VANCOUVER, BC / ACCESSWIRE / September 22, 2014 / Peru's gold industry is undergoing an exciting wave of development. Reforms in Peru have ignited a new gold rush that is spreading to other Latin American countries who are keen to follow in Peru's footsteps. The focus of the reform is on 'informal' mining whereby the government has opened up the gold market to companies with the right expertise to process mined materials. Foreign companies see the opportunity to establish a presence while the industry is just beginning to heat up.

But there is one mining junior worth watching out for - Inca One Gold Corp. (TSX.V: IO). Their share price doubled recently to $0.17 after achieving their first milestone of initial production and cash flow. Recently they attracted the expertise of mining expert Jamie Polar who formerly served as VP of mining colossus Barrick Gold Corp. (ABX:TSX, ABX:NYSE). Inca One is currently rapidly expanding its operations at Chala.

But what is the reform process that is giving rise to the gold rush?

Peru's Gold Ascension

Peru is the largest gold producer in Latin America today, having overtaken South Africa as the 5th biggest producer globally (Jan '14, see below) with an estimated 182 tonnes of gold produced in 2013. A key enticing feature of Peruvian gold mining success has been the availability of high-grade gold, involving low-tonnage and low CAPEX allowing companies to generate profit in the near term. This is something many exploration companies crave in the current market.

Top 20 Gold Mining Countries in 2013, Thomson Reuters GFMS Survey, Jan 2014

Inca One's best days are yet to come as Peru is still in the process of reforming the gold mining sector, trying to address illegal or small-scale mining. The government is also attempting to bring small-scale mining into legal business in order to tax effectively. It generates revenues of about US $3bn annually according to official figures, with over US $500m estimated tax lost to date because this activity has operated under the tax radar.

"The business of informal gold mining would be huge if we could effectively start collecting from this sector. On top of that they would work within environmental laws and meet their obligations to the taxpayers."

Minister for Energy and Mines, Jorge Merino Tafur, in La Republica

The Investment Opportunity

A rare opportunity has presented itself as the government attempts to bring a US $3bn revenue sector into the tax stream via the expertise of companies licensed to operate gold processing mills. Registered small-scale miners can bring their extracted materials to a licensed mill to have the materials processed. Foreign companies like Inca One are particularly set to gain as the right expertise is required to help organise, develop and mature a very lucrative industry for the country.

Inca One only started out in Peru in 2011 but has grown quickly in that time. Their gold milling facility at Chala is expanding to 100 TPD and is due by the end of Q4 2014. The company wants to achieve four mills running at 250 TPD to reach 1,000 TPD. The plan is to achieve 18,000-20,000 ounces of gold per year when they reach the 100 TPD mark.

Only a handful of other companies have made a name in Peru. Probably the largest name in the game is Dynacor (TSX: DNG.TO) which has been active in Peru through its subsidiaries since 1996 with nearly 20 years of experience in the local mining industry. They have significant exploration and mill processing presence. In terms of mill processing, they have a 250 TPD mill at Huanca, a 250 TPD gold and silver mill at Acari and are awaiting a permit for a 300-600 TPD mill at Chala TPD operation. Dynacor is viewed as a solid business model for gold processing in Peru.

Another name is Volcan Compañía Minera S.A.A. (STT: H3Z.SG), a Peruvian exploration and production company with main operations in Alpamarca, Animón, Cerro de Pasco, Chungar, Vinchos and Yauli. Volcan has advantages of being a domestic company with all the market knowledge that brings and has been involved in mining since it was founded in 1943.

The gold mining sector is clearly just beginning to heat up, with the country leading the way for other Latin American countries to bring small-scale mining into the legal business stream and to tax activity too. Dynacor found a viable model of investing and expanding in Peru but the market is wide open for newer companies to get a piece of the action. Inca One stands out because it has progressed from a 25 TPD operation to 100 TPD (due late 2014) in just a year, with bigger plans ahead. Importantly, they did so on schedule and on budget – a rollout that separates them from other ambitious juniors that can't go the distance. The doubling of their share price recently on the news of successful expansion confirms the broader appraisal of the company and the arrival of a talented veteran like Jamie Polar with experience at a mammoth like Barrick Gold shows that big business knows a good bet when they see one.

SOURCE: Resource Reports