Peru Tames a $2 Billion Rogue Industry
September 26th, 2014 by resourcenewsreport
Inca One Gold Increases Plant Capacity by 400%
By Resource News Report
Peru"s Central Government has sent thousands of troops into the jungles of Madre de Dios to confiscate and destroy illegal mining equipment. With unregulated, untaxed gold mining operations estimated at $2 billion a year in Peru, the stakes are high.
The new mining legislation and the military muscle behind it – creates a significant opportunity for Inca One Gold (IO-TSX.V) – a Canadian-based gold manufacturing company operating in Peru.
"The rules in Peru create something of a captive market for Inca One," confirms Gold Newsletter Publisher Brien Lundin in the summer 2014 issue.
"My COO George Moen and I met Brien Lundin at a gold conference," recalls Edward Kelly, President and CEO of Inca One Gold, in an exclusive interview with Resource News Report, "I think he liked that we come from the business world and that we"re here to make a profit."
Inca One Gold buys raw materials (ore) and manufactures an end product (gold).
Inca One Gold is at the halfway point of an upgrade from a 25 tonne per day operation to 100 tonnes per day. This week a new ball mill is being delivered along with new crushers. The current permit allows Inca One Gold to expand to 100 tonnes per day.
"There"s a game changing shift in the gold business in Peru right now," stated Kelly, "The government is beginning to regulate a fractured multi-billion dollar industry that has been operating for centuries with no permits and paying no taxes."
Inca One Gold is playing a pivotal role in the "formalization process". The army has confiscated stockpiles of mercury destined for jungle streams. The government is determined to exert environmental and fiscal controls on the artisanal miners and Inca One Gold is backing the Peruvian government"s campaign 100%.
"Small family operations used to be able to just grab some unclaimed land and start digging it, milling the ore and spewing chemicals into the streams and rivers," stated Kelly, "But now the government is insisting on transparency in the way gold projects are engineered and operated, in addition SUNAT has taken control of permitting for explosives and cyanide, the only way to purchase these critical supplies is to be formalized."
Approximately 77,000 small scale mines have already applied for a formalization number and there are an estimated 200,000 that haven"t applied. Kelly declares that he will only buy ore that has the correct papers attached to it.
"We have a compliance committee on the ground in Peru," confirms Kelly, "We are forced to turn down ore, but it does help us identify opportunities, providing legal advice to small operators with high grade projects."
Kelly business is not sensitive to the spot price of gold. Inca One Gold pays fair market value for the ore and takes a cut to manufacture the bullion. If the spot price of gold is $1,900 the margins are higher than if the spot price is $1,200 – but the numbers are healthy in either scenario. Inca One Gold operates on manufacturing metrics, rather than those of a junior explorer.
Typically the miner delivers a truckload of ore to a receiving area. Inca One Gold extracts samples which are then crushed and assayed in an on-site chemical lab. The miner is invited to observe the process, which only takes a few hours. If the trucks or the chemical lab are backed up, overnight accommodations are provided on site for the miners.
Comparable operations by Dynacor Gold Mines (DNG-TSXv) generated about $9 million in net earnings in 2013. Kelly believe Inca One Gold will generate around $8 million in annual cash flow by expanding Chala One to a 100 tonnes per day operation and continuing to source high grade ore.
"We changed our name from Inca One to Inca One Gold because we do not want to mislead investors into thinking that we"re a resource company," explained Kelly, "We are not staking land, running airborne surveys, drilling or proving up a resource. We are making gold bars. With tens of thousands of miners looking for legal ways to process their ore – we are confident that we are on the leading edge of a big incoming wave."
Inca One is currently trading at .16 with a market cap of $10.5 million.
- See more at: http://www.resourcenewsreport.com/...e-industry/#sthash.o4LwKViO.dpuf
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