VANCOUVER — Emerging Vancouver-based silver producer Aurcana Corp. (AUN-V) continued to demonstrate steady production growth through the first quarter, as the company posted record profits and announced development is ahead of schedule at its flagship Shafter silver mine in Texas.
Aurcana successfully expanded production at its 99.8%-owned La Negra silver-copper-lead-zinc mine in Querataro State, Mexico, following completion of a US$4.5 million mill upgrade in March that bolstered throughput from 1,500 to 2,000 tonnes per day.
The company’s year-on-year quarterly revenues jumped 6% to US$11.6 million, with net income surging 186% to US$2 million on the back of heightened silver prices and production growth.
Aurcana increased silver output by roughly 20% compared to first quarter 2011, producing 287,500 oz. of silver equivalent. The company enjoyed a 15% increase in copper, zinc, and lead concentrate production as increased higher-grade recoveries also fueled earning increases. Aurcana reported grade improvements of nine percent to 81 grams per tonne.
Le Negra's current measured and indicated resource — encompassing the Alacran, Maravillas, and Monica deposits — clocks in at 1.25 million tonnes grading 105 grams silver per tonne, 0.62% copper, 0.56% lead, and 1.44% zinc totalling 4.2 million oz. of silver or 7.5 million oz. of silver equivalent.
Aurcana processed 130,600 tonnes of ore during the quarter. Interestingly, only 15% of the processed materials originated from La Negra’s measured and indicated resource base, with the remaining 85% coming from new discoveries or non-compliant deposits.
The company is undertaking a 15,000-metre exploratory drill campaign at La Negra aimed at expanding its resource through the definition of roughly 28 historic deposits on the site. The majority of La Negra's deposits remain open at depth, and all are accessible through 60 km of underground development over five levels that stretch 500 metres vertically. The company is expanding its underground tailing facility to accommodate ten years of added mine life.
Aurcana is two months ahead of schedule and US$1 million below budget on its Shafter silver project in Presidio County, Texas — the historic silver mine produced 35 million oz. of silver at an average grade of 425 grams between 1883 and 1942. Commissioning is underway, with a three-month ramp-up period expected to bring the mill to its 1,500 tonnes per day capacity.
“We are very pleased with the progress we are making at Shafter,” commented president and CEO Lenic Rodriguez during a conference call in late April. “It is the fourteenth largest silver mine in the world according to the Silver Institute, and the second largest pure silver mine in the United States. We expect production shortly.”
Shafter is projected to add 10% to U.S. silver production, with first-year estimates pegging output at 3.8 million oz. of silver at cash costs of US$8.73 per oz. When combined with La Negra, that increase would bump Aurcana's total production to roughly 5.5 million oz. of silver equivalent, which is comparable to mid-tier silver outfits like Endeavour Silver (EDR-T, EXK-N) and Fortuna Silver Mines (FVI-T).
Shafter has existing measured and indicated resources totalling 2.8 million tonnes grading 244 grams silver for 24 million oz. of contained silver. The project maintains further exploration upside as well, with inferred resources pegged at 2.2 million tonnes carrying 298 grams silver for 22.8 million oz. contained silver.
Initial economics had Shafter's price tag at US$45 million, carrying a 32% internal rate of return and a pre-tax net present value of US$269 million at a 5% discount rate and US$34 silver price.
Aurcana increased its exploration budget at Shafter to US$3 million in early March, including a 5,000 metre drill program tailored to test the potential for mineralization hosted by carbonate units lying below the thickest and highest grade historic intersections.
The company released maiden results from the program in March, with Hole 401 intersecting silver mineralization from depths of 280 to 284 metres over a true width of 3.2 metres grading 274 grams silver.
Aurcana's shares have bounced back 38% or 26¢ to start the year on average volumes of 1.5 million shares per day. The company has remained firmly within the top-end of its 52-week range of 55¢ and $1.07, though it demonstrates typical silver sensitivities to the movement of precious metals prices. Aurcana closed at 94¢ on a 1.2 million share trade volume at presstime.
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