According to Resource News Report, Peru’s Central Government has sent thousands of troops into the jungles of Madre de Dios to confiscate and destroy illegal mining equipment. With unregulated, untaxed gold mining operations estimated at $2 billion a year in Peru, the stakes are high. Resource News Report says the “new mining legislation and the military muscle behind it – creates a significant opportunity for Inca One Gold – a Canadian-based gold manufacturing company operating in Peru. “The rules in Peru create something of a captive market for Inca One,” confirms Gold Newsletter Publisher Brien Lundin in the summer 2014 issue.

“My COO George Moen and I met Brien Lundin at a gold conference,” recalls Edward Kelly, President and CEO of Inca One Gold, in an exclusive interview with Resource News Report, “I think he liked that we come from the business world and that we’re here to make a profit.”

Inca One Gold buys raw materials (ore) and manufactures an end product (gold).

Inca One Gold is at the halfway point of an upgrade from a 25 t/d operation to 100 t/d. Recently a new ball mill was delivered along with new crushers.  The current permit allows Inca One Gold to expand to 100 t/d.

“There’s a game changing shift in the gold business in Peru right now,” stated Kelly, “The government is beginning to regulate a fractured multi-billion dollar industry that has been operating for centuries with no permits and paying no taxes.”

Inca One Gold is playing a pivotal role in the ‘formalization process’. The army has confiscated stockpiles of mercury destined for jungle streams.  The government is determined to exert environmental and fiscal controls on the artisanal miners and Inca One Gold is backing the Peruvian government’s campaign 100%.

“Small family operations used to be able to just grab some unclaimed land and start digging it, milling the ore and spewing chemicals into the streams and rivers,” stated Kelly, “But now the government is insisting on transparency in the way gold projects are engineered and operated, in addition SUNAT has taken control of permitting for explosives and cyanide, the only way to purchase these critical supplies is to be formalized.”

Approximately 77,000 small scale mines have already applied for a formalization number and there are an estimated 200,000 that haven’t applied. Kelly declares that he will only buy ore that has the correct papers attached to it. “We have a compliance committee on the ground in Peru,” confirms Kelly, “We are forced to turn down ore, but it does help us identify opportunities, providing legal advice to small operators with high grade projects.”

Kelly’s business is not sensitive to the spot price of gold. Inca One Gold pays fair market value for the ore and takes a cut to manufacture the bullion.  If the spot price of gold is $1,900 the margins are higher than if the spot price is $1,200 – but the numbers are healthy in either scenario.  Inca One Gold operates on manufacturing metrics, rather than those of a junior explorer.

Typically the miner delivers a truckload of ore to a receiving area. Inca One Gold extracts samples which are then crushed and assayed in an on-site chemical lab.  The miner is invited to observe the process, which only takes a few hours.  If the trucks or the chemical lab are backed up, overnight accommodations are provided on site for the miners.

Comparable operations by Dynacor Gold Mines generated about $9 million in net earnings in 2013. Kelly believe Inca One Gold will generate around $8 million in annual cash flow by expanding Chala One to a 100 t/d operation and continuing to source high grade ore.

“We changed our name from Inca One to Inca One Gold because we do not want to mislead investors into thinking that we’re a resource company,” explained Kelly, “We are not staking land, running airborne surveys, drilling or proving up a resource. We are making gold bars.  With tens of thousands of miners looking for legal ways to process their ore – we are confident that we are on the leading edge of a big incoming wave.”

On a smaller scale, BNamericas reports a Colombian court has ruled 11 gold miners must cease operations in a nature reserve, part of an ongoing drive to formalise the mining industry. The Antioquia superior court ordered mining agency ANM to evict miners from the 50,000 ha protected area in the northwest Chocó department, home to the Embera Katío indigenous people.

Miners with operations in the area include AngloGold Ashanti and local companies Exploraciones Choco Colombia, Gongora and El Molino, according to local newspaper Portafolio. The government awarded mining concessions in the area in 2008, it said.

ANM said the concessions were awarded before the area was declared a reserve and denied it had authorized concessions after legislation in 2013 decreed the area off-limits to mining, agriculture and industry.

“Since starting operating two-and-a-half years ago, the national mining agency has not awarded concessions that overlap reserved areas either totally or partially,” ANM president Natalia Gutiérrez said in a statement. ”

Unauthorized mining accounts for more than half of the country’s operations. In a 2010-2011 census on mining activity in Colombia, the mining ministry (Minminas) registered 14,357 mining production units in Colombia of which 63%, or over 9,000, did not have mining titles.

Illegal gold mining has spread in Colombia, Peru, Ecuador and Bolivia as gold prices jumped sevenfold over a decade to $1,900/oz by 2011, according to Thomas Hentschel, director of Swiss government program Better Gold Initiative.

Officials from Colombia, Bolivia, Brazil, Ecuador, Guyana, Suriname, Venezuela and Peru met at an Amazon Cooperation Treaty Organization (ACTO) meeting in November to discuss joint efforts to fight illegal mining in the region