As Aurcana Corporation is bringing its Shafter Mine online, there has been lots of chatter on the stock bulletin boards as to what they should do next.
The different choices are:
- Dividend in form of cash or silver
- Rollback of shares
- Share Buyback
- Reinvest profits into new mining projects
My choice is number 4. Even when Shafter comes online, Aurcana will need to replace the reserves it's now taking out of the ground. A dividend or share buyback just reduces the amount of cash they have on hand to do such strategic moves in order to increase reserves. They will need cash in order acquire properties as banks haven't been in the mood to financing "risky" mining projects since 2008. With close to 500 million shares outstanding, diluting shareholders in order to raise money would be counterproductive at this point.
A rollback of shares in my opinion does nothing to help the company. Any investor with a computer can go and see the reasons why this company did a rollback. A rollback doesn't enhance share value.
Right now Lenic Rodriguez and crew need to concentrate on getting Shafter up and running and making sure that their mill upgrades at Shafter and La Negra go smoothly. Once the cash starts rolling in at a high rate, then they need to look at expanding their reserves. They'll need all the cash they can to make that happen. I rather see the money reinvested in the company rather than give me a dividend for being a loyal shareholder. A couple of pennies per share won't give the warm and fuzzy feeling like another producing mine would financed purely through cash flows.
Listen to the Year End Aurcana Corporation conference call here:http://www.aurcana.com/mp3/Aurcana-Year-End-2012-04-16.mp3. Being concerned about their reserves, I asked Lenic a question about their future exploration during the question and answer period of the call.