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REPORT
MINING AND COMMODITY RESEARCH
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Inca One Gold
Visiting Peru’s newest toll mill operation
January 6 ∙ 2015
January 6th, 2015 — Inca One Gold - Visiting Peru’s newest toll mill operation
CAESARS REPORT — www.caesarsreport.com
Inca One Gold
0.26
tmx charting
0.24
Price
C$ 0.230
Ticker
TSX-V: IO
FRA: SU9
O/S
MarketCap
Average Volume
Commodity
Countries Active
63.9M
14.7M
128,347 (TSX-V)
Gold
Peru
Working Capital
C$ 800,000
52 week high
52 week low
C$ 0.220 2015·01·02
C$ 0.080 2014·03·11
0.22
0.20
0.18
0.16
0.14
0.12
0.10
0.08
0.06
2014
Feb
Mar
Early
Exploration
Apr
May
Jun
Advanced
Exploration
Jul
Aug
Sept
Feasibility
Oct
Nov
Dec
2015
Financing
www.incaone.com
Development
Production
CHALA ONE MILL
Introduction
We have recently visited Inca One
Gold’s (IO.V) Chala One processing
plant where the company is in the
final stages of upgrading the existing
20 tpd mill to a modern facility
capable of processing in excess of 100
tonnes per day.
Access, infrastructure and
security
Getting to Chala One is extremely
easy. The Pan-American Highway runs
right through the city of Chala and
from there it’s a short 3 kilometer ride
on a well-maintained dirt road to get
to the mill. There seems to be plenty
of labor forces available in Chala and
the company is trying hard to source
a lot of the equipment and hardware
it needs from the local town. Once
construction is completed activities
will have been completed, the local
merchants of Chala will definitely feel
it.
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January 6th, 2015 — Inca One Gold - Visiting Peru’s newest toll mill operation
CAESARS REPORT — www.caesarsreport.com
The plant is currently running on
diesel powered generators but since
there is a power grid just a few
kilometers away, Inca One is hopeful it
will be able to connect the processing
plant to the power grid in the not so
distant future. There used the be a
moratorium for ‘industrial’ companies
to get connected to the power lines
but as the power shortage in the
Chala district has been solved, this
moratorium will likely be lifted soon.
When entering the Chala processing
facility, an armed guard checks off
the names of the people who want
to enter and if there are any nonstaff visitors, the ID-card has to be
left behind at the entrance gate. All
guards were armed with shotguns,
so it looks like Inca One has gone
to great lengths to protect its staff
and plant from intruders. On top of
that, nobody really knows when the
carbon harvests will be transported
as that information is kept on a ‘need
to know’-basis, which reduces the
transportation risk.
The expansion plans and
the time line for completion
When we were at the Chala One site,
the first ball mill with a theoretical
capacity of 50 tonnes per day was
being commissioned using a blend of
lower-grade ore mixed with highergrade ore. This fine-tuning is expected
to take approximately 1-2 months, so
the company definitely remains on
schedule to finish the commissioning
stage of both ball mills by the end of
Q1 2015. We also noticed the mills
were quite big and even though
Inca One didn’t want to confirm our
suspicions, we think the mills on site
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will be capable of processing more
than 50 tonnes per day. This could
create a lot of additional value as a
throughput of 110 tpd vs 100 tpd
increases the throughput by 10%
and will very likely increase the cash
flow by more than 10% (as additional
economies of scale will be kicking in).
We were positively surprised by the
Chala One site as everything looks
very clean and very well structured.
The company definitely has growth
plans and there’s plenty of space to
install additional CIL tanks (see image
above).
The CIL tanks were almost fully ready
and we expect the contractor to
have finished construction by now.
The next steps will be to gradually
increase the output through mill one
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January 6th, 2015 — Inca One Gold - Visiting Peru’s newest toll mill operation
CAESARS REPORT — www.caesarsreport.com
and two, as well as increasing the
average grade to the ‘sweet spot’ rate
of 0.8 oz/t.
As Peru is a catholic country, there
also was a ceremony to officially
inaugurate the Chala One plant so
things can hardly go wrong when
the plant has been blessed by a local
priest.
The Ore Sourcing progress
– Transparency will be key
Before Inca One started to upgrade
the Chala processing plant, our main
concern was that we weren’t sure
the company would be successful
in attracting as much gold ore as
it needed. We have been proven
wrong on this one as looking at the
stockpiled ore tells us that small-scale
mining companies and mom&pop
operations are very interested in
selling their ore to Chala One.
This is caused by several factors of
which transparency is paramount.
Inca One has commissioned its
own scale so all trucks are being
weighed on site instead of relying on
(unreliable) third party scales. The
trucker immediately sees the weight
of his truck and then continues
towards the crushing station. The
ore he’s delivering is being crushed
immediately and three samples are
taken and sent to the lab for analysis.
Payment for delivery usually happens
within just a few business days
afterwards.
We had the chance to talk to one of
Inca One’s main ore suppliers who
was attending the opening ceremony.
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January 6th, 2015 — Inca One Gold - Visiting Peru’s newest toll mill operation
CAESARS REPORT — www.caesarsreport.com
They confirmed that Inca One’s level
of transparency was one of their main
reasons to give this new operator
a try. A few weeks ago they sent a
truckload of high-grade ore hundreds
of kilometers to the Chala plant. They
have previously shipped ore to Inca
One’s nearby Canadian competitor
but now seem to be preferring Inca
One’s mill facility, which is a huge
accomplishment.
There’s plenty more high-grade ore
available, and Inca One is mulling
over raising additional debt to make
sure it can continue its ore purchases
whilst it’s still ramping up production
as it doesn’t want to turn potential
ore suppliers down. The impact on
the financials will be limited as we
aren’t expecting the company to add
a substantial amount of debt (we are
guesstimating this number to be $11.5M max).
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January 6th, 2015 — Inca One Gold - Visiting Peru’s newest toll mill operation
CAESARS REPORT — www.caesarsreport.com
Conclusion
Inca One is still on track to get its
mill fully operational in 2015. The
company will need approximately a
quarter to overcome all the teething
problems which are quite typical
for a company in the commodity
markets. We are confident that Inca
One’s transition from construction to
production will go smoothly.
The sourcing of ore is going extremely
well, and we expect an increased
number of carbon harvests from
January 2015 on. 100 tonnes per
day definitely won’t be the end
point for Inca One’s Chala operation
as the application forms to expand
to 200 tonnes per day are already
in the mail, and the company has
taken future expansion potential into
consideration when they designed the
position of the mills and CIL tanks.
Inca One is ready to hit the ground
running in 2015 and should be free
cash flow positive by next summer.
CEO Ed Kelly and his team are ready
to roll out their strategy and will very
likely acquire more old and small
plants in Peru to convert those into
state-of-the-art processing facilities.
2015 will be an important year for
Inca One and we have no doubt the
share price will be much higher one
year from now.
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January 6th, 2015 — Inca One Gold - Visiting Peru’s newest toll mill operation
CAESARS REPORT — www.caesarsreport.com
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