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speedybure (< 20)

My Top Silver Miner For 2011

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January 09, 2011 – Comments (10) | RELATED TICKERS: SLV

Aurcana Silver – One of the most lucrative Junior ( soon to become mid-tier) silver producers in the industry, providing a very lucrative investment opportunity if one is willing to take on a little more risk.  This risk, however, has been dramatically reduced over the past couple of months making it ripe for the picking. Equity financing coupled with a good quarter( in which silver prices averaged over $10 less than current spot) has de-risked it to a considerable degree. One of the best things is the fact the investment community has not paid any attention thus far.

Aurcana has two mines, one in operation and a second larger mine set to come on-line in 2012. It has geographical diversification with mines in Mexico and Texas, the latter (The Shafter Mine) will become their flagship operation once in production which should pave the way for possible acquisitions to further growth down the line. Historic mining in Presidio Country (South Texas) had high grades to the tune of 15oz/t.

La Negra – Aurcana’s first producing mine is a great start to transforming them from and Exploration Company to a commercial producer, providing positive operating cash flow as of Q4 2010, which will increase over the course of 2011 due to higher year over year metal prices and ramp up toward peak production. There still remains upside potential as 5 new deposits have been identified, likely to be given more attention once their Shafter mine is up and running. Cash Costs remain relatively high at $8.25/oz but will come down due to the structure of the mine and pillar mining methods. Higher grade ore is expected which should also help bring down extraction costs over the next couple of years.  There is one caveat however, In order to bring La Negra into production; they sold a 50% royalty stream to Silver Wheaton in order to get into production. While this isn’t great news it only applies to the silver mined, not the bi-products. In other words, they will pay Silver Wheaton 600k ounces annually, leaving them with 1.4m silver equivalent ounces. On the positive side the recoup a fraction approx $4/oz for each of the 600k ounces in addition to an underground mine is being explored for further expansion.

Shafter Mine – Located in Texas, is Aurcana’s Flagship property boasts an incredible internal rate of return and is set to commence production in a little over a year. Aurcana is cashed up via an equity financing deal in addition to operating cash flow generating by La Negra.  Silver Dore will be produced on sight, which will reduce costs, especially important for aggressive growth mining companies. The most bullish aspect of this project is the incredible internal rate of return. At $21/oz silver using a 5% discount rate, it is a staggering 73%! The Shafter Mine will produce 3.8m ounces in the first two years of operations increasing to 4m ounces thereafter with cash costs of $8.27/oz.

Recent Updates: Aurcana has resolved their liquidity and solvency concerns via a 60m dollar equity offering to help fund some of the portion of the capital requirements for their Shafter Mine. They have also got a 25m loan from Sprott Asset mgmt, which will allow them to repurchase their streaming agreement with Silver Wheaton, drastically increasing future margins and total production from La Negra.

In Conclusion: Aurcana presents a rare opportunity in the silver arena which has been decreasing as many silver producers have doubled many times over. So seeing an 80m dollar company increasing production from 1m ounces in 2010 to over 6m ounces by 2012-2013 is one incredible deal.

This is 1 of the 13 mining stocks in a report highlighted by a colleague and myself in a report "Treasure Hunting" which also includes a database of miners valued based on 3 various metrics relative to industry averages and the prices of gold or silver. 

10 Comments – Post Your Own

#1) On January 10, 2011 at 3:49 AM, ath002 (< 20) wrote:

Hello Speedy, and thanks for your posts.

Can you please advise where I would be able to find the report that you mention: "Treasure Hunting"?

Thanks in advance, and sincerely appreciate your input to this site.

Best to you.

L

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#2) On January 10, 2011 at 8:37 AM, silverminer (30.60) wrote:

There's no question, Aurcana is a compelling name to consider for inclusion within a carefully selected basket of junior producers and explorers. The basket approach is important in this industry, especially when you get down into the small-cap names.

Thanks for the post, speedy!

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#3) On January 10, 2011 at 9:24 AM, 100ozRound (29.39) wrote:

ath002

Here is the link to his blog where you can find the Treasure Hunting report.

http://comingcurrencycrisis.blogspot.com/

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#4) On January 10, 2011 at 7:58 PM, NevSilverJunkie (< 20) wrote:

After the latest financing, Aurcana is much more than an $80 million market cap company.

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#5) On January 10, 2011 at 8:32 PM, speedybure (< 20) wrote:

Yes it is, though due to the provisions of the financing, I believe there will be a 4 month period until these shares trade (correct me if I'm wrong). While I;m usually opposed to such a big equity financing, I absolutely believe their Shafter project coupled with the repurchase of 50% of La Negra is well worth it. I believe the market severely undervalues the economics of La Negra and don't realize how profitable Shafter will be at these or higher silver prices.  

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#6) On January 11, 2011 at 8:32 PM, NevSilverJunkie (< 20) wrote:

You are correct, there is a 4 month hold. Since the warrants were so cheap, those will be way in the money, so the company will be close to 500 million shares outstanding.  

Once Shafter is in production, the company will warrant a higher share price.

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#7) On January 22, 2011 at 9:27 PM, maxbentley (< 20) wrote:

My understanding is AUN is 330 million outstanding now and will not go over 400 million.

 6.5-7 million oz AgEq production in 2012 (early production rumoured) at $30,$40 silver that is 200-300 million cashflow.

 

The prospects  of discovery and upgrade of resource with MAG Silver's MeGaw heading exploration drilling now is realistic.

AUN just announced construction has begun at Shafter and a formal ceremony is to take place Feb. 16th.

AUN's mine management upgraded La Negra fro 1,000 tpd -1,500 tpd (now 1600tpd) under budget and within time constraints set.

Expect  pre-production in mid-2011 at Shafter with drilling headed by MeGaw leading to a high chance of discovery.

 

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#8) On February 08, 2011 at 5:33 AM, maxbentley (< 20) wrote:

This outline is months old as La Negra's primary production profits of copper and silver are much higher in price now.

These numbers support  the overview of what Speedy is saying about the profitability of La Negra without SLW in their pockets for 50% of LN's silver-life of mine basis.

SLW was bought out in a December financing supported by Sprott Inc..

 

La Negra 2010

Annualized forecast at 1500tpd is  1,200,000 ounces silver, 5 million pounds copper and 5 million lbs of zinc

Silver has averaged $26 for the last two months.

copper has been averaging 3.80 per pound for Oct and Nov.

Zinc has averaged $1 per pound

La Negra monthly production

silver - 100,000 oz per month  

copper - 416,667 lbs per month

zinc - 416,667 lbs per month


Silver October or November $26 X 100,000 = $2,600,000 per month

Copper October or November $3.80 X 416,667 = $1,583,335 per month

Zinc October or November $1 X 416,667 = $416,667

Total = $4.6 million per month

Conscider that the Aurcana site is giving their forecast based upon 1500tpd.

La Negra is now operating at 1600tpd and mining silver rich zones within the mine.


Shafter Silver

3.9 million oz per annum production-3.8 m/oz year one,3.9 m/oz year two,4.0 m/oz year three

12 months equals 325,000 oz per month

@ $28 silver per oz = $9.1 million per month

@ $30 silver per oz = $9.75 million per month

@ $35 silver per oz = $11.375 million per month

@ $40 silver per oz = $13.0 million per month

@50 silver per oz = $16.25 million per month


La Negra Silver -no base metals present here that account for 1.2 million Ag Eq annually

1.2 million oz per annum production

12 months equals 100,000 oz per month

@ $28 silver = $2.8 million per month

@ $30 per oz= $3.0 million per month

@ $35 per oz = $3.5 million per month

@ $40 per oz = $4.0 million per month

@ $50 per oz = $5.0 million per month

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#9) On February 17, 2011 at 7:16 PM, MiaAmore (< 20) wrote:

WHY IS IT HOWEVER HE HAS NO SHARES OF Aurcana Silver

http://seekingalpha.com/article/248581-top-silver-miners-to-watch-in-2011

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#10) On August 12, 2011 at 9:39 PM, speedybure (< 20) wrote:

You're not supposed to talk about penny stocks in published articles so naturally I would try to hide it as well as possible. 

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