Silver: Bigger is Better in
By Marc Davis of www.BNWnews.ca
“Bigger is better” is a bit of
boastful bravado that proud Texans are renowned for proclaiming, often with a
genteel southern smile. After all, the ever-industrious citizens of this
sprawling, oil-rich southern state like to do things on a grand scale.
So it seems fitting that Texas
is about to become home to the second largest primary silver mine in the U.S.
And it’s being accomplished in a manner befitting Texas’ long tradition of
rags-to-riches entrepreneurial success stories. By way of explanation, the
Shafter Mine is now owned by a tiny Canadian upstart company that was
unprofitable and drowning in debt just a few years ago.
However, since Aurcana
Corporation (TSX.V: AUN) acquired new management in 2006, it has gained a new
lease on life. It has already turned a small Mexican silver mine into a
profitable venture with fast-growing revenues. And with its overall income
primed to ramp-up in a big way as a result of its new high-octane U.S. business
venture, Aurcana is poised to become a silver mining industry stand-out. Hence,
the company’s aspirations for continued success appear to be as big and bright
as a Texan summer sky.
Beginning in April, Aurcana will
re-commission the past-producing Shafter silver mine near the ghost town of
Shafter in Presidio County, southwest Texas. In so doing, the company should
soon yield prolific enough output to add an addition 10 percent to America’s
overall annual production, making it one of the biggest primary silver mines in
Following an initial projected
output of 2.8 million ounces of silver during the balance of the year, Shafter
is expected to produce up to 19-21 million additional ounces over the next four
years. However, nearly 23 million additional ounces have been roughly outlined
by way of an “inferred resource” -- which the company hopes will at least double
the life of the mine.
Such encouraging estimates are
getting the attention of the investment industry. According to Christos Doulis,
a mining analyst for the Canadian securities firm Stonecap Securities, Aurcana
is poised to use Shafter as a springboard to becoming a mid-tier silver
“Shafter is a significant silver
asset and is certainly a game changer for Aurcana,” he says. “Successful
commissioning of the Shafter project will propel Aurcana into the ranks of mid
tier silver producers by the end of 2012. And it would provide investors with
exceptional exposure to silver.”
The company’s track record since
its reorganization in 2006 is also a key value driver for Aurcana, Doulis adds.
“What I really like about them is that they’ve demonstrated a strong operating
performance at La Negra. They’ve also done everything they said they were going
to do, both on time and on budget.”
Company president Lenic
Rodriguez says that the company’s combined annual silver equivalent production
(which includes by-product base metals from La Negra) is projected to reach over
five million ounces by the year’s end. And with the benefit of comparatively low
mining costs relative to other small silver producers, this is projected to
translate into over $100 million in cash flow, according to Rodriguez.
By way of a little background,
Aurcana’s ongoing revitalization began at the La Negra mine in Queretaro State,
Mexico. Since 2006, when Rodriguez first set about turning the mine’s flagging
fortunes around, it has seen a significant rise in output and a corresponding
decrease in production costs. Under his direction, the company management’s has
since built sufficient enough value into Aurcana to wipe out its debt and to
realize a greater than ten-fold increase in its market capitalization.
In fact, this last year saw
record output at La Negra. All told, 1.74 million ounces of silver equivalent
were produced, which entails a 28 percent increase over 2010’s output. Rodriguez
forecasts that the mine should realize a further boost in production to 2.4
million silver equivalent ounces this year. This amounts to a 34 percent
improvement over 2011’s yield, and an eye-catching 78 percent jump over the
previous year’s figure of 1.35 million ounces. The company is planning a further
expansion of the mine, which should ensure a mine life of at least 8-10 years,
and the prospect of a continued upwards trend in output.
Rodriguez believes that the
Shafter mine also has plenty of unlocked potential, which is why an exploration
program is running concurrently with the mine development plans. In so doing,
Aurcana hopes to help address a current shortfall in the availability of silver
coins and bars in the U.S. -- which many investors are hoarding as a hedge
against a devaluation of the dollar.
“Besides shipping silver
concentrate to a smelter, we will also be producing our own silver bars, which
will display a ‘Made in Texas Silver’ stamp of authenticity,” he says.
No doubt, the prospect of more
bragging rights should suit any Texan who appreciates a little more of a silvery
sheen to the Lone Star state’s lustrous legacy.
The principals of
www.Top40GoldStocks do not directly or indirectly own shares in any
of the companies mentioned in this article.