-- Published: Tuesday, 13 January 2015 | Print | Disqus
For most mining companies 2014 has been a tough year that canít end fast enough. But for Inca One Gold (TSX-V: IO) it has been a year of growth, with the company managing to deliver on its commitment to transform itself from another struggling junior explorer into a gold-ore processor with established potential.
The company is currently in the final stages of upgrading the capacity at its Chala One gold-ore processing plant in southern Peru to 100 tonnes per day, a quadrupling of the capacity compared to when Inca One bought the plant only last year.
Final upgrades underway at Inca One Goldís ore processing plant.
Inca One is working to expand its capacity and establish itself as a gold-ore processor to take advantage of a major shift in Peruís gold industry. The government is working to formalize the countryís $2-billion informal gold mining sector, with new laws requiring all miners to become licensed and to process their ore at a certified facility. Inca One is looking to become one of the processors of choice in the country.
Since buying its Chala One plant, the company has been concentrating on increasing processing capacity, securing high-quality ore supply, and finding the money needed to make use of both. So far itís succeeding.
The company managed to raise $5.5 million this year to fund the 400% increase in capacity at Chala One, despite the tough markets. It took five months longer than expected, but the company was able to find the money in three tranches of bond financing over six months. For a junior to raise millions in this climate is no small accomplishment, and it opens the doors to much needed future cash flow.
Gold ore delivery at the Chala One site.
If the company manages to find enough 0.8-oz.-per-tonne ore supply to feed itís 100 tpd mill it should generate US$9.8 million in cash flow for 2015. That number drops to a still very respectable US$7.8 million at an average of 0.5 opt, with both totals based on US$1,250 per oz. gold.
So far the company has secured 350 tonnes a month of ore supply from a local miner, with the potential to ramp that up to 1,000 tonnes a month as the miner itself increases production. The company is also busy on the hunt for more supply, with five employees working full-time on establishing relations and arranging ore supply contracts. More high-grade gold ore supply deals should materialize shortly.
Processed gold ore sacks waiting for delivery.
In the meantime the company is working to make sure its mill is ready for the supply, having started test milling in October. The company recovered 157 oz. gold and 184 oz. silver in the process, though no recovery rates were announced.
If everything goes as planned, the company can just keep ramping up capacity and cash flow. The companyís 42-acre property easily has enough room for 300 tonnes a day of capacity, while Inca Oneís long-term plans are to buy more small-scale processing plants in Peru and ramp up overall production to over 1,000 tonnes a day in five years.
The company has plans to apply for permits to increase capacity to 250 tpd and it has also installed an 80-tonne weigh scale and metallurgical lab on site.
People make the company
To prepare itself for the transition to full-fledged gold processor Inca One has not only been boosting its physical capacity but also its operational capacity. The company has made several key hires that will be key as it ramps up production.
Jamie Polar was hired in September to lead the company on the ground as VP of development and operations in Peru. Polar has over 20 years of managerial experience in mining and steel, having worked as operations general manager at Barrick Goldís Pierina mine before coming to Inca, and before that as project superintendent at Barrickís Lagunas Norte mine.
In late November Polar brought on his old colleague Emilio Ortiz to be mill superintendent. Ortiz brings 15 years of experience, including a long stretch at Barrick Goldís Pierina gold mine in Peru where his positions included General Chief of Maintenance Engineering, Chief of General Water Management, and Manager of Processing.
For chief metallurgist the company has hired Carlos Santana, who previously worked for over seven years as chief of plant operations at the Chaparra Mill of Minera Colibri, (Approx 60 KMs from Chala One Plant) where he oversaw the doubling of capacity to 150 tonnes per day. Santana also worked for four years as chief shift supervisor of metallurgical operations at the Chumpe concentrator of Centromin Peru.
And to make sure operations finances are managed properly the company brought on Oliver Foeste as Chief Financial Officer, who brings over 10 years of experience to the job. Foeste is also the managing partner of Invictus Accounting Group, and was previously director of finance and corporate secretary of Huntingdon Real Estate Investment Trust. Mr. Foeste is a Chartered Accountant with significant experience in growing companies. Prior experience includes Divisional Controller of Precision Drilling Trust where he helped expand operations back into the United States in 2007 with a $50 million capital budget.
The new hires join an already established team that includes Edward Kelly as President and CEO, who brings more than 20 years of management experience and several years of working in Peru; George Moen as Chief Operating Officer, who has run a number of successful franchise businesses across Canada including Blenz Coffee and Steamrollers; and Mark St. John Wright, as VP Operations & new projects, with a background in process engineering in heavy industry, metal purification and extraction.
Together the team has managed to raise the profile of the company, and its share price in turn. The company has managed to roughly double its share price from about $0.09 in January to High of $0.22 in December in a year that saw many better-known companies falter.
With 65 million shares outstanding (17% of which are owned by management) the company has a market cap of over $11 million, while it reported assets of $1.4 million in early December. The company also has about 18 million warrants and options, with most ranging from $0.15-$0.20, so Inca One could see more money come in if the share price holds.
As the company transitions away from its junior explorer roots it had to make some write-downs on its exploration properties. For its Corizona project the company wrote down $367,000, and it wrote down $2.5 million on its Las Huaquillas project after it couldnít find a partner to continue development.
Compared with most gold mining companies in the sector, Inca One can be quite satisfied with what it has accomplished this year, and the promise that 2015 holds. The company should emerge from Q1 of next year with a 100 tpd operating mill, a good start on quality feed for the mill, and plenty of room for growth.
Longer term, the company will be looking to secure more mill projects in the country, raise upwards of US$15 million to continue increasing capacity at Chala One and secure more mills, and before long become a profitable and sustainable milling operation.
The company faces competition from more established players like Dynacor Gold Mines, which also operates as a gold-ore processor in Peru, but Inca One looks to be putting the pieces in place to claim a healthy chunk of Peruís $2 billion informal gold mining sector.
Dynacorís business model is to take its profits and fund its exploration. Inca Oneís model is cash-flow focused which is more welcome in this low-risk environment. Strong balance sheets will find better valuations in the marketplace.
As one of the top performing gold stocks in 2014, Inca One Gold has transformed itself into a high-grade gold ore processor. 2015 will see these efforts pay-off with strong cash-flow as it reaches the next big target in Q1, 100 tonnes per day. Management continues to build a qualified team that will facilitate further growth. All is coming together for Inca One to continue building off of this yearís momentum and deliver to its shareholders another year of sector outperformance.
- Peter Spina, President of GoldSeek.com
Inca One Gold (TSX-V: IO)
Peter Spina's experience with the precious metal markets started back in the mid-1990s, which led to the creation of GoldSeek.com back in 1995. Today GoldSeek.com ranks in the top three most popular global gold websites and its sister site, SilverSeek.com ranks as the most visited silver website in the world. Back at the start of the new secular precious metals bull market, Peter established the technically-focused subscription newsletter, which at the start of 2005 was merged into the more comprehensive Gold Forecaster (goldforecaster.com) service. In addition to the newsletter and websites, Peter frequently appears in the media including MarketWatch, Reuters, and Investors Business Daily.
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-- Published: Tuesday, 13 January 2015 | E-Mail | Print | Source: GoldSeek.com