The Gold Report interview of Resource Specialist Peter Krauth... Extract where he is discussing Aurcana Corp..
PK: In silver, we hold Aurcana Corporation (AUN:TSX.V; AUNFF:OTCQX), which also has been growing its production quickly. In mid-December, the company reached commercial production at its Shafter mine in Texas. It also produces in Mexico from a project called La Negra.
Shafter is a milestone that will move Aurcana to much higher production levels this year. I look forward to seeing Shafter's contribution in the company's Q1/13 results. Even without Shafter, Q4/12 production was up 34% YOY; overall 2012 production was up 42%.
La Negra is another exciting project. In October 2012, Aurcana announced a new resource there, which brought the silver resource from 4.9 Moz to more than 115 Moz.
Aurcana's P/E is relatively high, at about 39. It is a smaller silver producer but it is profitable, which means a lot. Its forward P/E is estimated at 5.3, which is very low and makes it very attractive. The forward P/E reflects the higher production levels and, therefore, profitability.
TGR: Aurcana has four institutional analysts covering it. Does institutional coverage on a small company reassure you?
PK: Institutional ownership is more important. Ownership means more than just giving an opinion. Institutional investors tend to take a longer view.
TGR: Both Shafter and La Negra are past-producing assets. Aurcana has nothing in the pipeline beyond those two, although both are producing fairly strong cash flow. What does Aurcana plan to do with that cash flow?
PK: The plan is to plow it back into drilling off and expanding the resource and increasing production capacity. Aurcana wants to mill and crush more of the ore it gets out of the ground.
At La Negra, the company wants to prove up higher levels of its 115 Moz silver. Shafter is a similar story. In the first phase, production at Shafter will be around 3.8 Moz with 1,500 tons per day (1,500 tpd). The second phase will achieve 2,500 tpd. That could actually increase the Shafter production to approximately 6.3 Moz silver annually. That is close to 70–80% growth from the initial production targets. If Shafter reaches its phase 2 targets, it will be the third-largest primary silver mine in North America.
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