I felt strongly enough about Aurcana's (OTC: AUNFF) likelihood of delivering on its plans for an epic production growth spurt to feature the company among my top five silver stocks for 2012, and designate it as a top pick within my Motley Fool CAPS portfolio. But when it comes to effectively communicating the reasons why I'm so excited about the company's growth prospects, nothing captures the story quite like going straight to the source.

That's why I made a point to sit down with Aurcana CEO Lenic Rodriguez during last week's Cambridge House World Resource Investment Conference in Vancouver, and why I'm happy to share excerpts from that conversation here. In Part 1 of this discussion -- which you can review first by clicking here, as long as you promise to return -- we learned a bit about Rodriguez's background and how he came into the CEO position. We also heard him share his own excitement at his company's prospects for surging abruptly into the ranks of the leading midtier silver producers.

Along the way, he sees Aurcana swiftly surpassing the silver production volumes of three of my other favorite names in the silver industry: Alexco Resource (AMEX: AXU) with its expansive Keno Hill silver district in Canada's Yukon Territory, Endeavour Silver (NYSE: EXK) and its growing silver bonanza starring shallow high-grade veins in Mexico's legendary Guanajuato district, and Fortuna Silver Mines (NYSE: FSM) with its own impressive operation in Oaxaca, Mexico. Now let's hear Rodriguez describe just how he sees his company achieving these aggressive growth objectives.

Christopher Barker: Even before commercial production at the Shafter mine is achieved, you are already looking forward to the next stages of production growth to come...

Lenic Rodriguez: Of course, yes. At La Negra, we have 95% certainty that we will be able to increase production on-budget and on-time by early March. We're already mining at 2,000 tons per day, and we will start producing at 2,000 tons per day as of March.

Barker: And then already the company is referring to output of 2,500 tons per day...

Rodriguez: Well the ball mill is oversized at 2,500 tons per day. The guys already know that we're going to go for the next expansion to 2,500 tons per day sometime during 2013, but I am going to push them to see if we can do it in 2012. The mill will be ready as of March, so then we can start with the mine ramp-up to increase mine production toward 2,500 tons per day. Hopefully we can do that by early 2013, or earlier.

At Shafter, we have 90% certainty that we are at least two months ahead of schedule and under-budget. That's pretty significant, because 12 or 13 months ago, there was nothing there. Also at Shafter we have an oversized ball mill at 2,500 tons per day. I just spoke to our people at Shafter today, and told them I am going to make a presentation today, but I don't want to overdo it. So I asked them what it will take to begin milling at 2,500 tons per day, and he told me "the mill can do it; it's not a problem."

The only thing is feeding the mill. Our mining engineers are very careful, and their first priority was to prove the geological model. So the first hole we drilled was to prove the geological model, and we struck the orebody within 1 foot of where the geological model indicated. The next priority was to get underground, and we are currently at around 1,100 feet there and advancing at a rate of 20 feet per day, which is very substantial. That means that next month we will reach the orebody and start the mining process.

In the meantime, at surface, we have about 200,000 tons of ore at 4 to 6 ounces [per ton]; and that's what we will use to begin testing the mill. It's there, so we can just go and pick it up and bring it to the mill. So we are very optimistic that we are going to be mining about 500,000 ounces per month within about two or three months. That will place us suddenly as a midtier silver producer. On top of that, we will have most of the infrastructure at 5,000 tons per day [combined between the two operations], and that will allow us to increase our production to 8 or 9 million silver-equivalent ounces.

I'll give you some back-of-the-envelope numbers. From the 3.8 million ounces of annual production according to the initial mine plan at Shafter, if we increase throughput from 1,500 tons per day to 2,500 tons per day, that added 67% gives us around 6 million ounces of pure silver. At La Negra, we produce 1.7 million ounces silver-equivalent, but now we're looking to increase that to 2.7 to 3 million ounces. That gives us around 9 million ounces. Do you know how much Industrias Penoles produced in 2010?

Barker: About 9 million ounces?

Rodriguez: Nine million ounces. So that's a benchmark, and when we get to between 8 and 9 million ounces we will be a major silver producer. And of course we are looking beyond that point toward growing the company further still.

Barker: Could you give my readers a bit of historical background of the Shafter mine?

Rodriguez: The Presidio mine produced silver for 60 years, and then was closed for 70 years. So now after 70 years, it's going to be reopened. It produced 36 million ounces of silver at 15 ounces per ton. What we now have today is really 8 to 10 ounces per ton, and samples from Gold Fields (NYSE: GFI) [a prior owner of the property] showed a 10% to 15% increase in grade. So we're not there yet, but those are some of the results that we have on hand. We have a very important mine already now, with lots of potential to grow. It's high-grade, which means it will be very profitable. This mine can produce $100 million for us per year.

I'm very pleased with everything that's happening. We've had our challenges, as in mining you always do. But we have tackled them head-on.

Barker: You reported a phenomenal fourth quarter of production from La Negra, where fully 86% of your output came from outside the existing 43-101-compliant resources...

Rodriguez: We're expecting a resource update at La Negra by mid-February. We are going to add about 1 million tons, which will be a substantial increase from what we now have, and these will come from the 1950 level ... the first time we have gone so deep into the mine. The haulage level is at the 2000 level. So all of the orebodies -- these 28 orebodies -- are above the haul level; all of them are gravity fed. And all of them are open. So we're down in the 1950 level now, and we have about 1 million tons here, (with more copper than silver).

Meanwhile, at the 2400 level in the Northwest Trend, we have two orebodies that seem to connect; bridging an 800-meter gap. We're already drilling 400 meters into it, and we need to drill the other 400 meters. And if they do connect, we have the potential for about 4 million tons there, and the grades are around 100 to 200 grams per ton of silver.

We have 500 meters of vertical expanse in these orebodies. The main orebody at La Negra, which goes by the same name, is 60 meters wide and 400 meters high. So you can put the Empire State Building in there.

We are lowering our costs and increasing our grades. Very few mines can say that; most of them are seeing grades coming down. In our case, we are increasing [grades] by about 8% to 10% this year already. The net cost per ounce of silver is negative; minus $6. So it's very profitable; very efficient.

This mine lost money before, and I made the changes that needed to be made to make the operation profitable again. We had two choices: either close the mine, or make it productive. And I said "I'm not going to put 350 families in the street!" So I went down there, dismissed all the people who were damaging the company. I told them: "I want this mine to be productive, and you have 60 days to do it." In 45 days we were making money, and we've been making money ever since. I was told by some technical people that it could never be done; that La Negra would never produce a penny.

Within a span of three years, we will have turned the company around from a nearly bankrupt state to a thriving midtier silver producer on our way to becoming a major silver producer.

Barker: I can see your excitement. It's refreshing to see in a senior executive.

Rodriguez: Exactly. I am very fully committed to the company, and very excited about where we are going, and where I think we can take the company.

Please click here for Part 1 of this discussion with Aurcana CEO Lenic Rodriguez.

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