Remarkable Tolling Operating Margin
Inca's Chala has 40% net revenue margin in first half
2016-07-08 08:44 ET - News Release
Mr. Edward Kelly reports
INCA ONE GOLD CORP. REPORTS SIGNIFICANT INCREASE IN NET REVENUE MARGINS AND PROVIDES CORPORATE UPDATE
Inca One Gold Corp. has provided the following corporate update to shareholders.
Net revenue margins
Net revenue margin (NRM) from operations at the Chala One SAC plant averaged 40 per cent for the first six months of 2016, nearly double over the same period last year. NRM, a key industry metric being gold sales revenue less the related cost of mineral purchasing and processing, grew consistently from 23 per cent in the first six months of calendar 2015 to 40 per cent during the first six months of calendar 2016. Over the six months through December, 2015, the company enacted numerous improvements in the gold-measuring-and-recovery processes, improved security, and began sourcing mineral with better deal terms, which collectively increased NRM to 33 per cent. During the first six months of 2016, the company began operating its newly installed desorption plant on-site at Chala One, and continued to improve recoveries and mineral sourcing resulting in an average NRM of 40 per cent. From Jan. 1, 2016, through June 30, 2016, Chala One has exported approximately 92.2 kilograms of gold and realized gold sales of approximately $3.7-million (U.S.). Over the past 12 months the operational successes have been a reflection of the determination, hard work and attention to detail of the operating and mineral buying teams at Chala One.
Invested in great people
Underpinning this operating achievement is the strength of the Peruvian operating team along with collaboration of Canadian management. From the start of commercial production to present, Inca One attracted top industry talent hiring select ex-Barrick and ex-Newmont senior management personnel as key employees at the Chala plant and Lima administrative office. The Inca One team achieved notable improvements to net revenue margins (see above), rightsized and upgraded staff, and continued to add strategic team members, while leaning out operating costs.
VAT/IGV (Impuesto General a las Ventas/value-added tax) update
Management also successfully navigated the company through the extensive IGV audit conducted by SUNAT, Peru's tax and customs authority, which finally closed at the end of June, 2016 -- a significant achievement. Chala One collected its first refund cheque in early February, 2016, and has been receiving monthly IGV/VAT refund cheques within weeks of each month end filing. The company is now awaiting two final payments totalling approximately $1.0-million (U.S.) over July and August, 2016, relating to the original IGV submissions which were under audit. The IGV audit process began in June, 2015.
Financing and restructuring update
Early in 2016 the board of directors and executives of Inca One determined that a debt restructuring was required to improve the balance sheet, which would enable a much-needed financing for operations to ramp back up to 100 tonnes per day. From February, 2016, through April, 2016, the company communicated with all debtholders and arranged preliminary restructuring terms. The plan for the second half of 2016 includes finalizing the restructuring with debtholders, and closing of a financing the company announced under a separate press release dated July 8, 2016.
The company would especially like to thank all its shareholders, stakeholders and particularly its debtholders for their support during this restructuring and refinancing period.
Ramp-up plan
Once recapitalized, the company is ready to enact a 90-day ramp-up plan to get back up to 100 tpd of production, whereby the company expects to be operating at approximately 70 tpd within 60 days which is the projected break-even. Currently the company has been operating at approximately 30 tpd. The company has prepared break-even projections based on a gold price of $1,250 (U.S.), NRM of 35 per cent and recoverable grade of 0.75 ounce per ton.
Peru election update
The recent presidential elections in Peru resulted in a leadership change with Pedro Pablo Kuczynski coming to power. His position is very supportive of the small-scale mining sector. President-elect Kaczynski campaigned on a business- and mining-friendly platform including proposing the creation of a private mining bank that would buy gold from small-scale miners and provide financing, training and tax breaks for those who agree to formalize their concessions. The company believes his election is positive for the small-scale mineral-processing sector in Peru.
We seek Safe Harbor.