AuRico repositions for growth in Mexico

AuRico Gold (auq-t, auq-n) has had nothing short of a notable year so far, as the company continues to rebrand as a low-cost, gold-silver producer, with now three operating mines in Mexico.

Formerly known as Gammon Gold, the company recently changed its named and logo to signify a “new beginning and a new chapter.”

The new name, amalgamating the atomic symbol for gold (Au) and Spanish for rich (rico), became effective in mid-June, following the bitter showdown for producer Capital Gold and its El Chanate gold-silver mine in Mexico’s Sonora state.

AuRico outmanoeuvred Timmins Gold (tmm-t), which runs the San Francisco mine nearby, and secured El Chanate as its third mine in early April.  

AuRico says El Chanate almost doubled its gold reserves, and boosted company-wide production.  

The mine contributed 14,871 oz. gold and 24,912 oz. silver or 15,505 gold eq. oz. to the company’s quarterly production of 43,714 oz. gold and 1.2 million oz. silver, or 75,073 gold eq. oz., using the actual gold eq. ratio of 39-to-1 realized during the quarter.  This represents a 53% increase in gold eq. oz over the same period last year.

The remaining production came from the company’s flagship Ocampo gold-silver mine in Chihuahua state.

Ocampo had a remarkable quarter, yielding 19% more gold eq. oz. than the previous three months, at lower cash costs of US$340 per gold eq. oz. As a result, AuRico lowered its 2011 cash cost estimate for Ocampo to US$400-$430 per gold eq. oz. from US$420-$455. 

The miner reported company-wide realized cash costs of US$384 per gold eq. oz., giving it a margin of US$1,125 per oz., a 65% improvement over 2010.

 Revenue came at a record US$113 million, compared to the previous quarter’s US$73 million. As a result, it posted record operating and net free cash flows of US$54 million and US$21 million, respectively.

“We have delivered one of our strongest production quarters at cash costs well below industry average,” said Rene Marion, AuRico’s president and CEO, in a press release. In 2010, the average industry cash costs were US$557 per oz.  

Marion added the company will start the second half of the year with more than $102 million in hand, and three operating mines.

In July, AuRico restarted the Las Torres mill at the El Cubo gold-silver mine in Guanajuato. The mine will start operating in the third quarter.

AuRico has upped its 2011 production guidance to 175,000 to 195,000 oz. gold, 4.95 to 5.50 million oz. silver, or 265,000 to 295,000 gold eq. oz., at lower cash costs of US$445 to US$475 per gold eq. oz. (using the long-term gold eq. ratio of 55-to-1).

Along with production from its mines, the company has several other Mexican projects lined up to support future growth.

While a preliminary economic assessment (PEA) for its Orion gold project indicates the potential for an underground operation, a PEA for its Guadalupe y Calvo gold project is expected soon.

AuRico plans to complete 24,000 metres of drilling on its six other exploration projects in Mexico this year.  

In Toronto on Aug. 11, as gold hovered around US$1,757 per oz., its stock touched a new 52-week high of $13.05, before settling at $12.37 apiece.