New owner Aurcana seeking funds to begin operation of Revenue-Virginius Mine
Ouray Silver Mines (OSM) Inc. is now a subsidiary of Aurcana Corporation, a Vancouver, Canada-based public company that develops and operates mines. The acquisition of the fully permitted operator of the Revenue-Virginius Mine was completed through a resolution approved by approximately 99 percent of Aurcana shareholders at a special meeting Dec. 20.
Aurcana obtained the final order of the Supreme Court of British Columbia approving the arrangement on Dec. 24, the transaction closed Dec. 27 and Aurcana shares recommenced trading on Dec. 31. The actions were the culmination of a series of transactions first announced in a letter of intent on July 30, 2018.
“With the transaction completed we can now look forward to the future,” Aurcana CEO Kevin Drover said. “The shareholders of Aurcana voted overwhelmingly to endorse the acquisition of Ouray Silver Mines Inc.”
Aurcana owns the Shafter-Presidio Mine in Texas and has managed operations at the La Negra Mine in Mexico for the past few years, under contract with the owner. New York-based Lascaux Resource Capital Fund, OSM’s owner since 2015, became the largest shareholder in Aurcana as part of the deal. Lascaux also holds two seats on the five-member board and has the right to nominate a third seat.
“I expect our board will be engaged. The role of the board is oversight of management,” said Drover, whose career as a mine operator has spanned more than 40 years. “Committees within the board with specific responsibility for oversight of such activities as occupational health safety and environment will visit the site from time to time to see the operations first-hand and to assess the effectiveness of our various programs.”
Worker safety and environmental impacts are two areas that OSM has been working to improve since taking over operation of the mine in 2015, when Lascaux foreclosed on Fortune Minerals. In November 2013, Star Mine Operations LLC had an accident that killed two people and injured 20. In May 2014, Fortune Minerals acquired the mine and operated it until the foreclosure.
“All of the policies and procedures that contributed to the poor safety record prior to 2015 have been reviewed and required changes made. We are certainly going to have all the necessary ingredients to operate this mine safely, such as well-trained, experienced personnel,” Drover said. “Safety is paramount. We will do what we have to do to keep employees safe.”
Concerning environmental impacts, OSM has been enhancing facilities that discharge mine water into Sneffels Creek, as required by the Colorado Department of Public Health and Environment. On Monday, the Colorado Mining Association announced that the Revenue-Virginius Mine won the Best of the Best of the 2018 Environmental Sustainability Award, which will be presented to OSM at the CMA’s 121st National Western Mining Conference & Exhibition in Denver Feb. 26.
The company collaborated on a nearby mine reclamation project that improved water quality at the historic Atlas Mill site and is planning two future reclamation projects. One project at the Atlas Mill site will be primarily funded by a Colorado Department of Public Health and Environment fine paid by the company for water quality shortcomings found during Fortune Minerals’ ownership, with additional funds from OSM. The other proposed project will be in Governor Basin, above the Revenue-Virginius, and funded by both OSM (via in-kind participation) and Natural Resource Damage funds from the Idarado Mine settlement with the state.
Drover said Aurcana is absolutely supportive of the reclamation projects.
“Those are going to get done,” he said.
The current mine staff of 16 will remain in place, including OSM CEO Brian Briggs who reports directly to Drover. When in operation, the number of employees is expected to grow to 150 or 160. But before the mine can go into operation, Aurcana must secure financing.
“In all likelihood, financing will come from a combination of equity and debt financing. That’s now our primary asset, and our focus is to get that into production. We are out in the market to see if we can raise production financing,” Drover said. “I think the markets are improving and that encourages me that we would be able to get it done in short order, but these types of financing could take a little time. It won’t happen tomorrow, but maybe in the second or third quarter.”
Since 2015, when OSM took over operation of the Revenue-Virginius, silver prices have fluctuated between $14 and $21 per ounce. In those three years, the highest valuation was in July 2016, when the price hit $21.24 per ounce; the lowest was on Nov. 13, 2018, when it dipped to $14.08. On Friday, it was at $15.67.
A feasibility study completed in 2017, and updated in 2018 as part of the transaction with Aurcana, showed that the mine is expected to extract approximately 92,000 tons of ore per year, averaging 2.25 million ounces of silver, plus gold, lead and zinc, a year. The study showed that the mine has more than 522,000 tons of proven and probable reserves containing over 14.2 million ounces of silver, 33,000 ounces of gold, 57 million pounds of lead and 24.7 million pounds of zinc. Over the current seven-year mine life, the value of those reserves based on the feasibility study is estimated at $333 million with an after-tax undiscounted free cash flow of $92.4 million.
Editor’s note: This is the first article of a two-part story.