Silver: Bigger is better in Texas
About to become home to the second largest primary silver mine in the United States
“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, Stock Forum) 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 the world.
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 producer.
“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.
Disclosure: Principals of www.BNWnews.ca and www.Top40GoldStocks do not directly or indirectly own shares in any of the companies mentioned in this article.
ABOUT THE AUTHOR
Marc Davis, BNWnews.ca
Marc Davis manages www.top40goldstocks.com, a performance-based Top 40 table for the “Who’s Who” of the junior gold sector. This site provides investors with key data-driven buy/sell signals that are generated by Chicago-based Barchart.com – North America’s leading provider of technical analysis solutions for the investment industry.
He also manages www.BNWnews.ca, a business news aggregator which also generates objective and influential mining investment news media that receives high profile online distribution and international propagation, consisting of over 60 news agencies.
Contact him at: marc@top40goldstocks.com or marc@BNWnews.ca
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