Lupaka secures $6.1m to complete, start Invicta gold production

TORONTO (miningweekly.com) – Peru-focused gold explorer and project developer Lupaka Gold has signed a $6.1-million definitive prepaid forward gold purchase agreement with British Columbia-based limited partnership PLI Huaura Holdings to fund the completion of development and to start production at its Invicta gold project.

PLI is a private investment vehicle controlled by Pandion Mine Finance, who would, pending TSX-V-listed Lupaka achieving certain completion milestones, pay gross proceeds of the agreement in two tranches of $1.8-million and $4.3-million.

Under the terms of the agreement, each tranche will have a grace period of 15 months, after which the company will deliver to PLI 19 530 oz of gold for both tranches over the following 45 months. The company will receive an amount per ounce of gold equal to the market price at the time, less a fixed discount. After the tranches had been repaid, the company would have no further obligations under the agreement. During the term of the agreement, PLI will also share in the upside on any increase in metal prices, Lupaka advised.

Vancouver-based Lupaka noted that the proceeds would be used to complete mine development, safety and efficiency upgrades, upgrade and complete access roads and starting mining operations, as well as finalise general and administrative costs and arrangement fees.

"We are very pleased with this financing package in that it has very favourable characteristics, including that it is non-dilutive to shareholders, has a fixed term and can be paid out at any time,” stated president and CEO Gordon Ellis.

Lupaka planned to ramp up operations to 350 t/d as quickly as possible using contractors for all aspects of the operation.

The company has the right to buy out and terminate the agreement at any time and its obligations under the agreement will be secured by a first charge over the company's assets.

The agreement also made provision for a future prepayment estimated to range between $6-million and $12-million, which would be used to fund Lupaka’s acquisition or construction of a processing plant for the Invicta mine.

Lupaka planned to eventually use the cash flow from Invicta to further develop its Josnitoro and Crucero gold projects.

The company added that it expected to pay finders' fees in cash and shares to the Red Cloud Klondike Strike platform regarding the agreement, subject to TSX-V approval.

PROJECT SPECIFICS
Lupaka’s 100%-owned Invicta gold project is located about 120 km by road north of Lima. The company expected to start production in 2016 by using third-party mining contractors and utilising the adit and workings completed by previous owners.

Mining operations would be focused on accessing Invicta's measured and indicated resource estimates, which stood at 131 000 t grading 6.65 g/t gold equivalent containing 28 000 oz gold in the measured category. This was derived from 18 000 oz gold grading 4.29 g/t, 133 000 oz silver grading 31.71 g/t, 2.11-million pounds copper grading 0.73%, 1.11-million pounds lead grading 0.39% and 1.1-million pounds of zinc grading 0.38%.

The indicated category comprised 8.51-million tonnes of ore grading 3.43 g/t gold equivalent for 939 000 contained ounces of gold, derived from 573 000 oz gold grading 2.09 g/t, 4.28-million oz silver grading 15.65 g/t, 79.05-million pounds copper grading 0.42%, 45.17-million pounds lead grading 0.24% and 53.48-million pounds of zinc grading 0.21%.

The project also held an inferred resource of 2.53-million tonnes grading 2.9 g/t gold equivalent for 236 000 contained ounces of gold.

Invicta's approved environmental impact assessment allowed for mine production at 1 000 t/d, however, the current mining plan was limited to 400 t/d, Lupaka stated.