Inca One has announced an update on its 100% owned 25 tonnes per day mill. Plenty of reason to provide an update on the company’s main activities.
Introduction
Inca One has announced an update on its 100% owned 25 tonnes per day mill in Peru’s Chala district, stating that the refurbishment has been completed and commissioning could start. Plenty of reason to provide an update on the company’s main activities.
The Chala Mill
As said, the Chala mill is practically completed and could be processing ore before the end of this month. Inca One plans to operate this mill as a toll milling facility for artisanal miners who would otherwise not have access to a modern mill which would allow them to reach a decent recovery rate.
As those nearby artisanal miners are mining ore at an average grade of approximately 1 ounce of gold per tonne of ore, the Chala mill could produce 7-8,000 ounces of gold per annum. If we extrapolate the profit margins from competitors such as Dynacor Gold Mines, we estimate the Gross Operating profit margin of the Chala mill to be between $200-300/tonne of ore. This would result in an operational cash flow of $5000/day or approximately $1.5M per year (Please note these are our estimates and are not an official guidance). Whilst this might not sound like much, it will be an important source of income for the company to continue the development efforts at Corizona and to expand the throughput from 25tpd to 50tpd, which we expect to happen in the second half of next year.
The Corizona Project
Development at the Corizona project is ongoing and the company is currently accessing the San Francisco vein, which should contain high grade ore in the region of 10-15g/t. There’s currently a stockpile of approximately 100 tonnes at Corizona with an average grade in the low double-digits g/t, which could be trucked to the Chala mill for processing. As there have been no metallurgical studies on the ore there is no official production guidance either, but we are estimating the recovery rate to be in excess of 90%.
Where to go from here?
Now the Chala mill will provide free cash flow before year’s end, Inca One will have more room to breathe, and might be on the lookout to acquire more small mills throughout the country. These milling facilities could be acquired on the cheap as most of them are going through the recently announced formalization process instated by the government.
Inca One will likely need to raise more money after closing its current debt offering, but it should be easier to find money now the Chala mill is almost up and running.
Conclusion
Inca One Resources is ticking all the boxes and has now several horses in its stable as opposed to just owning the Las Huaquillas project at the same time last year. The Chala mill facility will provide cash flow which will be used to fund the development work at Corizona and probably to acquire additional mill facilities in Peru.
Disclosure: Inca One Resources Corp. is a sponsoring company. Please see our disclaimer for current positions.
