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Shake-Up In Peru – Toll Milling Update

Summary

Four news releases in one day, five news releases in two.

M&A and gold production updates.

One undervalued toll miller flying under the radars.

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 (NYSE: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.

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: I am/we are long INCA ONE, ANTHEM UNITED, MONTAN MINING.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.