Inca One has recently reported a first gold pour at its 25tpd facility in Chala, Peru. We sat down with Edward Kelly (CEO) and George Moen (COO) to discuss the company’s plans for the future.

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The Chala plant

The company acquired the plant earlier this year and did a remarkable job in getting it up and running. The first operational statistics look impressive, as the Chala plant was able to show a recovery rate of in excess of 90%. The first gold pour consisted of 62.36 ounces which were recovered from a 96.77 tonne batch, and the Chala plant continues to mill ore from nearby artisanal miners.

The numbers

Let’s now have a look at the numbers. Inca One expects to have a gross operating margin of $250/tonne (which is in line with its peer Dynacor Gold Mines which had an average gross margin of $252/t over the past 36 months and an average of $285/t in Q3 of this year). This would mean that at the maximum capacity of 25 tpd, the Chala One plant would generate approximately $2.3M in annual gross operating cash flow (based on 325 production days).

One obviously has to deduct the general and administrative expenses of the company and the income taxes, but we think it’s safe to say the company as a consolidated entity is cash flow positive, as the net cash flow of the Chala plant covers the company’s overhead in Canada as well as the ongoing development of the Corizona mine.

The Outlook

When talking to Ed Kelly, it becomes very clear Inca One is very ambitious and doesn’t want to stay a day longer than necessary at the current 25tpd production level. Inca One plans to raise approximately $1.5-2M to immediately double the throughput of Chala to 50tpd, and wants to reach the 100tpd mark by the end of next year. So within 13 months, Inca One expects to grow its throughput rate by 300% which would result in a gross operating margin of approximately $9M. It’s obvious the payback period of the expansion plans is extremely short, and that makes the Chala asset so impressive.
We hope the majority of the funding for the expansion will come from debt financing, but we wouldn’t exclude an equity raise at this point in time. Whilst shareholders might be disappointed with another private placement, by raising just 7.5M more shares at C$0.10 and raising C$1.2M in debt, the company might generate approximately C$0.20 per share in cash flow from the 100tpd Chala plant.

The eyed C$2M would be sufficient to increase the capacity to 50tpd, where after Inca One would be able to reach the 100tpd through internally generated cash flow.
So whilst investors might have to deal with some short-term growth pains, one should keep its eye on the prize, and if Inca One is indeed able to execute what it promises, the future looks very bright for this company.
Longer term, Inca One plans to raise more money to expand its facility portfolio to four or five assets, in order to reach a combined throughput of 1000tpd, all over Peru.

Las Huaquillas

There’s no real news from Las Huaquillas, and we have the impression the company won’t spend a lot of money on the project. It looks like the Inca One team is fully focused on the toll milling business, so we expect the Las Huaquillas project to be divested in the near term.


Inca One has ticked all the boxes it promised to tick at the Chala processing plant. As the company raised $420,000 in a lock-box offering to secure the mill feed, we expect Inca One to continue pouring gold on a regular basis. We are in fact looking forward to the company’s future financing plans to raise additional capital to double and quadruple the mill capacity within 13 months from now. Should Inca One be able to execute its ambitious expansion plan, the potential is enormous. Even if the share count would double (as worst case scenario), the upside potential would still be huge as every capital raise will immediately be accretive to the company’s cash flow profile.

Disclosure: Inca One Resources Corp. is a sponsoring company. Please see our disclaimer for current positions.

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