

The Bonanza district has produced approximately 8 million ounces of gold historically, one of the most productive mining districts in Central America.

What makes HEMCO’s economics different from a conventional mid-tier mine is where its ore comes from. Roughly 80% of the ore volume processed at the plant is sourced from artisanal miners who haul material to the facility from within Mineros’ own concessions, and that ore is purchased at approximately 45% of the prevailing spot gold price.

The artisanal share is not a footnote. Around 80% of HEMCO’s ore volume comes from artisanal partners. In Q1 2025, that share was confirmed in the actuals: 24.2 koz of artisanal production out of 31.0 koz total HEMCO output, or approximately 78%.

That sourcing model reshapes the cost structure in three specific ways:

• Ore is purchased rather than mined by Mineros, converting a large slice of what would be fixed mining cost into a variable input linked to throughput and grade.
• Capital concentrates in processing infrastructure and the company’s own underground operations, not in developing dozens of narrow veins.
• The blended all-in sustaining cost can sit structurally below a comparable mine that must fund every ounce of its own extraction.

This matters before you evaluate the expansion, because the throughput lever only converts into the margin expansion the headline numbers imply if the artisanal feed keeps arriving. The current 1,800 tpd plant is the binding constraint on how many of those purchased ounces can actually be processed. That is precisely the constraint the expansion is designed to relieve.

The US$25 million throughput expansion: what 700 extra tonnes per day buys

The expansion is straightforward to describe and more interesting to interrogate. Mineros is lifting plant capacity from approximately 1,800 tpd to approximately 2,500 tpd, a throughput increase of roughly 40%, for around US$25 million in capital. The company expects it to add 30,000-40,000 oz per year, alongside recovery improvements.

Run the arithmetic on that and the picture sharpens. At US$25 million for a midpoint of 35,000 oz of incremental annual production, the expansion costs roughly US$714 for every added ounce of annual capacity. Across the full guidance range, that lands at approximately US$625-833 per incremental annual ounce.

That number is the one that matters most here.

At roughly US$700 per annual ounce of added capacity, this is priced like a brownfield debottleneck, not a mine build. A greenfield operation typically demands multiples of that figure in upfront capital per ounce, which is why the distinction has direct consequences for how quickly the new ounces convert into free cash flow. The payback on a debottleneck of this kind is short, and the ounces sit on top of an operating asset rather than waiting on years of construction.

Brownfield expansion economics consistently deliver faster payback and lower capital intensity than greenfield alternatives at comparable throughput increments, a structural advantage the HEMCO debottleneck illustrates cleanly against the more capital-intensive Porvenir build sitting behind it in the queue.

The wider portfolio momentum supports the case. Consolidated production reached 118,103 oz in H1 2026, up 9% year on year, indicating the platform was already trending upward before the expanded capacity was fully in place.

The financial logic still rests on one dependency the headline capex figure does not surface: 700 additional tonnes per day only produces incremental ounces if it can be filled with ore at grades consistent with historical performance. Given the artisanal model’s variable supply, that is a real assumption, not a given.

Phase 2 and the permitting runway

There is a second leg of optionality already sitting in inventory. Mineros holds a separately stored 1,000 tpd mill that could form the basis of a further expansion, potentially lifting total capacity to approximately 3,500 tpd.

The permitting runway is what makes this cheap optionality. Existing authorisations already permit processing of up to 4,000 tpd, so neither the confirmed 2,500 tpd phase nor a future 3,500 tpd phase carries incremental permitting risk.

No formal Phase 2 decision or timeline has been publicly announced, so this remains optionality rather than commitment. For an investor, it is upside to note, not production to model.

Porvenir’s prefeasibility case: reading the 37.9% IRR honestly

The second leg of the Nicaragua plan is where the returns get eye-catching, and where scrutiny earns its keep. The 2026 updated prefeasibility study (PFS) for the Porvenir underground polymetallic project, announced by Mineros in March 2026, lays out headline economics that stand out sharply against the sector.

Initial capital is pegged at US$206.8 million, generating an after-tax net present value (NPV) of US$460 million at a 5% discount rate, a 37.9% after-tax IRR, and a payback of roughly two years from the start of production. Average annual sales across years 1-9 run to 72.3 koz of gold-equivalent (54.5 koz Au, 190 koz Ag, 28 Mlb Zn, 3.75 Mlb Cu), at an all-in sustaining cost of approximately US$1,295/oz AuEq.

Proven and probable reserves stand at 6.48 Mt grading 2.86 g/t Au, for 596 koz of contained gold and 736 koz AuEq in total.

NPV-to-capex of ~2.2x. A project generating more than twice its build cost in net present value sits well above typical mid-tier project economics. It signals a genuinely high-return asset, provided the assumptions underneath it hold.

Here is where honesty about the numbers matters. Latin American mid-tier gold projects typically show IRRs clustering in the 15-25% range at comparable discount rates. Porvenir’s 37.9% is close to double the sector norm, and an outlier of that size is a signal to interrogate rather than accept at face value.

Two assumptions drive most of the gap. First, the PFS models a gold price of US$3,150/oz, which reflects recent highs rather than a long-run consensus figure. An IRR nearly double the sector average at a price deck sitting near recent peaks is a prompt to re-run the economics at a more conservative price before treating 37.9% as the base case rather than the optimistic scenario.

Mining feasibility study economics at the prefeasibility stage carry embedded assumptions that compress or expand IRR estimates significantly depending on commodity price deck choices, discount rate conventions, and cost escalation buffers, and those methodological choices are frequently where sector outliers like Porvenir’s 37.9% figure require the sharpest scrutiny.

Second, Porvenir is polymetallic. The revenue mix spans gold, silver, zinc, and copper, which cuts both ways: the by-product credits improve the economics meaningfully and offer some natural hedging against any single metal’s weakness, but they also expose the IRR to four separate commodity markets, each with its own supply and demand dynamics.

The variables worth stress-testing before treating the PFS as your base case are:

1. Gold price: the US$3,150/oz deck is elevated versus long-run averages, and sustained weakness would compress both IRR and NPV.
2. Capital deviation: any drift above the US$206.8 million estimate from inflation, engineering changes, or delays feeds straight through to returns.
3. Grade and recovery: lower-than-modelled grades or metallurgical recoveries would reduce annual AuEq output.
4. Operating cost escalation: energy, labour, and reagent costs all sit inside that US$1,295/oz AISC.

The artisanal model as competitive advantage and operational dependency

Return to the artisanal partnership, because it is not a background operational detail. It is the single variable that most explains why HEMCO’s economics look attractive, and where the growth story’s least appreciated risk sits.

Start with the advantage. Buying ore at approximately 45% of spot means Mineros captures a substantial margin on every artisanal ounce without funding the extraction. With that feed comprising around 80% of HEMCO’s ore volume, the blended cost structure lands structurally below a comparable mine that must pay to mine every tonne itself. The company’s exploration economics compound the edge: internal drilling costs run to approximately US$100 per metre, roughly one-quarter of what peers pay, and mineral data from the artisanal ore streams helps guide exploration targeting.

Now the dependency. With artisanal feed at approximately 78-80% of HEMCO ore volume, any disruption to that supply flows directly into production, not merely into operational inconvenience. The 2025 guidance illustrates the scale: 87,000-96,000 oz of the 120,000-132,000 oz HEMCO target was expected from artisanal sources.

The contrast is worth laying out plainly:

• Advantage: ore at ~45% of spot lowers blended AISC. Risk: grade variability from decentralised sourcing.
• Advantage: minimal extraction capital required. Risk: supply swings from security events, community relations, or seasonal factors hit production directly.
• Advantage: artisanal ore data sharpens exploration targeting. Risk: the model only works where community trust is actively maintained.

What this tells you is that production reliability at HEMCO is ultimately a community-relations outcome as much as a mining-engineering one. That is a different category of risk from the operational risk investors usually price into a conventional mine, and it is asymmetric: the model makes the unit economics work, and it carries the sharpest downside if community or supply dynamics deteriorate.

Artisanal mining formalisation frameworks, where a processing company anchors decentralised small-scale producers into a structured supply chain, have produced meaningfully different cost and community-relations outcomes across comparable operations globally, offering a useful reference point for assessing how durable HEMCO’s model is likely to be.

ESG and governance: the costs of maintaining the model

The sustainability of the model depends on ongoing spending, not a one-time compliance sign-off. The specific pressure points are enforcing environmental and safety standards across decentralised artisanal operators, overseeing labour practices, and managing grade variability in the incoming supply.

These are best read as continuing investment requirements rather than binary pass-or-fail risks. They are currently described as well-managed, but the governance complexity and cost of keeping them that way are real.

The Artisanal Gold Council’s Nicaragua sector assessment documents the scale and operational dynamics of artisanal and small-scale gold mining in the country, including production volumes, formalisation processes, and mercury inventory data, providing independent context for the structural role that artisanal supply plays in HEMCO’s ore sourcing model.

One feature does double duty here: ore from artisanal partners undergoes a transparent thermal whitening process that partners can directly observe. It serves as a quality-control step and, just as importantly, as a trust mechanism that underpins the community relationships the whole model depends on.

What Nicaragua needs to deliver before the 300,000-ounce target becomes credible

Put the two legs together and the destination comes into view. The expanded HEMCO platform (137,000-147,000 oz in 2026, with further upside from Phase 2 optionality) plus Porvenir at 72.3 koz AuEq average annual production across years 1-9 approaches the 300,000 oz level at the portfolio scale. That combined figure only materialises if Porvenir reaches full production on schedule.

The honest read is that the target is plausible, and the timeline is not yet firm. Three specific gates stand between detailed engineering and confirmed production.

1. Receipt of the outstanding forestry permit and water discharge authorisation, neither of which has been publicly confirmed as received as of September 2026.
2. A formal construction sanction, which no public disclosure had announced as of September 2026.
3. Successful execution of the roughly US$206.8 million capital programme in a higher-risk operating jurisdiction.
4. Ramp-up to the full 72.3 koz AuEq annual production rate once built.

The engineering is not the gating item. Detailed engineering is underway following an independent engineering review confirmed on 18 August 2026, and preliminary site work including access roads has begun. The gap where the investment thesis is currently parked sits between “detailed engineering underway” and “construction decision made”, and the outstanding permits are the items holding that decision, not the engineering, the capital, or market appetite.

The jurisdictional layer deserves conscious pricing rather than a discount for the company’s long history in the country. Nicaragua carries a risk premium tied to:

• Concentrated political power and limited institutional checks.
• Evolving regulatory frameworks.
• International sanctions considerations that can affect access to capital and trade.

Mineros’ long operating record, existing permits, and community integration mitigate some of this, but the premium remains a real input for anyone pricing the stock. The 300,000 oz figure frames the entire growth narrative, yet its credibility rests on a set of concrete, trackable milestones that management cannot fully control.

Nicaragua sanctions risk has escalated materially in 2026, with asset seizures and expanded designations creating tangible consequences for companies operating in the country, a dynamic that any investor pricing Mineros’ jurisdictional premium needs to track actively.

The district optionality that could extend the upside

Beyond the reserve base sits the broader Porvenir Polymetallic District, including the satellite deposits of Guillermina, Leticia, and San Antonio. These are being explored as potential reserve extensions.

Frame them as NPV upside and mine-life extension, not committed production. Tellingly, the Porvenir processing facility was designed at an initial 2,000 tpd with engineering headroom to scale to 4,000 tpd, a design choice made explicitly to accommodate district-level growth.

A staged capital model with a credible first leg and a contested second

The clearest way to hold this investment case is to weigh the two legs separately, because their risk profiles are not remotely alike.

The HEMCO expansion is where the case is already largely de-risked: an operating asset, US$25 million in capital, a 40% throughput increase, incremental production of 30,000-40,000 oz per year, and no incremental permitting risk. At roughly US$700 per annual ounce of added capacity, it sits at the favourable end of brownfield benchmarks. The one caveat is that no commissioning date for the 2,500 tpd capacity had been confirmed as of September 2026.

Porvenir is where the upside concentrates and where the unresolved risks live: a stand-alone plant build, US$206.8 million in capital, a 37.9% IRR, a US$460 million NPV, roughly two-year payback, but outstanding permits and no construction sanction.

The analytical insight is in the sequencing. Mineros is using the low-risk, fast-payback brownfield leg to generate cash flow and demonstrate execution while Porvenir works through its remaining pre-construction gates. The whole case rests on whether the company can run the first leg cleanly enough to sustain the credibility needed to finance and build the second on the terms the PFS assumes.

For the next 12 months, four variables tell you how the story is tracking:

• Receipt of the forestry and water discharge permits.
• A formal Porvenir construction sanction.
• 2026 Nicaragua production delivered against the 137,000-147,000 oz guidance.
• Any revision to the US$206.8 million capital estimate.

Understanding the two-stage structure lets you assign separate probability weights to each leg rather than treating the 300,000-ounce target as a single binary outcome, which produces a more accurate risk-adjusted view of the growth story.

This article is for informational purposes only and should not be considered financial advice. Investors should conduct their own research and consult with financial professionals before making investment decisions. Past performance does not guarantee future results. Financial projections are subject to market conditions and various risk factors, and forward-looking statements are speculative and subject to change based on market developments and company performance.