Hi JimmyP,
Maurizio laid out the overall plan at the “informational meeting” Auryn hosted in Las Vegas several years ago. Right after Kevin spoke, Maurizio took the stage and explained that he (I’m assuming Auryn Holding Co. but I don’t know that for a fact) had the resources to put the vein deposits into production. That’s exactly what he did. He mentioned that he wanted Auryn to quickly become a “mid-sized gold producer”. At the time, I thought that this statement took some cajones since that meant a minimum of 100,000 ounces of production per year. He said that the porphyry areas like the Pegaso Nero are going to necessitate the level of funding that a major or a consortium of majors could only provide. At the time, he had permission from Freeport McMoRan to use their name as a party of interest. He mentioned that they were scheduled to be on site within several weeks of that meeting. He also mentioned that 2 other parties, “even larger than FM”, were also parties of interest but he did not have their permission to use their name. This is all back when copper was trading at $2 per pound before all of this “Green new deal” sentiment became mainstream and everybody started talking about the need for a vast network of charging stations for electric vehicles using insane amounts of copper. Today copper is at $4.41. If the consortium approach is being taken, then negotiations will take what seems to be light years until the day it smacks you in the face.
At that meeting, Maurizio went into how the negotiations for the porphyry areas would probably go. He mentioned that the major or the consortium would demand 51% but they weren’t going to get it. This made me think that the negotiations would not be a short-term event. He wanted to talk more about shorter term goals namely the vein areas. At the time, I’m not sure he had confirmation that this was a mesothermal vein system or not. ACA Howe had suggested so, but I’m not sure if Richard Sillitoe, by far and away the most successful discoverer of truly world class deposits on the planet, had whispered to Maurizio that it was a mesothermal system and not just your run of the mill epithermal deposit. Recall how, when Sillitoe was retained, his mission was to evaluate the ADL Mining District, from a “regional basis” and that the results of his 4-day visit would remain “in-house” for the time being.
After reading this, I did a deep research dive into the area, and lo and behold Teresa Moreno and Victor Maksaev, who co-authored a chapter on metallogeny in “The Geology of Chile”, cited a belt of mesothermal deposits stretching from our next-door neighbor to the south, the Curacavi Mining District, to our next-door neighbor to the north, the Colliguay Mining District. Remember how “Masglas” went and acquired the Empressa Caballo deposit in Colliguay. This got me thinking that there might be an overall master plan in effect in which there might be an amalgamation of some or all of these Auryn, Masglas, American Sierra properties at some point. This would make the “S,G and A” expenses less on a deposit basis. Maurizio’s manner was direct, he’s going to build a major mining company. Period!
Is there a pathway within sight for Auryn to produce 100,000 ounces of gold per year? If you assume that the plan at the Fortuna mesothermal area is the same that they had at the Caren Mine/Merlin 1 Vein, i.e. simultaneously mining from 6 “working faces” at perhaps the Merlin 3, Leopoldo Antonino and Don Luis 1 Veins, then each “working face” would have to produce 16.666 thousand ounces per year. Assuming 300 working days per year, each “working face” would have to produce 55.5 ounces per work day. Kevin laid out a scenario recently asking the forum participants about the value of 40 gpt AU held within a 2-meter-wide vein assuming a 2-meter-deep blast penetration. This came out to represent 41.6 ounces of gold per “blast cycle” i.e. per shift. To get to that 55.5-ounce figure per working face the ore would have to average 53 grams per tonne in order to produce 100,000 ounces per year.
If management added more working days per year or more shifts per day then this goal would be very doable. In the areas of the Don Luis 1 vein where no blasting was needed to release the ore, a second shift seems like a no-brainer. If the Caren Mine were to also kick into production. then who knows what kind of numbers could be posted? Recall from a recent update that the Don Luis 1 Vein was actually averaging over 85 gpt Au. Both Kevin and Maurizio are about as far from being a promoter as they come. They’re both from the “under promise, overdeliver” school of managment. What jumps out at me more than even the ability to be a mid-tier gold producer is the potential profitability of however many ounces get produced annually. The same recent update also cited that blasting was not needed in order to produce that 85 gpt ore. This suggests that the rock in the vein is unconsolidated. There would be no drilling of holes into the working face, no stuffing of dynamite or ANFO into the drill holes, no waiting hours for the dust to settle, etc. One could produce a lot of very, very low-cost ore within a given time period under these conditions in comparison to the typical “blast cycle” and all it entails. I’m not sure what percentage of the Don Luis1 Vein falls into this “no blasting needed” category but I assume they’re going to go after it first.
I feel a bit sheepish about talking about producing 100,000 ounces per year within a couple of years perhaps. But I don’t sense observers appreciate the combination of very wide (2-meter) veins plus very high grades (let’s say 50-got Au) and very inexpensive costs on a “per ounce mined” basis. The ECONOMICS, especially in a mesothermal vein system, can get downright scary. So, I’ve forgiven Maurizio for dropping the “mid-sized gold producer” goal at a time I thought was premature. We need to recall that it was Maurizio that bought and later donated the Caren Mine and its ultra-high grades into the pot in the Medinah/Cerro/Auryn deal. He was probably thinking in terms of the Caren Mine/Merlin 1 Vein when he made that “mid-sized gold producer” comment. Now the focus has shifted to the Don Luis 1 Vein and the 2 “massive veins” they’ve been referring to. Here is where the widths and grades appear to be going berserk. But let’s wait for confirmation.
Maurizio, Sillitoe and to a lesser extent Kevin are all 3 or 4 steps ahead of the rest of us. The timing never seems to be as quick as prognosticated but the results sure are there. Management projected that they would be at that initial 40 tonnes per day production rate many months ago but they didn’t intersect the Don Luis 1 Vein until June 23, 2021. Intersecting the Don Luis 1 Vein should have got them to 2 extremely high-grade working faces from, let’s say, July 1 or so onwards. The first of those 2 “massive” veins that were over 2-meters wide even AT SURFACE, is located within spitting distance of the Don Luis 1 Vein intersection as the map they provided clearly shows. I’m going to guess they hit this “massive” vein 30 or so days ago on or around July 1. As the map shows, the Leopoldo Antonino is about 60 meters west of the already reached intersection with the Don Luis 1 Vein. We’re now about 40 days past the timing of the intersection with the Don Luis 1 Vein.
Based on 22 working days and a 40 tpd production rate since July 1, Auryn should have stockpiled or shipped about 880 tonnes just in July. What they averaged on a tonnes per day basis in April, May and June, I couldn’t tell you other than it was less than the anticipated 40 tpd they planned on producing. Their press release said that they couldn’t produce at the 40 tpd pace UNTIL they intersected the Don Luis 1 Vein which they successfully did on June 23. Remember, the production results cited to date were from the old Fortuna Mine near surface. This new adit is 150-meters below surface where those mesothermal veins may have dilated out AN and may have become richer.
JimmyP, Back to your question about Maurizio having leverage in his back pocket by now and is it a good time to do a deal on the porphyries. Yes, he has plenty of leverage now and it might go up exponentially soon with positive developments. Is it time to do a deal on the porphyries? If he knows that big news is coming, then I’d wait until that occurs. Otherwise, the spring in Chile is right around the corner and this would be the time of year to mobilize any drilling equipment and/or do any geophysical work to help narrow down drill target sites. As far as any terms for any JV with a major or consortium of majors, I couldn’t even venture a guess. I’ve been around the ADL for 21 years. My focus is more on being an overnight success in just 21 years on the mesothermal veins. Not that we haven’t earned it or anything!
