LUPAKA GOLD CORP. (“LPK”) We wonder was it really wise to take on $10.6 in debt for Invicta? Has Lupaka made a mistake here? The company was able to close a small $110,000, 2.2 million Units (shares plus warrants) at $0.05 private placement recently with Insiders accounting for 1.6 million of the 2.2 Units. Exchange acceptance was announced December 30, 2015.
Lupaka’s CEO Gordon Ellis touts the financing as ‘Non-dilutive to shareholders”. OK, debt financings usually are non-dilutive. But they are generally much riskier than equity financings as the company’s assets, production, or future cash flows are pledged in some form as collateral. Mr. Ellis speaks of favourable terms and so on. Perhaps he would have been well advised to have also released the specifics of the financing package within the company’s January 21, 2016 news release. Transparency in these kinds of deals is advised. The investing public was certainly not all that excited about the news. Even though the share price traded up a penny and a half on the announcement the trading volume was only 134,000 or so shares; about as exciting as pouring molasses in the high arctic in the middle of winter.
We would advise our Members to carefully review the readily available, and required annual disclosure in Lupaka’s Annual information Form (AIF). Up until 2014 it seems the company’s “flag ship” project was its Crucero Gold Project in southern Peru. Now, the company’s taking the Invicta Gold/Copper based Polymetallic project into production. Yet in its AIF dated March 15, 2015 on page thirty-six (Page 36) the company states the following:
Production at the Invicta Gold Project
The decision to commence pre-production permitting, engage technical consultants and update internal studies for the Invicta Gold Project was based on economic models prepared by the Company in conjunction with management’s knowledge of the property and the existing preliminary estimates of the measured, indicated and inferred mineral resources on the property. The decision was not based on a preliminary economic assessment, a pre-feasibility study or a feasibility study of mineral reserves demonstrating economic and technical viability. Accordingly, there is increased uncertainty and economic and technical risks of failure associated with this production decision, in particular the risk that mineral grades will be lower than expected, the risk that construction or ongoing mining operations are more difficult or more expensive than expected, the risk that the Company will not be able to transport or sell the mineralized rock it produces to local custom toll mills on the terms it expects, or at all; production and economic variables may vary considerably, due to the absence of a detailed economic and technical analysis according to and in accordance with NI 43-101. Inferred mineral resources are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. would not place Lupaka Gold at the top of any lists at the moment, with the exception of its sit back and let’s see what happens here list. We do wish the company success. Our approach to this company is not due to reservations on the merits on the assets. It is based on corporate decisions and our desire to see them become bankable. Lupaka gold’s ambitions may be achievable in this market, with its new debt load however we would suggest a wait and see approach at this time to see if Lupaka’s strategy is flyable.