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Analysis

La Negra is the Gift That Keeps on Giving

Wed, 10/21/2015 - 09:01

Aurcana Corporation (Aurcana) is a Canadian junior mining company listed on the TSX Venture Exchange with aspirations of becoming an emerging senior silver producer. To accomplish this goal, Aurcana is counting on two producing silver mines located in welcoming mining jurisdictions, these being the Shafter silver project in Presidio County, southwest Texas, and La Negra in Queretaro. Aurcana’s Shafter property is made up of the historic Presidio Mine and the newer Shafter Silver mine, both of which are located at the eastern end of an 11km long and 5km wide trend of lead, zinc, and silver prospects. Gold Fields Mining acquired the Presidio Mine in 1977 and spent around US$20 million on exploration and development, during which time the Shafter deposit was discovered. In 1994, the project was acquired by Rio Grande Mining Company, which was subsequently acquired by Silver Standard in 2001. Aurcana then bought the Shafter Silver Project from Silver Standard in July 2008, with a positive feasibility study being announced in September 2010. The company then commenced an 18-month construction program before eventually placing the operation on care and maintenance in December 2013. This decision was based on a combination of declining silver prices and uncertainty surrounding the project’s mineral resources.

The La Negra mine now represents Aurcana’s primary project, and is located 180km north of Mexico City in the state of Queretaro. The district was discovered during the colonial period when it was mined by the Spanish and Belgians throughout the 1800s. In modern times, La Negra was brought into commercial production by Peñoles in 1970 and continued to produce until the mine was put on care and maintenance in 2000. During that time span, 6.6 million metric tonnes of ore were processed which yielded 36 million metric ounces of silver, 323 million metric pounds of zinc, 70 million metric pounds of copper, and 161 million metric pound of lead. Aurcana bought La Negra in 2006, with operations starting back up the following year. Today, La Negra is recovering its former glory, producing silver, copper, zinc, and lead in the form of a metal concentrate. Aurcana’s careful management has considerably increased production, reaching a total of 2.9 million ounces of silver equivalent in 2013.

Since 2007, the La Negra mill has been through three consecutive processing capacity expansions. Starting at 1,000 t/d in 2007, the mill was expanded to 1,500 t/d in June 2010, then to 2,500 t/d in April 2012, and finally up to 3,000 t/d in April 2013. Production grades and tonnages at La Negra have varied during the course of operations due to a number of factors. Variables such as equipment maintenance and downtime, the number of working pit faces, ventilation and safety requirements, as well as the need to stockpile and blend different types of mineralization from up to 12 different zones, have all contributed to the diverse range of results. Work at La Negra has also regularly found mineralization that was not included in resource estimates since 2007. This has seen the company’s management team declare its intention to both pursue extensions of known mineralization, as well as explore new zones when mining conditions become more profitable. Historically, exploration performed at La Negra has resulted in the replacement and increase of mineral resources being extracted. These types of deposits require extensive direct exploration by means of core drilling, cross-cutting, drifting and development workings, all techniques that Aurcana is capable of utilizing. The company has its own diamond drill rigs on site, as well as an on-site laboratory for rapidly producing assay results. Production at La Negra is achieved through the use of mine portals situated at the base of a mountain, but the mineral resources at the mine have been advanced with underground drilling.

At the end of 2014, Aurcana issued an updated resource estimate for the La Negra mine. The estimate was based on 14,578 assays comprised of 4,074 drillhole samples, 8,674 channel samples, and 1,829 longhole samples. These were obtained by Aurcana’s subsidiary, Minera La Negra, during the period of 2006 to 2014, and by Peñoles between 1967 and 2000. In summary, the estimate shows 12.9 million ounces of silver equivalent measured, and 9.7 million ounces of silver equivalent indicated. Alongside this, a total of 54.2 million pounds of copper were found, both measured and indicated, as well as 34.9 million pounds of lead, and 160.4 million pounds of zinc. This more complete information has shone more light on the potential within La Negra, allowing Aurcana’s management team to believe even more in the strong opportunities to develop new zones of mineralization at the mine. Even with such promising prospects, Aurcana experienced a loss in 2014, listing in its financial reports a total equity of US$44.4 million at the end of September 2014. This is down considerably from the previous year when the company ended up with US$159.7 million in total equity. The company’s cash and cash equivalents were also down, totaling US$1.69 million at the end of the third quarter of 2014, as opposed to a previous total of US$41.7 million in the same period of 2013. These differences highlight the difficulties that silver producers face in these trying times of low commodity prices.