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Aurcana Silver Corp: Resurrecting The Revenue-Virginius Mine (OTCQX:AUNFF)

By Taylor Dart
Seeking Alpha.com
Jan. 07, 2021 8:49 PM ET

Aurcana Silver Corporation (AUNFF)

Summary

* Aurcana was one of the top-performing silver developers last year, up nearly 300% vs. its benchmark which returned 30%.

* The company recently secured a loan to restart its Revenue-Virginius Mine in Colorado, with an expected start date of Q3 2021.

* While the transition from developer to producer typically leads to a significant re-rating, some of this re-rating is now priced in at a market cap of $274 million.

* A rising silver price will lift all miners, but at a valuation of nearly $12.92/oz, I see no reason to chase Aurcana above C$1.15.

It's been an exciting year and a half for Aurcana Silver (OTCQX:AUNFF), given that the company has risen from the dead after years of lifeless performance since the Shafter Mine was placed on care and maintenance in 2013. Outside of Rubicon Minerals, which was decimated at the tail-end of the previous bull market, Aurcana was one of the worst performers, sliding 99% from its 2012 highs. However, a higher silver (SLV) price and a new mine, Revenue-Virginius [RV], has breathed new life into the stock, with Aurcana being one of the top performers last year. However, with a near 700% rise since the March lows, I don't see much of a margin of safety for new investors. Therefore, I see no reason to pay more than C$1.15 for the stock.


(Source: TC2000.com)

As noted above, Aurcana Silver has had a spotty history in the junior mining sector, and few names performed worse in the gruesome 2012-2016 metals bear market. However, the 2018 acquisition of Ouray Silver Mines and its RV Mine in Colorado has led to a significant improvement in sentiment, with Aurcana up over 1200% from its bear market lows. Over the past two years, the company had added new names to its management team, raised a significant amount of capital, and is now getting ready to restart the past-producing mine which originally operated until 1915 when the mill burnt down. Since then, the mine has had a spotty track record and two separate companies investing significantly in the project but not making much headway. Let's take a closer look at the past-producing mine below:


(Source: Company Website)

As pictured above, the RV Mine benefits from significant infrastructure with a new underground mill that was built in 2011. In addition to storage buildings and a tailings storage area, the project also benefits from a crusher and concentrator already in place, allowing Aurcana to restart operations with relatively modest capex. Based on the 2018 Feasibility Study [FS] completed by Ouray Silver Mines, upfront capex was estimated at less than C$45 million, which is very reasonable given that the average small-scale project takes a minimum of US$100 million to head into production. It's also worth noting that the mill at RV has a nameplate capacity of 400 tonnes per day, but the Feasibility Study used a conservative estimate of 267~ tonnes per day. This suggests there's a relatively easy path to increasing annual silver production.


(Source: RV Mine Technical Report)

Continued below:

https://seekingalpha.com/article/4397849-aurcana-resurrecting-revenue-virginius-mine?