Inca One Gold (IO.V) is still moving ahead with its plans to restructure its balance sheet as it is now raising C$4M in a private placement at C$0.05 per share with a 3 year, half warrant exercisable at C$0.08 per share. Concurrent with this financing, Inca One will complete a 5:1 share consolidation, so the post-consolidation pricing of the placement will be C$0.25 (with ½ warrant with a strike price of C$0.40).
The proceeds of the offering will be used for working capital purposes, as Inca One needs additional funds to increase the total amount of stockpiled ore. The lack of funds over the past few months and quarters resulted in Inca One having to reduce its daily throughput to just 30 tonnes per day, which most definitely is below the minimum threshold the company needs to process to be able to break even, so this cash injection is definitely necessary, despite the fact the net revenue margins have doubled to approximately 40% in the first semester of the current financial year.
The new desorption plant at Chala One has improved the recovery rates of the gold, boosting the NRM from 33% to 40%. The total gold sales in H1 2016 were just 92.2 kilograms (less than 3,000 ounces), resulting in a total gross revenue of approximately US$3.7M (whereas operating at a full production rate would have boosted the gold production to approximately 10,000 ounces). Fortunately there was also some positive news as the SUNAT has now completed its audit of the IGV payments in H1 2015, and the government agency has told Inca One it will pay US$1M in two tranches over the next few weeks.
The private placement is also necessary as part of the restructuring plan of the balance sheet, as Inca One wants to convert a substantial portion (almost 80%!) of its (short term and long term) debt into equity. This will repair the liabilities/equity ratio and will reduce the cash outflow related to interest expenses, but successfully completing an equity raise of at least C$2M is required to restructure the existing debt).
As soon as the additional cash has been raised, Inca One expects to be producing at 70 tonnes per day within 60 days, followed by a final ramp up to 100 tonnes per day within 3 months after receiving the cash.
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The author has a long position in Inca One. Inca One is a sponsor of the website. Please read the disclaimer
