Lupaka’s Invicta to hit commercial production in November

Lupaka Gold (TSXV: LPK) says a recent US$6.1-million gold purchase agreement with New York-based Pandion Mine Finance will get the construction of its Invicta polymetallic mine in Peru across  the finish line.

The proceeds — paid out in two tranches of US$1.8 million and US$4.3 million — would be enough to develop a mine, upgrade safety and efficiency, build access roads and start mining operations.

Lupaka Gold’s president and CEO Gordon Ellis tells The Northern Miner that contractors will be used in all aspects of the mining operation, and that the company should reach commercial production in November.

The junior intends to ramp up operations to 350 tonnes per day as quickly as possible.

Mineralization in the Atenea vein at Lupaka Gold’s Invicta project in Peru. Credit: Lupaka Gold.

“There’s no reason why we shouldn’t run at 350 tonnes per day by the time we start 2017,” he says in a telephone interview from his Vancouver office.

The prepaid forward gold purchase deal with Pandion announced at the end of June is an attractive way to finance Lupaka’s Peruvian project, Ellis says, not only because it is non-dilutive to shareholders, but because it has a fixed end-date.

“This is not a royalty agreement that goes on forever,” he says. “We don’t pay anything for the first 15 months and we only pay them a small percent of what we produce for the next 45 months, and we’re done. It’s gone, it’s clean, there is no residual.”

Ellis adds that Pandion is interested in putting up the funds needed to acquire or build a processing plant, and Lupaka is weighing the options.

“Pandion doesn’t really want to do just the US$6-million financing — they want to finance us for the plant and anything else we want to do,” he says, noting that the outfit has an excellent pedigree in the commodities sector.

The New York-headquartered group is made up of Pandion Management (the former leaders of Jeffries LLC metals finance business); MKS PAMP Group, a global precious metals and financial services company based in Switzerland; and Ospraie Management, an asset management firm focused on commodities that has seeded more than 20 funds and directly invested more than US$1.5 billion in privately held metals and mining companies.

MKS Pamp is one of the world’s largest buyers of concentrate, Ellis says (“they don’t own mines, they just trade in minerals”), and Ospraie “has been in mining for a long time.”

He says that “this is Pandion’s first deal, so that’s why you probably don’t know an awful lot about them. It was set up in the last quarter of last year … they’ve formed this organization to vet projects and invest in them.”

One of Lupaka’s first tasks, once Invicta is up and running, will be to assess the best way forward in terms of incorporating a processing plant.

“There are two plants within 100 km being built that are fully permitted for 350 tonnes per day, and they haven’t got supplies of ore — they’re building them on spec,” he says.

“The first one, we could buy the whole plant for a really low cost because the owners have gotten into a fight and want to sell … the alternative is to build a plant from scratch, which would take longer. But the joy of that would be to allow us to build it closer to the site, which would also reduce shipping costs, and we’re permitted for 1,000 tonnes per day.”

Lupaka picked up the Invicta project through its October 2012 acquisition of Andean American Gold. The project, 120 km from Lima, had been explored and developed by several previous owners since the mid-1990s. Lupaka estimates that previous owners poured more than $15 million into mine development.

The company completed its second run-of-mine bulk test in December and achieved good recoveries in concentrate streams — returning 87.5% gold, 91.2% silver, 91.5% copper, 90.03% lead and 90.1% zinc. “The recoveries we got were good, and they’re just first-time recoveries — they haven’t been optimized by any means.”

The first bulk sample in October 2015 produced a copper, lead and zinc concentrate that was sold to an off-taker, and “we actually made money,” Ellis says. “In the second one, the buyer said he just wanted a copper concentrate, so we put the whole thing through as a copper concentrate, and once again the recoveries were high.

“The nicest thing about it is that the concentrate is exceptionally clean, it has little in the way of contaminants, so buyers can pay well for it because they can mix it with some of their less clean concentrate and blend it,” he continues. “They can make use of some of the other stuff they get from other suppliers, so it’s attractive to off-takers.”

The second bulk test consisted of run-of-mine material from the Atenea vein. The sample was blended from 80% run-of-mine material and 20% from a low-grade stockpile after developing existing workings.

Cash flow from Invicta will be used to grow the operation. There are numerous zones outside of the Atenea vein that contain mineralization, and the targeted Atenea resource could increase, as development offers access to high-grade intercepts and underground drill sites. In addition, based on gold and copper within the under-explored quartz-sulphide vein zones, the company says Invicta could expand.

An initial six-year mine plan (which sets out the block mine plan for 680,000 tonnes at a grade of 8.83 grams equivalent oz. gold per tonne for just over 30,000 oz. a year) was developed from the 3,400-metre level and up, Ellis says. “Drill results indicate that the mineralization extends at least as far below the 3,400 level as it does above. In addition, there is a well-defined section of measured and indicated directly along strike to the northeast that is within a few hundred metres, and of the same characteristics as the segment in the mine plan.”

At 350 tonnes per day, he adds, Invicta could operate for between 10 and 15 years based on the current measured and indicated resource in the Atenea zone.

Proceeds from Invicta will also be used for more exploration at its other projects in Peru — Josnitaro and Crucero.