Aurcana's CEO Discusses Q3 2013 Results - Earnings Call Transcript

Dec. 2.13 | About: Aurcana Corp. (AUNFF)

Aurcana Corporation (OTCPK:AUNFF) Q3 2013 Results Earnings Call December 2, 2013 2:00 PM ET

Executives

Catalin Chiloflischi - Corporate Communications Director

Lenic Rodriguez - President and CEO

Analysts

Dan Rollins - RBC Capital Markets

Christos Doulis - Stonecap Securities

John Waters - Big Bend Gazette

Operator

Good morning ladies and gentlemen. Welcome to Aurcana Corporation Third Quarter 2013 Webcast and Conference Call for Monday, December 2, 2013. Please be advised that this conference call is being recorded. I would now like to turn the call over to Mr. Catalin Chiloflischi, Corporate Communications Director, Aurcana Corporation, who will introduce today’s speakers. Please go ahead.

Catalin Chiloflischi

Welcome everyone to Aurcana’s third quarter 2013 results conference call. Thank you very much for taking the time to be with us today. Today’s call will be presented by Mr. Lenic Rodriguez, President and CEO of Aurcana Corporation who will be providing an overview of Aurcana’s third quarter results as well as an update on La Negra and Shafter. After his remarks, we will open up the floor for questions.

For those of you who have joined us today on the webcast, we have included a number of slides to support today’s discussion. Please keep in mind that if you like to ask live questions after the presentation, you have to dial into the teleconference. Questions asked on the webcast online will be responded individually after the event. We’re going to try and answer all our questions today; however, anyone who does not have their questions answered, should contact us by email or telephone at any time after the teleconference.

As a reminder, in today’s call, we will be making forward-looking statements and we will be discussing forward-looking information that involves unique risks concerning the business operation and financial performance of our company. Please refer to the webcast slides for a complete forward-looking statement disclosure.

With that, I would now like to turn the floor over to Mr. Lenic Rodriguez. Please go ahead Mr. Rodriguez.

Lenic Rodriguez

Hello everyone and welcome to our call today. I would like to provide you with an overview of the third quarter results as well as an update on our operations.

I am pleased to say that once again Aurcana was able to increase its third quarter silver equivalent production from La Negra by 5% over the same period one year ago and by about 14% for the first nine months of 2013. La Negra produced over 750,000 silver equivalent ounces during the third quarter and over 2.1 million ounces for the first nine months of 2015.

The total cash cost per silver ounce net of by-product was about 17% lower than the previous quarter to $6.45 per ounce and the year-to-date cost remained under $8. Being able to maintain a low cash cost is an important strategic advantage for Aurcana, especially in these times of lower silver prices.

Total revenues were $10.4 million, down $4.6 million from the same period one year ago, due to a combination of lower silver prices, lower grades and higher unsold inventories at the end of the period.

Total earnings from mining operations were $2.6 million for the quarter and almost $10 million for the first nine months of 2013.

In the third quarter, the company posted a net loss of $15.5 million as a result of $6.1 million impairment charge related to the Shafter property and another $6.8 million for certain expenses incurred at Shafter mine during the first nine months of 2013.

As the mine development continued, the average grade of silver mine at La Negra in the quarter was lower due to an increase in mine development. This development was necessarily in order to support the higher mine production rates in the future.

Currently, La Negra has enough mine development to support two years of good production and will slow down mine development in the short term. La Negra’s mine plan includes a transition to mining higher silver grade mineralized zones from the upper levels of the La Negra mine in 2014 and 2015.

In an effort to improve our operations, Aurcana has ordered a $4 million raise-boring machine to construct ventilation raises and ore passes to the new mining areas. It is anticipated that this equipment will increase productivity and reduce operating costs. The raise-borer is expected to be commissioned in Q2 of 2014.

During the third quarter, a great production was sourced from the copper rich zones. As a result, the copper concentrate production exceeded the persisting capacity of the present (inaudible) lowering the mill throughput. A new larger capacity filter press has been received at La Negra and is expected to be commissioned in Q1 2014.

This improvement is expected to allow for sustainable production at the targeted rate of 3,000 tonnes per day in 2014. In response to lower silver prices, La Negra has undertaken cost cutting measures to improve margins while also cutting back on capital expenditures.

Now moving onto Shafter. The company continues to make capital improvements to the processing facility at Shafter in order to allow for sustainable throughput rate and acceptable recoveries starting in 2014.

The Shafter plant while in commissioning processed a total of 46,000 tons during the third quarter, an average of 505 tons per day. Mechanical problems with the ball mill curtailed commissioning in October 2013. The necessary parts for repair are on order and the mill should be repaired by January ‘14 at the latest.

Shafter mine continues to implement a number of additional improvement and we are focusing all our efforts and resources in completing the necessary changes. Additional plans are being developed to rehabilitate the mine shafts, hoisting systems and mine dewatering system in the eastern extension of the ore body, allowing access to the non-mined area delineated by Gold Fields. This work will be followed up with a comprehensive mine to complement production from the old Presidio Mine area.

The total capital costs required to achieve the target for capacity were originally estimated to be approximately $18.5 million, of which some $5.5 million has been spent as of the end of the second quarter. After our reassessment, some $5 million of the original amount have now been deferred indefinitely while preserving the ability to reach our guidance.

However, these deferred costs will now be used to rehabilitate the Gold Fields shaft. Our goal is to mine the Shafter deposit using Gold Fields shaft under the plans in 2014.

New precipitate filter presses have been received and commissioned in October 2013. Additional refinery equipment is arriving and will be installed and commissioned in the fourth quarter of 2013.

Foundation work has commenced on the three CCD and new primary thickener tanks in October. Actual tank fabrication is commencing in January ‘14, with the goal to have a fully operational circuit during the second quarter of 2014.

In closing, I would like to reaffirm that with the technical improvement for Shafter well underway and increased the business at La Negra, the company remains well positioned to continue its growth.

Thank you for your support and confidence in Aurcana Corporation.

We would now like to open the floor for questions. Operator?

Question-and-Answer Session

Operator

Thank you, Mr. Rodriguez. (Operator Instructions) The first question is from Dan Rollins with RBC Capital Markets. Your line is now open. Please go ahead.

Dan Rollins - RBC Capital Markets

Yes. Thanks very much. Lenic, could you give us little bit of color on what’s going on with the block model at Shafter and so how you guys envision this block model moving forward when it is redone sort of with respective, call upgrades and also some of the unit cost assumptions you will be taking into account?

Lenic Rodriguez

Well, I would say, those estimates from our resource and the service are now being commissioned to MDA. They are expected to be delivered sometime in 2014. The current block model has not been so accurate as we wanted to be in order to mine profitably. We will expect to have something more accurate in the near future.

Operator

Thank you. The next question is from Christos Doulis with Stonecap Securities. Your line is now open. Please go ahead.

Christos Doulis - Stonecap Securities

Good afternoon. I’m wondering, you talked about $5.5 million spent at Shafter to the end of Q2, can you provide us with what was spent until the end of Q3 and then estimate as how much more capital you guys need to spend to ultimately get to that 1,500 tons as of September 30th?

Lenic Rodriguez

Well, our expected total costs is $18.5 million, $5.5 million have already spent. $5 million were indefinitely deferred and that are going to be used to pull into operation the shaft. So the number remains the same, $18.5 million. It’s being distributed differently in order for capital to be able to use the shaft that was put into place by Gold Field that allow us to mine from their virgin areas of the high grade zones of Shafter.

Operator

Thank you. The next question is from John Waters with Big Bend Gazette. Your line is now open. Please go ahead.

John Waters - Big Bend Gazette

Lenic, good afternoon. In the recent MD&A, the company mentions that you may not -- you anticipate that the cash flow from current operating activities may not be sufficient to meet the company’s commitments and that the company may explore various sources of financing. Can you elaborate on what sorts of financing or you considering an equity offer?

Lenic Rodriguez

No, we are not considering an equity offering at this point in time. There are different stimulations that we are working on and those numbers being different needs from -- almost no need – (inaudible) little bit of extra money. But we haven’t really done any different given that respect.

Operator

Thank you. The next question is from Dan Rollins with RBC. Please go ahead.

Dan Rollins - RBC Capital Markets

Yes. Thanks again. Lenic, can tell you me how much you plan on spending for sustaining capital at La Negra next year and could you also maybe give me a comment on the $5 million of deference indefinitely at Shafter? Was any of that for the floatation circuit or anything with respect to improving recoveries and what impact that will have on recoveries going forward?

Lenic Rodriguez

Okay. No, the $5 million have not been reinvested in floatation. It’s being invested in the CCDs in the filter presses and other equipment. We can give you the exact list later on but we don’t have it really handy right now, okay and outstanding capital is about $4 million for La Negra.

Operator

Thank you. (Operator Instructions) There are no further questions registered at this time. That is all the time allocated for today’s call. However, the company would like to remind everyone that unanswered questions should be addressed by email or telephone at the contact information provided. The conference call has now ended. You may disconnect your lines at this time. Thank you for your participation.

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