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Aurcana: Near-term catalysts for share price increase

Christopher Wood
Saturday, 11 February 2012

Aurcana is my favourite silver stock right now and I own a bunch. Here are the the events that I believe will drive the share price significantly higher over the next couple years:

* Q1-2012: Resource update for La Negra; should significantly increase resource size and extend mine life... expecting to add ~1M tons of ore for as much between 25Moz and 50Moz silve

* Q1-2012: Increase La Negra from 1500 tpd to 2000 tpd; should increase AgEq production for this mine from 1.7Moz/year to 2.2Moz/year

* Q2-2012: Shafter comes online at 1500tpd; should add AgEq production from this mine of 3.8Moz/year for a company wide production number of 5.0Moz/yea

* H1-2012: TSX listing

* Q3-2012: First production numbers and cash flow from Shafter; should increase cash flow by 5x from ~$25M/year (La Negra only) to ~$100M/year (La Negra and Shafter) assuming $34/oz Ag

* H2-2012: Resource update for Shafter; should extend mine life by moving resources from inferred to measured/indicated (also upside from new discoveries)

* H1-2013: Increase La Negra from 2000tpd to 2500 tpd; should increase AgEq production for this mine from 2.2Moz/year to 2.9Moz/year for a company wide production number of 6.7Moz/year

* H2-2013: Increase Shafter from 1500tpd to 2500tpd; should increase AgEq production from this mine from 3.8Moz/year to 6.3Moz/year for a company wide production number of 9.2Moz/year

* ???: Purchase of 3rd property

In addition to all this, you get a free option on rises in the price of silver. Silver is currently ~$33/oz. The inflation adjust past peak for the price of silver is well north of $100.

Assuming Aurcana can deliver on all their objectives listed above and the market rewards them with a P/E of 8 (similar to current P/E of their peers: HL, PAA, CDM) and they don't issue any more shares (which at this time they have no plans to do), I have the following share price targets for the end of 2013:

$25/oz Ag: $1.29

$30/oz Ag: $1.94

$35/oz Ag: $2.58

$50/oz Ag: $4.52

$70/oz Ag: $7.10

For details on how I arrived at these estimates, refer here: https://docs.google.com/spreadsheet/ccc?key=0AiuriBacoDs0dEdGdi1SaWs3Nm5zR3ZLdmpOOXA0aHc

Posted by Christopher Wood at 15:42

http://investmentrevaluationcatalyst.blogspot.com/2012/02/aurcana-near-term-catalysts-for-share.html