INCA GOLD

BACK ON THE TRAIL OF INCA ONE

It's no surprise that the world markets always turn to gold in good times and in bad and the hoarding of gold is not limited to countries or corporations. The markets soften and then weaken in a not always predictable pattern but eventually everyone always heads back to gold. Either you are stashing away profits from pot deals or you are looking for stability in an uncertain economic climate, we all feel safer with a percentage of our portfolio in gold.

Over the years I have traveled to and toured mines in Colombia, Guyana, Argentina, Chile, Mexico and Peru and invested as far away as Borneo and Africa. I like to be "boots on the ground" if I am making a significant investment in a mining company but it's not always possible to drop everything and fly over to see the site. I meet with the management teams and other large investors as well and see who is holding the lions share of the stock. You will often here brokers and large investors talk about poor share structure as one of the negatives to look for when investing. This not only means how many shares are out but who holds them and is there a large overhang from previous financing's or debt settlement. Ask yourself whats stopping this stock from going significantly higher and often the answer is tired share holders or flippers due to the over liquidity situation the company is in. The numbers can be deceiving though and 200 million shares out does not always mean 200 million in the public float.

Institutional buyers usually pick strong stories and build positions for years down the road. They think long term and often very long term so their positions are not likely to enter the market as the share price rises. Day traders will often set price targets and start liquidating when those targets are hit no matter how strong the stock looks. If a company has only 20 million shares out it's hard for me to take 9% without causing a significant rise in the share price unless I do it over several months. A lack of liquidity can be a roadblock for investors who see the difficulty in buying equal to selling since the market is too tight, not to mention the premium you pay just to play along.

I have made some of my largest gains on mining stocks but early stage drilling companies are always looking for cash and continually go back to the market to do more financing and dilution on the stock. This in turn adds more warrants and options, which also dilute the stock. We have all seen the "wash-rinse-repeat" cycle from junior miners and unless you have a contact you are investing blind with exploration companies. Take the time to watch the interviews with CEO's of exploration companies and listen to how they respond to when they will be producing. Some will dodge the question while others will throw out a number that's probably half way to production. The odd CEO will admit they are at least 10 years to production and that they hope some bigger player buys them out before then. In other words they have no intention to produce, they just want to polish the apple and sell it to someone else and turn a profit for themselves and their shareholders.

A few years ago I met up with Ed Kelly from Inca One IO.V in San Ignacio, Peru and tagged along with his crew to tour their property. At the time the company was meeting with the locals and filing for permits and the locals coffee farmers played an active roll in seeing the project move forward. Well the end result was more meetings and delays as local political figures felt they weren't consulted or compensated for their opinion. The plan appeared to jump off the rails and this was just part of the business of mining in most countries. The oddest thing is Peru is the gold capital and has been for centuries but if you don't play your cards right and grease the right political wheels then you just sit and spin.

By random chance I met with them again at an investor event and was amazed at the changes the company had made to their approach in Peru. The company has their own processing plant now and rain or shine they are making money every day. They went ahead and made agreements with miners who were having a hard time trucking out their ore for processing and gave them a go-to spot that insures their ore is produced and they are quickly paid so they can keep the cycle going. Now there are no worries about drill targets or compliance estimates and if they will actually produce. The risk is now taken on by miners who are permitted and operating but have no access to processing. Years ago I remember reading about picks and shovel investing and how you are better off selling equipment to exploration companies since they are always looking and always spending money but not everyone hits pay dirt. Even the unlucky mining companies need equipment. This is the same type of thinking only better because now we know there will always be processing going on and the company takes its cut and then the next guy unloads.

“During the gold rush its a good time to be in the pick and shovel business”

― Mark Twain

Inca One just negotiated another processing plant deals that will see a large spike in daily operations and that combined with cost cutting measures at the first plant will see high revenue numbers in the coming months. Inca One Gold Corp.'s gold production in July, 2018, reached approximately 1,291 ounces as compared with 844 ounces in July, 2017, an increase of 53 per cent year over year (YOY). 

July 17, 2018 Inca One announce they had  acquire the Koricancha Processing Facility in Peru which will push their daily production to 500 TPD from the 100-150 TPD they get currently from the Chala One milling facility located in Chala, Southern Peru.

Highlights upon completion of Transaction for Inca One shareholders include:

• Establishes Inca One as the leader for publicly listed gold processing companies in Peru, with 450 TPD permitted capacity.
• Immediately more than doubles throughput to approximately 250 TPD, which diversifies Inca One’s operating platform.
• Additional 200 TPD of available capacity for future growth.
• Establishes Inca One as a consolidator in the industry with its second plant in operation.
• Economies-of-scale opportunities and several strategic benefits of having two plants within a 50km radius, including the potential for centralized purchasing, crushing, desorption and smelting services.
• Combined working capital of over US$5 million.
• Equinox becomes a new significant shareholder.

Inca One President and CEO, Edward Kelly, stated, “The acquisition of the producing Koricancha Mill is a strategic and transformative acquisition for Inca One.  It instantly elevates the Company from a small producer to a major player among publicly traded gold processing companies.  Inca One significantly increases its permitted capacity and more than doubles our current throughput. The transaction is aligned with our long-term growth objectives and is an important milestone in the consolidation we foresaw in the processing space. We look forward to working with the operating team at Koricancha. We also welcome Equinox as a business partner and significant shareholder in Inca One going forward.”

Christian Milau, CEO of Equinox, commented, “We are pleased to partner with Inca One on this transaction. While Koricancha is no longer a core asset for Equinox, it is highly complementary to Inca One’s existing operations in Peru and will deliver both increased scale and operating efficiencies. We intend on being a long-term and supportive shareholder of Inca One as their experienced team focuses on establishing the Company as an industry leader in the Peruvian gold milling space.”

The closing of the Transaction is subject to approval by the TSX Venture Exchange and satisfaction or waiver of other customary conditions. FULL STORY

 *Full Disclosure: I am invested in Inca One IO.V