Mining sector investors tend to have two choices: Juniors who may struggle and stumble for years before achieving greatness and the junior's bigger brother, which seems to enjoy successful project after successful project.
While investors can earn money investing in one or the other, the real prize – the coveted investment to have in any portfolio – is one where the junior is on the cusp of greatness. It's that thrilling money-maker where you invest for pennies and sell for dollars. Those are the investments to seek out! While finding those companies isn't always easy to do, we've researched one company that seems to be positioned to make that leap.
Aurcana Corporation (TSX.V: AUN) is a junior mining company (its placement on the Venture Exchange is one of the giveaways, of course), but the future looks very interesting for this company. Over the course of our interviews and research, we've found that there are a few key elements that growing companies tend to have that faltering companies do not. (Obviously, this isn't an academic list but a rule of thumb we've found to be relatively trustworthy). Those elements are: Experienced leadership with a clear vision, projects that are currently producing good results and that have huge future potential, and sound financials to fund operations and development.
Here's how we've found Aurcana to score on these key growth indicators:
Experienced leadership with a clear vision: Over the course of our interaction with Aurcana, we've spoken personally with Lenic Rodriguez, the president, CEO and Director of Aurcana, and we've diligently scoured interviews with Rodriguez and with Ron Nichols, Senior Vice President of Aurcana, as well as publicly available resources.
Lenic Rodriguez has a BA in Business Administration and a Master's degree in science and his experience is in international finance and business. Ron Nichols, Senior Vice President and Director is a Professional Engineer with over 3 decades of industry experience. He worked with Cominco and then as a consultant and manager of independent exploration and mining companies.
Andy Nichols, Vice President of Operations, is a Professional Engineer with over 3 decades of industry experience around the world for companies that include Cominco, Breakwater, Denison and Kilborn – SNC Lavalin.
Nils von Fersen, Vice President of Exploration, is a Professional Geologist with over 3 decades of industry experience around the world with Kidd Creek, Falconbridge, as a consultant and manager with junior companies.
Sandy McVey, Project Manager for Shafter has over 30 years of experience working on mining operations and capital construction projects in North America, Europe, and Africa.
Ron Netolitzky, Director, has the Snip, Eskay Creek, and Brewery Creek mines to his credit. More recently as former Chairman of Viceroy Exploration, the exploration success of the Gualcaymayo project in Argentina resulted in the sale of the company to Yamana Gold.
Alfonso Canseco is the mine manager at La Negra and he is a Mining Engineer with 35 years of experience with companies that include Gold Corp., Grupo Mexico, and Penoles.
Experienced teams know the opportunities and limitations that their company faces and can realistically assess each and act accordingly. This is a highly experienced management team used to working with both juniors and seniors in a variety of environments and if there is anyone equipped to make the jump from junior to senior, it's this team.
Projects that are currently producing good results and have huge future potential:
Aurcana has an operating mine and two projects underway, expansion of La Negra from 1000 TPD to 1500 TPD and bringing Shafter into production, and is expecting to grow in the next one to two years. According to their website, the company's current projects have the potential to produce over five million ounces of silver per year, and when converting the copper and zinc credits from La Negra into silver equivalent, the total increases to over 6 million ounces silver equivalent.
The Shafter project, located in Presidio County, Texas, is owned 100% by Aurcana and has a 43-101 silver resource of 24.6 million ounces (Measured and Indicated), 22.8 million ounces (Inferred) and a completed Prefeasibility Study. Production year one is forecast at 3.9 million ounces silver recovered. Once it goes into production, according to Lenic Rodriguez, this mine will be one of the largest pure silver mines in the world and will increase silver production in the US by 10%. "It's $39.9 million to put our resource into production… and it will take 18 to 24 months to get it into production," said Lenic Rodriguez in an interview with Al Korelin in September 2009 (http://www.kereport.com/dailyshow/daily-sep2509-seg1.html).
Their La Negra project, located in Queretaro State, Mexico, is 92% owned by Aurcana and is a silver-copper-lead-zinc mine. "There is exploration but it is more of a production scenario," said Ron Nichols in the same Korelin interview. The year 2009 production was approximately 750,000 ounces of silver and 3 million pounds of copper, and 3 million pounds of zinc, resulting in approximately 1.4 million silver equivalent ounces for the year. Their plans to expand the operation in upcoming months should see an increase to 1.2 million ounces of silver and 5 million pounds of copper, 5 million pounds of zinc, and 1.5 million pounds of lead, or an estimated over 2.0 million silver equivalent ounces. Aurcana shows their “current cost per ounce of silver net of base metal credits, is US $7.29.” Budget projections for 2010 which incorporate the cost benefits of the expansion at La Negra show the cost per ounce of silver falling to approximately $6 per ounce. "Production expansion is now underway and expected to be at 1500 TPD by Spring of 2010… that will have a major impact on our unit operating cost – that will reduce them significantly," said Ron in the interview. "With 23 ore bodies identified by Penoles, and all accessible from underground, we can see 8-10 years minimum [in the life of the mine]".
Sound financials to fund operations and development: Lastly, Aurcana's financials show impressively solid fundamentals and an ability to fund their own growth, which means they are not reliant on debt and the expensive interest rates that come with it. Roger Wiegand, who operates the resource newsletter Trader Tracks, said in an October Korelin Report interview (http://www.kereport.com/dailyshow/daily-oct0709-seg3.html): "They don't have a lot of cash but they have enough; they've got cash flow from production and the other project they have in Texas looks very intriguing."
These are just our rules of thumb, of course, and wise investors will try to get several opinions. So what do other experts say?
In the Korelin Report interview with Roger Wiegand, Wiegand said, "The first thing I do is go to the charts. You look at in 2007 and their stock had gone from a penny stock – 10 or 20 cents, all the up to $2.00 – but it came back to a good floor –21 cents or 22 cents – the technicals on the chart are showing a continuation triangle and that's a prelude to the big rally that we see." He sees their price rising up to $1.13 as early as March or April 2010 based on what's coming in the precious metals market.
The expert analysis of Bullion Master's Silver Stock Report (http://www.aurcana.com/i/pdf/2009-11-AurcanaPresentation.pdf) indicates that Aurcana is solidly superior to many of its junior silver mining peers.
Aurcana may seem like a junior but the building blocks are in place to see this small company become an impressive organization with a significant contribution to the sector.
References
See the company's website: www.aurcana.com
Read the Silver Stock Report: http://www.aurcana.com/i/pdf/2009-11-AurcanaPresentation.pdf
Listen to the Korelin interview: http://www.kereport.com/dailyshow/daily-sep2509-seg1.html
Listen to the Korelin interview:http://www.kereport.com/dailyshow/daily-oct0709-seg3.html
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