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Aurcana Expects Q4 Commercial Production for Shafter Mine and Expands 43-101 at La Negra to 115 Million Oz. Ag

Shafter Mine to Produce 3.8 Million Oz of Silver in its 1st Year, 8-10 Million Oz of Silver When Full Production is Achieved in late 2013

Aurcana Corporation (TSX.V:AUN; OTC:AUNFF) is about to fly by mid-tier producer ranking and soar straight into the heady class of major primary silver producers.

The reason is clear – the company already has a strong and expanding mine producing silver in Mexico and has now begun operations at a second and potentially much larger silver mine in Texas.

In fact, once in production the Shafter Mine will quickly begin producing about 10% of all U.S. silver, and will rank the 8th largest silver producer in North America, but expects to become the 3rd largest producer when full production is achieved in late 2013, according to Aurcana President and CEO Lenic Rodriguez.

Aurcana’s performance to date is impressive, generating $21.7 million in 12 months of mining operations (as of June 2012). Since then, the company continued to set new production and revenue records – all just from its La Negra Mine in Mexico. Those numbers will more than triple when the Shafter Mine is fully operational. Add to that Aurcana’s considerable exploration upside at both projects and that the company is currently trading significantly below intermediate silver producers with similar production profiles, and it becomes clear that Aurcana is a company with a strong future.

Another major milestone for Aurcana is the recent NI 43-101 report of 115 million ounces of silver at La Negra. That represents a large increase from just 5 million compliant ounces of silver before the latest update. With the impressive increase in the life of mine and the increase in grade to 131 g/t, La Negra gets new focus and more respect as a mine that will produce for decades to come.

Record Silver Production

In its second quarter of 2012, Aurcana posted the largest quarter of silver production at its La Negra Mine in the company’s history
– 373,037 ounces – bringing the total for the last 12 months to more than 1.1 million ounces of silver. The company increased its silver equivalent production to just over 2 million ounces for the last 12 months, continually growing the silver production at La Negra and Fourth Quarter 2012 increasing grades to 80 g/t.

Opening of Shafter Mine to More than Triple Aurcana’s Annual Silver Production

In February, 2011, Aurcana began building its Shafter Mine and now that construction is complete. Shafter is now in the testing and commissioning phase. The company has begun mining the stockpiled surface ore, grading between 2 and 4 ounces per ton. Processing of even higher grade underground ore – grading between 8 and 10 opt – will quickly increase the number of ounces mined at Shafter.

The Shafter mine ramp has reached the first resource block and has begun to mine from several locations on the block. Drilling through the first resource block has added the discovery of a thicker resource block than shown by historical drill results. The first silver pours have occurred at Shafter and commercial production is just around the corner.

The Shafter Mine is located in southwest Texas and encompasses the northeastern down dip extension of the historic Presidio Mine which produced an estimated 35 million ounces of silver between 1883 and 1942. Gold Fields Mining acquired the mine in 1977 from Amax and spent over $20 million on exploration and mine development. Silver Standard acquired the property in 2000 and sold it to Aurcana in 2008. Silver Standard continues to hold 15 million shares in the company. The mine site benefits from an excellent infrastructure, including a major power line and a paved highway that crosses the property.

Currently, the Shafter Mine has an NI 43-101 measured and indicated resource of 24.6 million ounces of silver and an inferred resource of 22.8 million ounces of silver, using a 4.0 opt cut-off. The mine currently has a 10-year mine life and is expected to produce about 3.8 million ounces of silver by the end of 2013.

Shafter has an exploration budget of $3 million this year and the drilling plan was developed to encounter the feeder systems to the Shafter resource.

“The Shafter Mine is now in the testing and commissioning phase. We built the mine and mill ahead of schedule and about $1 million under budget,” says Rodriguez. “We are excited about announcing the first revenues on the Shafter Mine.”

La Negra Production Increasing and New Resource of 115 Million Oz. Silver

Production at Aurcana’s La Negra is slated to increase in 2012 as the mine’s third expansion in consecutive years reaches to 2,500 tpd and continues up to 3000 tpd. The new 43-101 resource of 115 million ounces of silver makes La Negra one of the largest silver mines in Mexico. Adding the Copper, Zinc and Lead resources the silver equivalent is over 200 million ounces. Another exciting element of the report is the increase in silver grade to 131 g/t.

“The new 43-101 report at La Negra puts new focus on the mine and defines it as one of the premiere assets in Mexico. In the coming months we will be adding to the NI 43-101 report with new resources from the Northwest Trend where grades have typically been higher,” Rodriguez says.

The new report consolidated the ore bodies at La Negra into 13 distinct deposits. The deposits are still open at depth and are continuing to expand.

Most recently, Aurcana discovered new silver mineralization at depth at its La Negra Mine. This is the first time the company identified significant amounts of mineralization below the 1,920 meter level. Strong silver and copper values were encountered in several drill holes with the highest grades ranging from 120-200 gpt silver and over 1% copper. In the Northeastern Trend copper values increase with depth and in the Northwestern Trend silver values increase as we approach the surface.

Aurcana, which purchased the La Negra property in 2006, recently increased its ownership from 92% to 99.9%, at virtually no cost to the company. The operating mine is located in Mexico’s Queretaro State and includes 70 kilometers of underground development, five main mining levels, a three-stage crushing plant and mill producing copper, silver and zinc concentrates.

The mine was originally discovered and developed by Industrias Peñoles S.A. de C.V. and was in production from 1970 until 2000. Historically, the mine produced 36 million ounces of silver, 323 pounds of zinc, 70 million pounds of copper and 161 million pounds of lead. At the time the mine was put on maintenance, Peñoles estimated (non compliant) it still contained 1.22 million tonnes grading at 116 gpt silver, 2.8% zinc, 0.94% copper and 0.88% lead. Exploration conducted by Aurcana is expanding and extending that resource to NI 43-101 compliant standards.

Aurcana increased its milling capacity at La Negra by 60%, a project completed March 31, 2012. By 2013 the company plans to increase the mill’s capacity to a 3000 tpd throughput, the cost of increasing La Negra’s capacity is only $800,000.

“The annual exploration program at La Negra is 15,000 meters per year. Currently there are 6 drills and a team of geologists developing the additional resources in the mine which will ensure continued growth well beyond the current resources.,” says Rodriguez.

Investment Considerations

Over the next year, Aurcana’s Shafter and La Negra mines will have the capability of processing over 5,000 tpd of ore, an amount the company says it will process in late 2013. This translates to a production level of 6 million ounces of silver once Shafter is commissioned and the real possibility of approaching the company’s goal of an annual production rate of 8 to 10 million ounces of silver equivalent in late 2013.

Aurcana Corporation has a lot to offer investors. It is led by a proven and skilled management team, is very well financed with C$15 million in cash on hand and has a production cash flow that is about to more than double as soon as the Shafter Mine is fully operational.

The completed Shafter Mine, now in testing and commissioning phase, is just the latest success of Aurcana’s performance and business plan. The company is debt free and looking for ways to invest its anticipated growing coffers. And with the recent lower valuations of most resource mining companies the opportunities for growing the company through acquisition have increased.

“Are we going to be rolling in money? I would say that is the case,” Rodriguez says. “We will use that money to expand the company through organic growth and acquisitions. We will be a mid-tier producer when Shafter is operating at commercial production levels and with the expected increase from 1500 to 2500 tpd in late 2013 Aurcana will be a major silver producer, surpassing all of our peers.”

QUICK FACTS

Aurcana Corporation Highlights:

* Silver Producer Rapidly Advancing to Emerging Senior Silver Producer
– US$21.7mm generated from mining operations for the last twelve months (as of June 2012)
- La Negra produced 1.1mm oz Ag Eq.over the first 6 months of 2012

* La Negra Mine Has Significant Upside
- Continuous expansion by four upgrades from 1,000 tpd in 2009 to 3,000 tpd in 2013
- La Negra grades in 45-101 are 131 gpt Ag

* Shafter Will Become a Primary Silver Mine in the U.S.
- Operations at Shafter Mine have begun and expected to more than triple Aurcana’s annual silver production
– 3.8mm oz of silver expected to be produced beginning at the end of 2012

* Aurcana's Properties Have Significant Exploration Upside.
– Numerous untested targets at Shafter and La Negra
– Initial upgrading of historic La Negra deposits to 43-101 standards resulted in 115M ounces

* Attractive Relative Valuation and Re-Rating Potential
– Trading significantly below intermediate silver producers with similar production profiles

* Experienced Management Team
– Numerous ongoing operational improvements to drive production growth and reduce costs

* Strong Silver Market Fundamentals

Aurcana Corporation owns 100% of the Shafter silver mine and 99.9% of the La Negra silver-copper-lead-zinc mine. The Shafter silver mine, located in Presidio County, S.W. Texas, has a NI 43-101 silver resource of 24.6 million ounces Measured and Indicated (2,900,000 tons @ 8.48 opt), 22.8 million ounces Inferred (2,167,000 @ 10.52 opt) and a pre-feasibility completed. The mine is now operating and annual production is forecast at 3.8 million ounces silver. Shafter is expected be a major producing pure silver mine in the U.S. and will supply 10% of all U.S. silver.

More (incl. pics) at:

http://www.thebullandbear.com/bb-reporter/pdf/Aurcana.pdf