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Aurcana Corp. (Tsxv: Aun): New Recommendation By :
Peter Zihlmann |
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ON TRACK TO PRODUCE 5 MILLION OUNCES OF SILVER IN Business Summary Aurcana Corporation owns 92% of the La Negra
silver-copper-lead-zinc mine and 100% of the Shafter silver mine. The
company's current projects have the potential to produce over five million
ounces silver per year. The 1,000 tons per day La Negra
silver-copper-lead-zinc mine is located in The Shafter silver mine is located in Projects
Mexico : La Negra: Silver-Copper-Lead-Zinc Mine The La Negra mine was discovered and developed by Industriales Peñoles S.A. de
C.V. The mine commenced production in 1970 and produced until the mine was
put on care and maintenance in 2000. In order to re-commission the mine, Aurcana made the
following expenditures: - $3m Acquisition - $6m start-up CapEx to: - increase throughput by 50% to 1,500 tpd to
substantially improve mine profitability and gain access to - 23 ore bodies outlined historically by
Peñoles. Accessible through over - Over 10 year projected mine life, based on mining
history of 30 years Historical production as reported by Peñoles
was approximately 6.6 million tons of ore with metal production as follows:
Historical Reserves In addition to the 6.6 million tons of ore mined by
Peñoles the historical reserves* amount to 1.22 million tons grading:
The key data of the mill are as follows: 1,000 tpd mill: - 3 stage crushing plant -
8' x 10' ball mill -
upgrades being done to increase capacity
from 800 tpd to 1,000 tpd - mill produces zinc, copper and lead concentrates 23 nown ore bodies: - all accessible by existing workings -
large ore bodies -
amendable to low cost long hole, open
stope mining methods - all reserves are above the 2,000 level main haulage
way - ore Exploration potential is very good: - many zones open at depth Infrastructure is in place: - power provided by existing power lines -
company owned housing - water available All permits and agreements in place: - very good local support for the project During the 3rd quarter, the Company continued to
advance the operations of the La Negra mine, including the process of
expanding the mill and flotation plant to a rate of 1,500 tons per day of
production. A decision to initiate production from the Maravillas zone was
also made. The zone will be mined by a Contractor, who is on site, preparing
to commence work. In spite of an extended 14 day down period in
September to repair the main ball mill motor, the results from the La Negra
mine for the period were positive. Contributing factors were: rising metal
concentrate prices, positive foreign exchange rates, and management's
continued efforts to contain costs.
Underground at La Negra
Texas: Shafter
Aurcana acquired 100% of the Shafter silver mine
from Silver Standard Resources Inc. in July 2008. Shafter is located in Silver was mined in the region from 1883 until 1942,
when the mine was closed by the War Act. Production during that period was 2.3 million tons
of ore containing 35 million ounces of silver at an average grade of On June 29, the Company announced the results of a
pre-feasibility study. The highlights of the report were: - Payback of under 2 years based on a silver price of
$13.55 per ounce; -
An internal rate of return
("IRR") of 25% pre tax; -
A pre tax net present value
("NPV") of $23 million at a 5% discount rate; -
An initial estimated capital expenditure
of under $40 million; -
Silver production of 3.75 million ounces
in year one and 4 million ounces in year two; and - An average total cost of $7.50 per ounce of silver
produced in the first two years. Mr. Sandy McVey P.Eng., M.Sc., PMP. has been appointed project manager for Shafter and is
commencing with the detailed engineering on the project. Mr McVey is also
coordinating all of the permitting necessary for the mine start up. Mr. McVey
has over 30 years experience working on mining operations and capital
construction projects in North America, Africa and Europe, and has held
positions of plant superintendent and mine manager for underground
operations.
Fundamental Considerations AURCANA PRESENTLY HAS A MARKET CAPITALIZATION OF CAD
40 MILLION. IN 2010, AURCANA PROEJCTS TO PRODUCE ABOUT 2.6 MILLION OUNCES OF
SILVER EQUIVALENT. IF THEY CAN ACHIEVE THIS GOAL, A MARKET
CAPITALIZATION OF AT LEAST DOUBLE THE PRESENT ONE WOULD BE JUSTIFIED,
ESPECIALLY IF SUPPORTED BY HIGHER AVERAGE METAL PRICES THAN IN 2009. BUT BY 2012, WHEN THE SHAFTER MINE IN
AURCANA WILL NEED TO RAISE ABOUT $ 40 MILLION TO
BRING THE SHAFTER MINE INTO PRODUCTION. THIS MAY NOT BE EASY TO ACHIEVE WHEN
THE COMPANY HAS A MARKET CAPITALIZATION OF ONLY $ 40 MILLION RIGHT NOW. PART OF THE FUNDS MAY NEED TO COME FROM CASH FLOW,
ANOTHER PART FROM EXERCISING STOCK OPTIONS - AT PRESENT, HOWEVER, THESE ARE
MOSTLY OUT OF THE MONEY. AS THE COMPANY MOVES FORWARD AND CONVINCES THE
MARKET THAT THEY CAN CONSISTENTLY ACHIEVE THEIR OBJECTIVES, THE SHARE PRICE
WILL REACT ACCORDINGLY.
THE TIMELESS PRECIOUS METAL FUND is a shareholder in the company and will benefit from any increase in
the company's share price.
Disclosure: The author has
not been paid to write this article, nor has he received any other inducement
to do so. Disclaimer: The author's
objective in writing this article is to invoke an interest on the part of
potential investors in this stock to the point where they are encouraged to
conduct their own further diligent research. Neither the information nor the
opinions expressed should be construed as a solicitation to buy or sell this
stock. Investors are
recommended to obtain the advice of a qualified investment advisor before entering
into any transactions in the stock - or to use their own brains. In our opinion,
the best approach is to buy a diversified portfolio of stocks as represented
in THE TIMELESS PRECIOUS METAL FUND or THE SIERRA MADRE GOLD & SILVER
VENTURE FUND instead of shares of only a small number of companies. Peter Zihlmann The Timeless Precious Metal Fund Peter
Zihlman is an independant Swiss asset manager, who manages the Timeless
Precious Metal Fund and the Sierra Madre Gold and Silver Venture Fund. Disclaimer:
P. ZIHLMANN INVESTMENT MANAGEMENT AG does not accept any liability for any
loss or damage whatsoever, that may directly or indirectly result from any
advice, opinion, information, representation or omission, whether negligent
or otherwise, contained in the trading recommendations or in any accompanying
chart analyses, whether communicated by word, or message, typed or spoken by
any of its employees. Information
contained herein is obtained from sources believed to be reliable, but its
accuracy cannot be guaranteed. It is not intended to constitute individual
investment advice and is not designed to meet your personal financial
situation. The opinions expressed herein are those of the author and are
subject to change without notice. The information herein may become outdated
and there is no obligation to update any such information. The author,
24hGold, entities in which they have an interest, family and associates may
from time to time have positions in the securities or commodities discussed.
No part of this publication can be reproduced without the written consent of
the author.
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