Auryn/Medinah - 2021 - 2nd Half General Discussion

Hopefully metals keep pace or exceed rise in fuel

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This truck actually generates surplus energy! :slight_smile:

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That is actually really cool. How much fossil fuels were used in the mining, processing and transport of the materials used to manufacture it? How much will be used to maintain it? Can they build payloaders, dozers, and excavators this way? Can they build ore processing plants and equipment manufacturing facilities that use no fossil fuels?

Everyone loves the idea of green energy. They just usually don’t think or talk about the FACT that, so far, the green energy movement is built on the foundation of fossil fuels.

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Yes I know. The amount of energy required to manufacture a windmill is crazy. Even something like a nuclear power plant takes years to generate enough electricity to offsite all the energy costs to make it. For these type of reasons and others, global warming isn’t going to be stopped. If one plans on living another 30 to 50 years, investing/living in Florida won’t be a good idea!

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Yes. I would hope that everybody here invested over that period of time realizes that we hit 18 cents. It’s probably worth mentioning that the shares outstanding (as far as we know) were only 250M so we were looking at a $45M market cap which is right about where AUMC is currently trading so what’s the difference? 15 years, a shiney blue truck a $5k loader and Twitter.

There’s not much you can do about the opporutnity cost but, in total honesty, BB you should take your act to Twitter. If anyone can inspire the retail masses with optimism you are the man. Your only limitation is 280 “letters” which may be difficult but something I’m sure you can overcome. We are living in a world where fundamentals are totally irrelevant. Dividends and rainbows with pots of gold are ubiquitous. Strike while the “iron is hot” and take your game to WallStreetBets.

I’m not kidding.

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They probably mined 80 tonnes over the last quarter. So your “math” assumes a 99% improvement of efficiency. Otherwise you are on the right track.

Up until now, they essentially have been simply boring into the mountain and obtaining some ore from veins they happened to cross on the way to the Don Luis vein. Any ore they happen to obtain along the way was a bonus. Based on the pictures, it appears that maybe now they are finally following a vein for production purposes so we should see a dramatic increase in ore they are obtaining. Let’s wait of course for announcement to confirm this.

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I guess I’m gonna have to invest in a houseboat! :smiley:

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Understood but they thought they hit the DL vein back in June. We’re still talking about a couple dudes mining 60-80 tonnes over the past few months. It would indeed be a “dramatic” increase to assume they will be mining 20, 40, or even 80 tpd. Realizing I’m not a popular poster on this board, my best guess is that they may generate a $1-2M annual profit with their current setup. This isn’t a bad outcome but it will take a couple years to payback Mr. M and then they will need to assess a proper financing. Happy to accept the “I told you so” a year from now but that’s my (very objective) opinion.

Your opinion may be objective, and it is definitely biased. So is most everyone else’s on this board. Opinions aren’t worth squat. MC and the workers are the ones putting the money and sweat in. They are making steady incremental progress and are not charging or diluting any of us for that benefit. To paint it any other way is fiction. (Not saying you’re doing that.)

We can join the ride or not. If we are already on the ride, we can reduce the price of our tickets or not. Or get off along the way.

If Wall Street bets makes it go crazy, I’ll jump off. But otherwise, I am happy with the progress and will stay on for the next few quarters and see what’s next.

Incidentally look what happened this morning while I was posting!

AURYN Mining Corp on Twitter

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Great stuff! Am I reading correct old workings intersected

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Well said. If I wasn’t considering buying a ticket I wouldn’t still be reading and posting on this board. My comments are only my opinion. Today’s valuation (ticket prices) looks rich to me but that’s what makes a market.

I don’t think that would be an accurate read, DD.

“This and intersecting with the old works significantly improve the pace of exploitation.”

^^^ To me this seems like a restatement of what was in the quarterly update. I think they accomplished the first today. My guess is they’ll announce the second when they have confirmed the DL and made a connection with the old works.

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Hi JimmyP,

For me, the most accurate guide to Auryn’s production data and grades is “40/40/$5.77”. In other words, if they produce at 40 tpd and average 40 gpt gold then Auryn should trade at around $5.77 based on their having 70 million shares O/S. The math goes like this: the daily production of 40 tpd at a grade of 40 gpt would be 1,600 grams/day. If you divide this by 31.1 grams per Troy ounce of gold this represents 51.4 ounces per day. If you multiply this by 260 working days per year (52 weeks times 5 days per week) you get 13,376 Troy ounces per year. If their all-in sustaining cost is $800 per ounce then they clear about $1,000 per ounce at $1,800 per ounce gold. (I’m letting by-product credits for “Direct Shipping Ore” to Enami offset a 94% or so recovery.) Annual profits would be $13.37 million. If you divide this by 70 million shares then you get 19.1-cents per share earnings.

The most recent average multiple of EPS figure for the mining industry that I could find was from the Stern Business School at NYU. It is 30.21 for the “Metals plus Mining Industry”. Below is the link:

http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/pedata.html

That survey was dated January of 2021. Within the Gold industry, the precious metal producers always get a higher EPS multiple than the base metal producers. A new gold producer will typically ramp up production much more rapidly than an established gold producer whose production levels have already plateaued out. One could easily make the case that Auryn would deserve a larger multiple than the industry norm. This is because of the combination of the crosscut adit plus the previous trenching program. We can adjust the tpd figure through time and redo the calculations. Using the 30.21 multiple and multiplying it by 19.1-cents per share earnings you come up with an appropriate share price of $5.77. When factoring in the share count differential and Medinah’s holding of 16.1 million AUMC shares, Medinah should trade at 1 two-hundredth of AUMC’s share price. This would be 2.88-cents or $0.0288. This is the scenario for 40 tpd at 40 gpt gold.

If Auryn can get their daily production up to 80 tpd and average that same 40 gpt gold, then theoretically they should trade at $11.54 BASED ONLY ON THE MESOTHERMAL VEIN SYSTEM PRODUCTION. I think we might have a tendency to forget that the mesothermal vein system is NOT the elephant in the room from an asset valuation point of view. From a value point of view, the much more valuable asset, in the long run, might be the combination of the Pegaso Nero porphyries, the breccias, skarns, mantos, etc. The valuation of these mineral assets is much more difficult at this stage of development. The terms of any upcoming JV might be the first point at which we can take an extremely rough stab at a valuation. For example, if a major or consortium of majors were to sign a JV strategic alliance mandating that they put in “X” dollars of work in order to “earn in” a 25% stake of the Pegaso Nero and get an option to put in another “2X” to earn in another 25 or 26 %, then you could very roughly assume that the value of 100% of the PN today is somewhere around 6X. This is super crude, however. With copper breaking out like it is, I think “X” is going to be a very large number.

COMMENTS

  1. What the above calculations don’t give proper consideration to has to do with how statistically predictable it is for Auryn to ramp up their production over and above any 40 tpd introductory rate. That 40 tpd figure is what working on one adit “working face” in total could generate. The math goes something like this: the adit width and height are 3 meters each. The average blast hole is about 2 meters deep. This means that 18 cubic meters of rock gets turned into “rubble” with each “blast cycle”. The specific gravity/density of the ore is about 3.25 Tonnes (metric) per cubic meter. This means that each “blast cycle” will free up about 58.5 tonnes of ore. Some of this ore might be clearly not mineralized (barren granodiorite) and it is “hand cobbed” and cast to the side. I’m going to surmise that about 40 tonnes remains after this “hand cobbing” process. As we wait for the data to arrive, for now I would think that the number of adit “working faces” being simultaneously mined when multiplied by 40 tonnes per “blast cycle” will give a fair estimation for total production rate. Round it down to 30 if you feel more comfortable. As far as the probability of being able to ramp up production to perhaps 6 or so working faces, keep an eye on expenditures on the new adit, the addressing of ventilation issues, intersecting shaft #4 of the old works, etc. In looking at the results of the trenching program which delineated over 5,000 lineal meters of veins having made it to surface as well as Antonino Adit reports to date, management is going to intersect plenty of subparallel veins from which to choose new working faces from. This is termed “optionality”. The “meso-veins” tend to get wider and richer with depth and they tend to extend downwards for enormous distances (long mine lives). The Antonino Adit is about 180 meters below the plateau level which sits at 2,000 masl . The 9-tonne sample sent to Enami was taken from near surface in the old Fortuna Mine workings. It graded 45 gpt gold. The average underground gold mine hosts ore grading at about 6 to 8 gpt gold.
  2. A key parameter to keep in mind is that the new “Antonino Adit” (technically a “crosscut adit”) has already intersected several individual veins. Depending upon how the grades and widths look (unreported to date), each intersection could add 2 new “working faces”.
  3. Management gets to choose the best of the best “working faces” to produce from initially. This is called “high-grading”. Later on, the less deserving intersections can be exploited.
  4. We need to keep an eye on the permitted amount of production per month. Initially, Auryn was granted a 5,000 tonnes per month permit. These typically scale up with time. Based on 22 working days per month, this means we could produce 227 tpd and be OK with SERNAGEOMIN. This would represent about 6 working faces not needing further permitting. Subsequent to that granting of 5,000 TPM, Auryn did a lot of work in upgrading ventilation, etc. That 5,000 TPM could have been increased in the recent granting of the final exploitation rights/Mensura.
  5. When it comes to estimating the “All In Sustaining Costs” (AISC) to produce an ounce of gold, you need to keep in mind that mining has both fixed costs and variable costs. A lot of the costs are fixed and remain the same whether you are mining ore with a grade of 5 gpt or 45 gpt. When you spread those fixed costs over more ounces contained in each Tonne, the cost to produce gold on a “per ounce” gold drops a lot with extremely high-grade ore like that which Auryn is mining. The profitability is much higher on a “per ounce” basis also. More ounces being produced at lower costs per ounce enhances profitability quite a bit. The average AISC last year was $907 per ounce for ore not nearly as rich as that of Auryn.
  6. A confirmed intersection with the DL 1 Vein would be really nice from a ventilation point of view (via the DL 1’s shaft #4) and the fact that it has been studied to death with 30 years of very high-grade production (averaging 64 gpt gold) OVER A 30-YEAR TIMEFRAME. This was from one small portion of it up near surface that I believe only measured about 0.4 meters in width. The stellar grades that Auryn is mining are not exactly surprising.
  7. If management encounters a vein with excellent width and grade, they can always “go vertical” and mine that vein in parallel horizontal “levels” stacked on top of each other. When Maurizio was being interviewed by a mining magazine about 3 years ago, he mentioned contemplating mining one area of the Merlin 1 Vein/Caren Mine from 6 levels above the Larrissa Adit and 6 levels below that adit simultaneously.
  8. What jumps out at me on studying Auryn is how management has advanced the going into production process, which is usually hyper-dilutionary, without diluting either the share structure or the ownership percentage of the asset. I wish I had the time to study the record on the least number of shares outstanding for a mining corporation at the time of hitting “X” level of production. Auryn has to be in the running for setting some kind of record. In the mining sector, it has always been problematic that the vast number of dollars needing to be spent in going from exploration/development to production overlaps with a time period in which the share price is low because the market moving share price leap associated with going into production hasn’t occurred yet. Maurizio just keeps advancing the funds on a zero per cent interest rate basis and soon the cash flow will be self-sustaining. Wow, what a blessing. Where this is going to translate into shareholder rewards is when earnings are divided by a lesser number of shares outstanding in order to calculate the EPS figure. This is then multiplied by the appropriate multiple in order to determine an appropriate share price. In the Auryn scenario, Maurizio is going to be paid back AFTER the company is into production and the share price is probably going to be much higher. Likewise, if and when cash dividends are to be distributed, a given amount of cash will be much higher on a per share basis because of avoiding all of this dilution that other mining corporations never could. In essence, Maurizio has “supercharged” any future cash dividend distributions. Since he’ll be receiving about 65% of the cash dividends, then his generosity is more understandable BUT STILL VERY MUCH APPREIATED. Note that the generosity of cash dividends can put the share price to pretty much whatever level you desire. With dividend paying corporations, the average annual amount of cash dividends is 4% being divided into four 1% quarterly cash dividends. If a company can afford to pay quarterly dividends that are much higher than 1% of its share price then clearly the market has mispriced the stock. This will bring in opportunists that will buy up the shares until the cash dividends become moderately generous and not ultra-generous.
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Back on planet earth where 40gpt average grade would be a multiple higher than the highest grade, producing mines (with one exception: Klondex)…

I’d challenge anyone to find a precious metals mining co trading at $400M market cap ($5.77) while prodcuing 14koz let alone 30koz annually…

while maintaining a cost ($800oz) in the lowest decile when compared to large scale mines despite being a one truck, toll-milling operation.

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Please comment on the above since you continuously avoid this point when proclaiming that 40gpt is absurd. Furthermore, if these high grades indeed what will be experienced the AISC will be closer to BB’s estimate .

Your two arguments really hinge on the gpt expected. Your case for saying its insane to use these grades when making estimates is predicated on no other regularly producing mine in the world has those grades. That argument normally would be sound if it were not for evidence to the contrary right in front of our eyes.

You are both smart, figure it and get back to us all.

I think you are wrong about the 250M shares outstanding when it hit .18. Someone else please confirm. I recall it being 1.8B

Yep, evidence means something. Bald Eagle reminds us that perspective counts too, but when the evidence is staring you right in the face (as Jimmy says) it means more - in my humble opinion.

30 years at an average of 64 gpt?

And I do believe Mike was referring to some stockpiled ore that was >100 gpt?

I guess if I was a LENDER, I would definitely take the conservative approach when deciding the terms of a loan to a miner - and would require a LOT of drill holes proving it up in accordance with NI 43-101.

But I’m an INVESTOR, admittedly a speculative one - so I think I’ll consider the “best evidence” I have, in an effort to beat the market. That would include the opinions of reputable men who’ve been in the business for a LONG time, at least one of whom has his a LOAD of his own money in this thing, not to mention Sillitoe, Sepulveda-Perez, Howe, et al. If their opinions were all we had, then one would be definitely justified in being more hesitant. How many times have we seen geologists opine as to mineralization, only to come up short? The kicker here is the 30 years of production by artisanal miners, not to mention the 9-tonne sample sent to Enami at 45 gpt. Is all this just a lie? Maybe I will lose my rear, but I’m not going to ignore the evidence at hand. I believe the conclusions and computations bandied about by Brecciaboy above are reasonable - and conservative.

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A confirmed intersection with the DL 1 Vein would be really nice from a ventilation point of view (via the DL 1’s shaft #4) and the fact that it has been studied to death with 30 years of very high-grade production (averaging 64 gpt gold) OVER A 30-YEAR TIMEFRAME. This was from one small portion of it up near surface that I believe only measured about 0.4 meters in width. The stellar grades that Auryn is mining are not exactly surprising.

I think this refers to Section 5.1 of the 1999 Fortuna report which states:

Between 1941 and 1955 almost 2,000 tonnes of ore grading 63.9 grams goldtome, 51.2 grams silverltonne, and 0.2% copper were mined from the Fortuna mine and shipped for milling and smelting. …

Between 1941 and 1970 the Fortuna Property was continually monitored and occasionally visited by representatives of the Caja de Credito Minero (“CCM”) and later ENAMI (Empresa Nacional de Mineria), who had provided on-going financing and equipment for the mine through loans against future production. Most of the background data reviewed by Howe were from selected reports prepared by these two organizations during the approximately 30 years that they assisted the project.

So I think the 64 grams refers to the statement re. production from 1941 and 1955, 14 years. To be noted is that “almost 2000 tonnes” is not very much for 14 years. That only represents 50 days @ 40 tpd. So the degree to which they were high grading is not clear but likely.

The report discusses lots of channel samples and other samplings over the years with grades anywhere from sub 1 gpt to over 200 gpt. This all sounds quite similar to the variations we saw in samples over at the Caren and granted, very impressive.

I think all BE is saying is that a claim for 40 gpt of ongoing production is an extra-ordinary claim that requires extra-ordinary support before it is taken as a certainty. It is hard to argue against that point.

That there are spots where there are 100+ gpt gold in Fortuna and in Caren which are quite some distance apart is quite exciting. I don’t there is much risk that the loans to get to this early stage will not be paid back. There is easily enough high grade to get back that $1M or $2M in startup capital. Is it possible, especially at lower depths they will find 25 or 40 gpt gold across 1m to 2m and have hundreds of meters of depth to mine under these conditions and thus they will end up with hundreds of thousands of ounces of reserves at those grades? Maybe. It would be an extra-ordinary discovery to be sure. The point is to just be cautious in expectations.

BTW, BE, Klondex was bought by Hecla in 2018 for $450M + because of those official reserves at over 40 gpt. But the mine, with some of the the highest grade reserves in the world currently, is now under care and maintenance (not producing) because the veins are so narrow they have not figured out how, even at $1700 gold to mine it profitably. Klondex was losing money. Hecla thought they could fix it. So far they were wrong. I keep returning to the vein width topic precisely because of this example plus the examples of some very narrow veins both over at the Caren and at Fortuna. I don’t think Auryn will solve a problem Hecla has not solved. They need to find mineable mineralization: grade, depth, vein width, etc. We will learn more about all these things as they move forward.

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Thanks CHG. Mesothernal meaning higher grades and more width at depth. What’s the issue?

I know getting to depth is work and costly but is there enough high grade available to finance a much larger program?

Is it crazy to think they there’s enough high grade ore to mine for say 5 years at say 120 tpd? Around 200k tons of high grade?

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