Hi Zotron,
I think you might have hit the nail on the head in regards to the possibility that Hoch’s agreement may have been modified. This is still speculative but as I said before, mining is a race; it’s a race to become cash flow positive, in as nondilutive of a fashion as is possible, so that SHAREHOLDER REWARD GUARANTEES can be issued to the owners of the corporation. If you can’t trust the markets that these development stage corporations trade on then cash flow positive mining corporations, the producers, can reward their owners with cash dividends or share repurchase plans followed by cash dividends. With a share repurchase/cancellation plan, subsequent cash dividends will be more generous on a per share basis because there are less shares out there to divide up any given-sized pile of cash to be distributed. If the mine life associated with Auryn’s mesothermal vein system is significant, then the cash dividend process can be significantly long. The generosity of the cash dividend on a percentage of share price basis will, with great certainty, put the share price at the proper level even in a corrupt market. Otherwise, shareholders could simply take their cash dividend and buy back underpriced shares and then expose the next cash dividend distribution to a greater number of shares. I don’t sense that Auryn will be trading on the OTCPinks for much longer but I’m not convinced that the more senior trading venues are that much less corrupt.
If I were Maurizio, I’d go balls to the wall on the mesothermal vein system in order to win that race to becoming cash flow positive. The Pegaso Nero and the LDM will probably not provide for any positive cash flow opportunities for quite some time. I think it’s plausible that, as you suggested, Maurizio may have restructured the LDM deal with Hochschild so that their proven expertise in underground vein mining could help Maurizio win that race via exploiting the mesothermal veins. It’s not clear to me how much expertise the Auryn staff has in underground vein mining. I think we’re all trying to make heads or tails out of Hochschild saying that they recommend that 3 holes be drilled at the LDM but apparently, it’s not going to be by them, at least as Hochschild the partner in an LDM JV with Auryn. Initially, we all took it as a bit of a slap in the face that this JV partner, that was theoretically earning in a 51% ownership in the LDM by spending $7 million within 5 years, turns around and says you guys pay for the drilling. That made no sense. The question arises as to what the most plausible explanation might be. Again, this is speculation. Obviously there appears to be more to the story but after the results received during the trenching program and the grades being received from the work on the veins (85 gpt gold in the Don Luis 1 Vein), why would Hoch walk from the LDM when it appears that the grades of the underlying magma chambers that are feeding ALL OF THESE SRUCTURES looks so promising? Maybe Hochschild’s development efforts (and money) got reassigned to an area in which positive cash flow, and therefore victory in this “race”, is nearer at hand.
So, what are the facts. The 6-line- kilometers of IP/IR and their on-site sampling in the 2 LDM adits did indeed identify 3 targets worthy of spending some big bucks on. That seems like promising news but why in the heck doesn’t Hoch pay for it so that they can earn their 51% stake via spending only $7 million? Something must have changed. Did the terms of this JV end up being scrapped and a different approach was agreed to? At first, Auryn said that they would consider doing the recommended 3-hole drill program perhaps by selling some shares to fund it. Later, they said that the 70 million shares outstanding figure is not going to be increased. So, what gives? Did the LDM project get back-burnered and reincorporated into the Pegaso Nero/porphyry area projects where it probably belongs?
For me the elephant in the room is the fact that any major or consortium of majors that executes a strategic alliance with Auryn to co-develop the porphyries will obviously want the LDM’s 3,000 hectares. I think that this is an absolute given since this is a “Mining District” and the development plan needs to address the “mining district” in its totality. Recall how Auryn consolidated all of those disparate mining concession groups into one entity. The LDM deal with Hoch may have undone some of that consolidation. In my mind, the LDM JV with Hoch pretty much precluded a deal on the porphyry areas unless there was some clause to the JV deal that addressed any scenario wherein this JV was stalling a deal on the porphyries. Recall that hyperspectral satellite imaging survey showing a 7 Km swath of “about a dozen” intrusives. If you’re going to cough up the big bucks to build out this project then you’re going to want to annex that 3,000 ha LDM parcel NOW before your work might prove that it’s worth a bunch of money and you end up having to pay up for it LATER. This re-amalgamation of the LDM and the porphyry areas THEORY would also extend the mine life. Hoch would rather have a lesser percentage of the entire project than just the right to codevelop the LDM. Think about how inefficient it would be for Hoch to hire a helicopter to do an aeromagnetic study on just the LDM and the new partners on the porphyry areas hire a different firm to do the same type of study on the Pegaso Nero and porphyry areas.
What we learned yesterday from Kevin is that TODAY there are no encumbrances present that keep Auryn from doing a deal with anybody on any part of the ADL. That’s perfect. Maybe Hoch is part of a group to co-develop the entire ADL less the mesothermal vein area or maybe not. Another question is, would Hoch simply walking away from the JV not represent a “material event” necessitating a press release? I would think so, which makes me feel that Hoch might still be hanging around in some type of capacity other than as a JV partner at the LDM and only the LDM.
Hoch wouldn’t design and build a processing facility for the LDM if there’s going to be one next door. What’s interesting is that nobody has said that Hochschild “walked” from the LDM or ADL project in general, yet we got that atypical news about the 3 drill holes without any further explanation. I’m hoping that the lack of further explanation might have something to do with the chance for an upcoming deal on the porphyry areas but I certainly can’t guarantee that. Kevin’s comment tells us that IF the LDM JV was holding up a deal on the porphyry areas then it no longer is. Five years ago, at the “informational meeting” in Las Vegas, there appeared to be some solid interest in the porphyry areas. Since then, copper has more than doubled in price and all that people can talk about is “the electrification of America”. New copper discoveries remain few and far between. Hochschild’s “walking” from the LDM deal AFTER the tremendous results Auryn got on the trenching program as well as the follow up work done on the mesothermal vein system makes no sense. Their forte is UNDERGROUND VEIN SYSTEMS and they’re really good at it. Admittedly this is speculative but I think it makes sense. Thanks for your input Zotron!