Aurcana’s “Shafter Mine” Welcomes Academia
by Jeff Baker
MiningMgmt&GeoAnalysis
May 2, 2013
While the shareholders of Aurcana Corporation (TSX VENTURE: AUN; OTC: AUNFD) anxiously awaited a 1 for 8 share-consolidation, I was preparing to return to the only perceivable source of problems either currently or in the foreseeable future for the Company. Sixteen of us headed out on a Society of Economic Geologists UTEP Student Chapter trip to visit Aurcana’s Shafter project as part of an effort to foster the growth of the Geologic Sciences in the area, and subsequent excursion to TRER (Texas Rare Earth Resources) April 26-28, 2013
On arrival to the little town of Marfa, Texas the enchantment of the desert southwest had filled the air; it was early in the evening on Friday April, 26 2013, and the landscape was beginning to relax after the relentless pounding of the Sun that happens in these parts of South Texas. Geologic history predominantly marks this region within structural controls; each serving as a library of knowledge about the events that created them, faults and veins waiting to be read like a book. The evidence of the faulting activity and volcanism that mineral deposits source from is prevalent in front of us, adding to the eager anticipation of the next morning where the Society of Economic Geologists UTEP Student Chapter had been invited to the site out at Shafter to attend a “hands on” tour of the operations provided by contributions from both Aurcana Corporation and the UTEP student chapter of SEG.
We spent the evening visiting a couple local establishments until settling in at a great place named “Planet Marfa” where we could hang our hats and unwind from the journey (if you find yourself in Marfa then this was the place serving up the best nachos, regional brew and atmosphere making you feel right at home). With a large group of geologists and future geologists around the table the resulting conversations took on a new dynamic and depth about the subject of our trip, Shafter. The subjects were regional geology, and the events that created the deposits in the whole of the caldera zone we were situated in, and more specifically the Shafter Mining District and the mineralization involved specifically in this type of Carbonate Replacement Deposit (CRD). Its long history (since the discovery in 1880) and change of hands over the years allowed for both a historical and operational context which contributed to the discussion greatly.
This perspective was very different from my prior trip just one year earlier with a group of analysts, large investors, and accompanied by senior management of Aurcana Corp. At that time we had all been invited to attend the Grand Re-opening ceremonies, I attended with PreciousMetalsWarrants.com and was fortunate to receive a mine tour followed by a first-hand look at the mill (May, 2012). Within that trip the discussions centered around the business topics: share structure, expenses, plans, warrants, and afforded an opportunity to individually discuss Aurcana at length with management, a wide variety of analysts and their technical advisors who conveyed a range of viewpoints: all of which had a significant impact in the way I interpret the data.
The group that surrounds me now, however, was not asking the typical questions regarding stock structure and how much money am I going to make if I stay in or sell. This was a healthy mix of Grad students and undergrads resting comfortably under the umbrella of an amazing Professor with the University of Texas at El Paso, Dr. Philip Goodell,( http://newsuc.utep.edu/index.php/news-latest/691-professor-hopes-to-transform-geology-with-gift), The questions asked in our roundtable discussions were insightful and created a real world correlation to the material knowledge gained through academia.
Saturday Morning arrived and we headed off to the property in Shafter, Texas about a 40 minute drive, and were greeted by an enthusiastic crew that was smiling. I looked around bewildered, was I in the Twilight Zone, assuming to myself that the prior evening at the local watering hole had reserved its worst for the next day.
How could a junior mining company have people smiling??
MY GOD MAN!! HAVEN’T YOU SEEN THE SHARE PRICE!?!
But the real questions were for me, and they were obvious.
“Why watch the markets when you are looking at the ore bodies in the ground?
You don’t when you are confident with what you see on the ground.
“Why would you invite Academia to your doorstep; much less a group affiliated with the Society of Economic Geologists unless there is a level of confidence in your crew and property?”
You don’t unless you are confident with what you see on the ground.
In the world of analytics, investors are typically left without the advantage of an indicator that is incredibly accurate in current market environments;” the human factor”, which is very indicative here at Shafter. There were some familiar faces from the prior year, and a couple missing ones which showed me that the company has no problem relieving someone when they are not up to the task, and replacing them with someone exceptional to overcompensate for the prior shortcoming. This is a situation where overcompensation is not frowned on and poises the teams on the ground to not only overcome issues but exceed expectations. Ted Apodaca is a prime example of this overcompensation and excellent choice to rally the crew and overcome obstacles with a fantastic mining pedigree.
The Chief Geologist Bob Ward and senior geologist John Baker greeted us for our training sessions and passed out equipment necessary for safety and our exploration. Both Bob Ward and Lex Lambeck gave a PowerPoint discussion on things to look for and think about, while examining the mine and the operation, as well as, an in depth geologic discussion of the region. After which, we separated into two smaller groups of 8 to alternate between both the Above ground exploration discussions with Lex Lambeck PhD (Exploration Manager, Shafter Property); whose prior experience in analogous Mexican deposits was evident in his comprehensive approach to exploring and following the structures responsible for mineralization of significant (ounce per ton) silver content. Again, the questions being posed were intellectual and geologically related, as it pertained to standing on that specific fault; based on all prior compiled research and study of those involved in the discussion, and resulted in a high opinion for all of us attending the trip towards the Aurcana team.
We collected samples while exploring the open pit and asked extensively about its operations and resulted in the understanding in regards to the open pit: that while it was obvious to see the higher content patches of mineralization (mantos) it was more economical to consider it a “less bang for your buck” destination and use of current equipment and or mining staff when the alternatives are higher grade, or at least until the mill has been refitted and is at full capacity. This to me made incredible sense on the ground, and to see first-hand the “why” to not only that question answered but of so many questions posed within the investment communities and holders of Aurcana stock. I asked tough questions. And do not currently own any shares of Aurcana, but have many a colleague and family member with significant holdings; I shared the analytical and geological hat for this trip and knew that few if any analysts had returned to Shafter after the Re-Opening. At this juncture in the tour I had developed a degree of comfort with what I was seeing and the direction of exploration that Lex had described (including missed targets) seemed to fit perfectly with Aurcana’s forward-looking statements regarding Shafter output.
After a brief lunch we were eager to trade off with our counterparts and proceed to the underground part of the operation. In the same spirit of transparency we were walked down into the mine and inspected the geological structures we witnessed on the surface continue at depth. One of the mine geologists “Blake Huston” gave a very thorough description of each particular aspect (faults/mineralization) that we were coming across at different levels and “Yukon Joe, pictured at left” was quick to get our hands dirty by pointing out lead sulfide, galena and silver ore containing vanadate; that we were allowed to chip away at and sample. The mine geologists continued to explain how faulting controlled the mantos in the (CRD), and thus determined the next prospect for blasting. Further down we found the refuge chamber that a year prior I remembered, had been several layers in the mine higher seemingly at the 1-200 level and now had been positioned deeper due to progress. Some of us received a crash course in a hydraulic drill for bolting, and had the privilege of putting some holes in the wall, continuing to depth to see the (10-12 oz. per ton) ore being marked for extraction. The key to this part of the interpretation is to determine the trend of mantos containing (10-12+ opt) WITH the harsh reality that numerous faulting events and episodes of bi-modal volcanism (18 Mya) have led to complex mineralization in the region. Also, include in that the super saturated, super-heated solution that was intruding into the carbonate host; altering it and depositing the ore-rich mineralization. This mineralization is structurally controlled based on failure planes and structural weaknesses in the host rock. Major events have shaped this deposit and increased the complexity of the deposit. Complexity, says Lex, “leads to higher grade and greater reserves.”
While “us”, as investors, would love to find the “grand canyon full of gold or silver, underneath a mere few feet of dirt”, that’s just not based in reality.
This is a science to determine which structures have controlled major episodes of hydro-thermal mineralization during multiple volcanic events. Often times, complex relationships between faulting and jointing within Paleozoic and Mesozoic sediments will lead to complex, but rich, supergene deposits. Point is, it isn’t all (10-12 OPT) in every spot they are mining right now, but it leads the geologists to directions for exploration in which to confirm or deny a larger deposit it sourced from, and it falls well within Aurcana’s projections for average ore content and 43-101 statements.
We slowed our ascent briefly to examine the completed rescue shaft (a subject of discussion amongst some investors) which had been waiting to be inserted last year and then headed back out of the mine after having reached the very end of the shaft. Rejoining our group; we began to talk about all we had seen as we prepared to go examine core for the last stage of the tour. While beginning to unwind at around 5 PM the group was able to look over core samples, talk about the procedures they are using to catalogue and track the relevant data and further discuss things regarding the metallurgy and extraction difficulties within the leach process that are being resolved. The hosts at Aurcana ended the evening with great food and trivia prizes.
So when asked if I have an opinion of what the future holds for Aurcana it would be a very solid recommendation on a long or medium term holding, with serious caution paid to the volatility within the short term, (while avoiding the warrants at this time due to the short life).Additionally after watching the stock over the last few days it appears to have settled into its repositioning quite nicely and is poised to perform quite well over the next several months and years. We could easily see a couple down days in that same period but they would indicate a bargain to acquire rather than something to be hesitant of.
If you just skimmed through this to get to the guts then have at it, the guts are the same as they were before the consolidation and the same as in a “great market environment.” The largest negatives widely discussed had been the share structure and an excessive dilution, which has largely been addressed with the recent consolidation, and should function to remove a significant percentage of the short “penny stock” players thereby decreasing volatility. This consolidation virtually eliminated the potential for a “10 bagger” for anyone not currently holding shares, and in so doing also created a very risk averse path to a quick double within the year from its current price. Lenic Rodriguez has performed exceptionally as President/CEO since 2009 and it has been almost entirely a solid progression.
If you already own the stock than presumably you have also already read the company press release from a few weeks ago. If you have not read the release, it would be advisable to give it a once over, and examine the Subsection titled “Operational Update on the Shafter Mine.”
http://finance.yahoo.com/news/aurcana-reports-end-financial-results-003002969.html
It is with relative ease that I can say each of the aspects mentioned in that subsection were discussed at length, with the Rio Grande Mining Company (RGMC) and Aurcana, but it was not because we always asked the questions. These were the highlights of the deep discussions mentioned throughout this blog, from (Avg. opt) to mill issues, and the addition of consultants and new staff. Quite matter-of-factly, we were walking on “the ramp that’s proceeding down dip at the rate of 600 feet per month,” and the samples we collected were in the (8- 12 opt) range. All of which leads this human being to a very simple conclusion. The recently released information from Aurcana was a very tangible and comprehensive assessment. While there are inherent difficulties in locating ore bodies they have the team to get the job done, the largest negative on the horizon would be the lack of skilled underground miners in the region which could be a bottleneck issue that needs to be resolved.
Ultimately, this trip created a dynamic relationship between Education and Industry, and both sides came out ahead. Both the Aurcana Corporation and the University of Texas at El Paso benefitted greatly from this experience and it serves as a model to future opportunities.
So once again to ponder the intellectual question: “Why would Aurcana show a group of geologists and future geologists from the University of Texas at El Paso the operations, both above and below ground, unless they were anything less than confident in their employees, operation, and resource in the property?”
Quite simply, they wouldn’t.
Contributions and technical review of this “MMGA” blog:
Jeffrey A. Baker-juniorminingresources.com
Doug L. Standart PhDc-(Geological Sciences, University of Texas at El Paso)
Jonathan M. Merguerian B.Sc Geology Hofstra University, M.Sc-(Geological Sciences, University of Texas at El Paso
http://jeffbakergeo.com/2013/05/02/aurcanas-shafter-mine-welcomes-academia/
Dan  |
