Aurcana plans to start building Texas silver mine next year

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VANCOUVER (miningweekly.com) ? Canadian silver minerhigh tension electrostatic drum separator Aurcana expects to begin work on its second mine, the Shafter project in Texas, next year, and will likely start production at the operation early in 2012, CEO Lenic Rodriguez said on Thursday.

The company has started putting out feelers for the $40-million that it needs to fund the project, and Rodriguez is confident the money will be in place in the early part of next year, he said in an interview at the company?s Vancouver headquarters.

If Shafter was in production today it would be the twelve-largest pure silver mine in the world and, once in operation, the mine is expected to boost the US from number-eight silver producer up to sixth place and increase the country?s silver output by 10%.

For Aurcana, it will mean production surges to more than five-million ounces of silver a year, as Shafter adds to expanding output at the company?s already-producing La Negra mine, in Mexico.

Rodriguez plans to raise $40-million to finance the project, mostly in debt, although it could include an equity component, possibly in the form of warrants.

?But we want to keep dilution as low as possible,? he said.

Aurcana had a very good reception from fund managers and investors on a recent road show trip to New York and Boston, and is planning to do the rounds in Europe soon too.

?So, the markets are opening up and I feel confident that we will be able to get this financing in place.?

Based on a June 2009 prefeasibility study, Shafter could produce an average of 3,2-million ounces a year of silver, with cash costs forecast at $7,50/oz.

Once the financing is in place the company plans to start work towards development right away, and expects production should follow within 18 to 24 months.

Aurcana bought the past producing mine in 2008 from Silver Standard Resources. The asset currently has an NI 43-101 silver resource of 24,6-million ounces measured and indicated, plus 22,8 million ounces in the inferred category.

The operation will produce silver dore bars on site, and Rodriguez said there is also a possibility the company could mint the silver and brand it as ?Texas silver?, which would create an additional profit margin.

LA NEGRA

Aurcana is also expanding its La Negra operation, in Queretaro state, Mexico, from the current 1 000 t/d throughput to 1 500 t/d.

The expansion should be completed in the first quarter of next year, and will increase metal output to 1,25-million ounces of silver, five-million pounds of copper, five-million pounds of zinc and 1,5-million pounds of lead.

The firm is adding a new circuit for the lead, which will mean it not only escapes smelter penalties, but will also start realising revenue for the metal.

The company is putting cash flow towards the expansion, and plans to raise about $3-million in a small private placement later this year.

In June, Aurcana announced it would remove the contractor at La Negra and took over the operations itself.

Besides the savings it achieved simply by not paying a contractor every month, the company also tackled what it saw as costly supplier contracts and trimmed some surplus personnel.

?And we have really started turning that mine around,? Rodriguez said.

?It?s cash-flow positive and we expect it to be very profitable once the expansion is completed.?

All told, the operation is expected to generate more than a million dollars a month in net profit once the expansion is completed.

The La Negra mine was developed by Penoles and operated from 1970 to 2000.

When Aurcana bought it the mine had 1,2-million tons of proven and probable reserves.

After mining for two years, and without much effort in the way of exploration, those reserves now stand at 2,1-million tons.

The company will, however, start an exploration programme in November.

There are 23 known orebodies at La Negra, and many of the zones are open at depth.

?The mine?s already been producing for 30 years and we expect it to produce for us for the next ten years or more.?

Beyond the two current operations, Aurcana is also looking at some additional opportunities, both in Canada and Mexico, to ensure that it maintains a pipeline of projects.

Certain potential targets already have significant NI 43-101 compliant resources, but the firm is also considering some more grassroots opportunities, Rodriguez said.

He is hoping to see a rerating in the company?s share price as the La Negra mine ramps up and Shafter moves towards production.

Aurcana?s stock trades at just around C$0,20 apiece on the TSX Venture Exchange (C$0,23 close on Thursday).

Source: http://opoutpost.com/aurcana-plans-to-start-building-texas-silver-mine-next-year/

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