VANCOUVER, British Columbia, Jan. 14, 2015 (GLOBE NEWSWIRE) -- By Financial Press
In the last two years, Peru's government has aggressively reigned in and regulated 200,000 small scale miners - establishing environmental controls and creating tax revenue from the massive rogue industry.
Prior to the new regulation, an estimated two million ounces of untaxed gold was produced every year in Peru – creating a $2.9 billion hole in Peru's GDP.
The new mining legislation in Peru has created a perfect storm of opportunity for Inca One (TSX-V:IO) – a Canadian-based resource company with a gold milling facility in Peru. Bucking a downward trend in junior precious metal companies, IO's share price is pushing a 52-week high.
"The rules in Peru create something of a captive market for Inca One," confirms influential Gold Newsletter Publisher Brien Lundin in the summer 2014 issue.
"The easiest way to explain what we do is to use a forestry analogy," stated Inca One President and CEO Edward Kelly in an exclusive interview with Financial Press, "The miners are the loggers. Inca One is a pulp mill. We buy raw product from a variety of sources and process it into gold – not paper."
Construction of Inca One's 100 tonne per day milling plant is complete. The new machinery is being broken in - in the same way that you break in new car. Initial teething problems - like bearings heating up - are now fixed. The company is currently processing about 40 - 50 tonnes of ore a day, ramping up steadily to full capacity.
"We do not stake land, run seismic or drill," confirms Kelly, "Inca One just makes gold, at a healthy margin. Our risk is metallurgical, not geological. We need to run the mill efficiently to be profitable, and that is where our focus is."
Inca One recently hired Carlos Santana as Chief Metallurgist for the Chala One gold milling plant. Mr. Santana, who has a Chemical Metallurgy degree, is joining Emilio Ortiz and Jaime Polar, two mill operating managers with extensive previous experience at Barrick Gold Corp.
"We anticipated grades of 15 grams per tonne," stated Kelly, "But we are getting 27 grams per tonne. This means that we have to leave the ore in the tanks longer than we projected. The unanticipated high grades have slowed us down a little. It's a good problem to have."
Peru is one of the world's top producers of gold, with substantial production coming from artisanal miners who now need government permitted milling facilities to process their ore.
"'Artisanal Miner' is a term that need to be qualified in Peru," explains Kelly, "These are not Mom & Pop operations panning for gold with dinner plates. It is a huge multi-billion dollar business. While building our company I have met hundreds of these so-called 'artisanal miners' and they are usually business-savvy millionaires."
Kelly states that a typical miner that trucks ore to the Inca One facility is extracting 10 tonnes of ore a day, at over 1 oz. per tonne - that's about $100,000 a week of bullion. The scale of the operations and the money that is being made in Peru is significant.
"The price we pay for the ore is based on the closing price of gold in London that day," stated Kelly, "Since it takes 30 days to extract the gold, we take a discount to hedge against a drop in the spot price. And we also charge for the metallurgy, the toll milling fee, and chemical fees. With gold at $1,250 an ounce, we will keep roughly $550 and the miner will keep $700."
Inca One is currently processing about 30 tonnes per day – generating about $15 million a year in projected sales. In the next 60 – 90 days, the processing volume expected to more than triple.
The only comparable to Inca One is Dynacor Mines that also has a gold ore-processing business in Peru. Its Dynacor's plant has maximum capacity of 250 tonnes per day. The company also has an exploration project. Dynacor's share price has risen from .20 to $1.60 in the last 5 years – an increase of 1,300%.
"The, chemical companies, shippers, security firms and government agencies. We have built intricacy of our business gives us some insulation against competition," stated Kelly, "There are a lot of moving parts to running a mill in Peru. We have relationships with miners, metallurgists, labs, truckers what I would call a proprietary skill set. It is now part of the DNA of our company and we plan to replicate it in other parts of Peru."
Inca One is currently trading at .225 with a market cap of $14.75 million.
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CONTACT: For More Information Kin Communications Inc. 1-866-684-6730 1-604-684-6730Source:Inca One Resources Corp.