Shake-Up In Peru – Toll Milling Update

Cejay Kim October 7, 2015
Category: Research

The toll milling space has been somewhat quiet since the initial rush; however, this has not stopped several key players from making moves on both the M&A and operational front.

First, Inca One Gold Corp (TSXV:IO) entered into a binding letter of intent to acquire Standard Tolling Corp (TSXV:TON) in an all-stock transaction. According to Inca One, the transaction equates to CA$3.2 million and it will receive cash, the plant, and Standard’s inventory, which will be shipped south for processing.

For those reasons the deal makes sense. Most importantly, Inca One also inherits a very competent ore buying team, something essential in the relationship-based toll milling space.


Ticker Price (C$) Shares (mm) Mkt Cap (C$ mm) Cash (C$ mm) Debt (C$ mm) EV (C$ mm) Current Capacity (TPD) Planned Capacity (TPD) EV/Capacity (C$ / TPD)
Dynacor Gold Mines Inc DNG.TO 1.68 36.52 61.35 17.33 44.02 300 600 73,360
Anthem United Inc AFY.V 0.34 82.53 28.06 5.20 0.65 23.50 560 41,972
Inca / Standard * 0.14 103.65 14.51 4.00 16.35 26.86 130 600 44,764
Montan Mining Corp MNY.V 0.13 36.32 4.72 0.75 0.22 4.19 150 27,940
* Post-Consolidation Estimates

The NewCo now rivals Dynacor in terms of planned capacity; that is until Dynacor shuts down its older plant. One key figure to look at is how leveraged the NewCo will be post-transaction, the debt will require C$1.75 million per year to service, and Inca One recently engaged Jett Capital Advisors to raise even more. However, the company has revenue, and according to a representative we spoke to, the debt will be more than manageable.

Not to be outdone, Anthem United (TSXV:AFY) finally announced that Koricancha has commenced production. With all permitting and regulatory hurdles behind it, Anthem can now concentrate on ramping up production.

Lastly, Montan Mining (TSXV:MNY) is still in the process of raising money, closing the first tranche of its note placement while concurrently raising cash via private placement. Behind the scenes, the company is quietly advancing the Mollehuaca gold processing plant and Eladium gold mine. Montan is now the smallest player in the space, and according to our analysis, significantly undervalued. We expect Ian Graham and Luis Zapata to either merge with a private player in Peru, or be acquired themselves.

Our original toll milling report can be downloaded here.

Disclosure: We are long Inca One, Anthem United, and Montan Mining

We were not paid by any of these companies to write this post, but we do stand to benefit from any volume this post stands to generate. The information contained in such publications is not intended as individual investment advice and is not designed to meet your personal financial situation.

Information contained in this report is obtained from sources we believe to be reliable, but its accuracy cannot be guaranteed. The opinions expressed in this report are those of Palisade Capital and are subject to change without notice. The information in this report may become outdated and there is no obligation to update any such information.

Get our Research for FREE