I can’t express how exciting it is for Auryn to have a close fitting “template” for its ADL vein system with that of Yamana’s El Penon Mine as well as access to the operational methodologies used by Meridian and Yamana Gold to develop this very similar deposit. This ability to compare these two vein systems and study the operations at El Penon can provide us a “yardstick” useful to determine where developments at the ADL stand and what to expect for future developments. The El Penon mega-mine has been in production for 24 years. They are just now changing their operational model to go after the narrow veins they have been putting on the back shelf while producing from the wider veins that featured superior economics. I’m going to continue to pick apart the “El Penon Site Visit” paper and try to point out where we might be able to garner useful objective information.
If you compare the ADL trenching program results seen on Figure 3 at:
to the pictorial showing the orientation of the various veins within the El Penon vein system seen on page 28 at this link:
you can easily see that we are dealing with two well-organized “vein systems”. In Chile, the component veins within a vein system will tend to run from north to south and the individual veins will tend to be somewhat parallel to each other. The main difference between these two diagrams is that the ADL trenching program shows the veins that made it all of the way to the present surface whereas the El Penon shows all of the veins they have discovered to date whether they made it to surface or not. We’ve learned from the drifting of the Antonino Adit at the ADL that there are a variety of veins already discovered that did NOT make it to the ADL’s surface and are NOT included in the trenching survey diagram. However, these “blind veins” are very much fair game to produce from now that the Antonino Adit has a ventilation system and is doubling as an exploration and production adit.The early emphasis at the El Penon Mine was on the “Orito Vein”, while to date the early emphasis at the ADL on the “Don Luis 1 Vein” (“DL 1 Vein”) as well as the Merlin 1 Vein/Caren mine. At El Penon, there are a total of about 36 veins involved. If you fast forward 5 or 10 years at the ADL there may be a similar number of veins serving as production options.
On page 29 of the “El Penon Site Visit” pdf you can see that Yamana is currently mining veins averaging in between 1.1 and 1.5 meters in width in an economic fashion. The average grade being mined at El Penon is 5 gpt gold with an additional contribution from silver production of another 2 gpt gold equivalent totaling 7 gpt gold. This is very close to the average gold grade being produced from underground mine worldwide. IN TODAY’S MINING WORLD, YOU CAN MAKE GOOD MONEY MINING 7 GPT GOLD FROM 1.3-METER-WIDE VEINS IN CHILE. This fact should give us a reference point in judging the merits of the ADL mesothermal vein deposit.
Due to a 32-year lack of new discoveries, miners worldwide are digging deeper and deeper in search of lower and lower grade deposits in more and more geopolitically risky countries. After 42 years of studying this industry, I would be hard pressed to identify a time period in which a significant gold and copper discovery could be more fortuitously timed to go into production. With the prices of both copper and gold looking strong, the majors have gone into high production mode. The problem for them is that the MR/MR on the balance sheets of the majors is at a 32-year-low and decreasing with time. Several mining analysts have used the phraseology that the MR/MR of many majors “is about to fall off of a cliff”. Replacing the ore you mine on a monthly or annual basis is not just a good idea for the majors; it is EXISTENTIAL.
At the ADL, management just discovered a new, yet to be named vein that was 1.2 meters wide when they exited it within the Antonino Adit. We are awaiting results relating to widths and grades of a variety of veins encountered to date within the Antonino Adit. We know that 2 veins at the ADL referred to by management as the “massive” veins averaged over 2 meters in width at surface. Management is attempting to intersect these at depth as we speak. The hope would be that these veins become even wider with depth and richer in grade as is the norm for mesothermal veins.
As far as the average grades to be expected for the ADL veins, we do know that a 9-tonne “test batch” was sent to Enami that averaged 45 gpt gold by Enami’s calculations. This was taken from the upper aspects of the old workings at the “Fortuna Mine/DL 1 Vein” where grades might be expected to be lower than at the depth of the Antonino Adit. We’ll know soon. We also know that production from the near surface components of the DL 1 Vein from 1940 to 1970 averaged about 64 gpt gold according to Enami’s records. When certain “beneficiation” measures were introduced by "SMFL” (the operators) during this time period, a crude “flotation” system designed to enhance the recovery of gold from “sulfide ore”, the grade was enhanced to about 91 gpt gold. From the most recent Auryn corporate update: “The Mining Engineering group (from Universidad de San Sebastian) is working on the feasibility of a flotation plant. They requested an additional 200 kilograms of ore samples for their tests which AURYN delivered.” We already know that the ore at the ADL is “free-milling” and conducive to being processed by inexpensive gravity-based methodologies. The test work was done with Sepro/Falconer gravity-based equipment and the recoveries were in the high 90’s from a percentage point of view.
On the Auryn website, a picture of a 54-tonne stockpile of ore mined by Auryn about 10 months ago had a caption indicating grades of somewhere in between 62 and 85 gpt gold. Other than hand sorting, Auryn has no “beneficiation” equipment on site to enhance the grade. “Bonanza” grades from channel sampling have been reported at several sites at the ADL but what I would suggest is to wait for the shipping results of the ore shipped to Enami to get a better read on “representative” grades. The same holds true for average widths; wait for official results. Then we can compare these figures to El Penon’s 1.3-meter average width and 7 gpt average gold equivalent grade. Auryn might have a distinct advantage when it comes to average grades because the El Penon Mine has been producing for about 24 years and a lot of the highest grade material has probably already been “high-graded” and processed. Perhaps this is something that the Auryn shareholders have to look forward to as long as they realize that any super high-grade material will have a corresponding life expectancy to it. I would assume that the Meridian Gold shareholders (Meridian made the initial discovery) had an awful lot of fun during those days. As you can read on this “El Penon site visit” pdf, after 24 years of production, management has just brought down their production projections and are instead focusing in on techniques to mine narrow veins economically especially involving “split blasting”.
In doing due diligence on the ADL Mining District and Auryn/Medinah, I’ve found it very beneficial to constantly review the older quarterly updates. These have a massive amount of information that sometimes only becomes relevant while reviewing newer information. Below is a copy of the most recent quarterly update dated Oct. 4,2021. Any comments that I feel might be helpful I will put in brackets. I’ll use CAPITAL LETTERS to provide emphasis on key points.
October 2021 – Shareholder Update
Oct 4, 2021
October 2021 – Shareholder Update
AURYN Mining Corporation Shareholder Update
AURYN Mining Corporation (OTC: AUMC) is pleased to share its Q3 2021 accomplishments, Q4 2021 objectives, and outlook for the future.
Q3 2021 – ACCOMPLISHMENTS
Intercepting the Don Luis vein
Our primary objective has been intercepting the Don Luis vein at shaft 4 [of the old Fortuna Mine operations which featured 7 shafts] and beginning exploitation with regular shipments of ore to Enami. This will provide SIGNIFICANT cashflow and improve ventilation within the system. [To date, Auryn management has been about as nonpromotional as any management team I’ve studied in the industry. I would infer that this management team citing SIGNIFICANT cashflow would refer to either very high-grade ore being shipped or respectable production rates or both. If I had to guess, I’d say probably the former until mechanization (especially a “jumbo” drill rig) is introduced into the operations. Management has cited several times that their introductory projected production rate was 40 tonnes per day]. In the Q2 2021 update, we stated that we intercepted the Don Luis vein on June 23, 2021. After further analysis, it has been determined that the vein intercepted is not the Don Luis because its orientation and geochemical signature do not fit the profile of the Don Luis. It is a new structure. An initial assay returned a grade of 15.92 g/t Au, 47 g/t Ag, and 5.3% Cu [it’s the 5.3% Cu that caught my eye. A grade of 15.92 gpt gold is a wonderful grade. Auryn/Medinah shareholders may have become a bit spoiled by the grades of the DL 1 Vein]. The team did not follow the new structure as it changed course and drifted toward the West. Instead, the team continued SSW to stick with the plan of intercepting the Don Luis and improving ventilation by connecting with the existing tunnels. [The Antonino Adit runs from NNE to SSW or from an aerial/plot view from about 1 o’clock on a watch dial to 7 o’clock. When they exited this new structure it drifted toward the west. Its “strike” appears to be more from perhaps 2 o’clock on a watch dial to 8 o’clock. The Don Luis 1 Vein, on the other hand runs from about 11 o’clock to 5 o’clock.]
On August 12, 2021, the team intercepted what appears to be [yet] ANOTHER highly mineralized structure. The initial width was 0.8 meters and grew to 1.2 meters in width. The structure followed the same path the team was taking to intercept the Don Luis for approximately 8 meters before it began veering off toward the South. [This new vein is therefore aligned pretty much N to S or 12 o’clock to 6 o’clock. All of these veins are what is referred to as being “subparallel” which means not quite parallel. The Merlin 3 Vein is the odd man out as it runs basically from E to W. At the intersection points of these various veins, the highest-grade ore is typically found.] Samples have been sent to the lab for assaying and selected material has been stockpiled for processing. [this too apparently is not the DL 1 Vein]
On September 29, 2021, the team intercepted [yet] another structure which it believes IS the Don Luis. AURYN will publish an announcement once this is confirmed. [If this vein is indeed the DL 1, then these other two represent new structures over and above the two NEW, yet to be named, veins they encountered early on in the Antonino Adit drifting process. Again, a lot of these veins probably never made it to surface. The early miners at the DL 1 Vein, “SMFL”, simply saw an outcropping and followed it where it led them. They never had an option to mine these newly discovered “blind” veins even though the grades and widths, being lower in a mesothermal structure, may have been superior to those up high in the DL 1 Vein. We need to patiently wait for the results which are extremely slow in being reported nowadays due to Covid issues. It appears that management is holding off on revealing the widths until the grades are ready to be revealed or until the mining process gives them a more reliable “true width” to the vein. Getting confirmation of the intersection of the DL 1 Vein would represent a significant achievement not only from an enhanced ventilation point of view but also because of the extraordinarily high grades proven by 30 years of production. We know a lot more about this vein than the others. Recall that the 64 gpt gold average grade was increased to 92 gpt gold by adding a crude “flotation” system. Despite these incredibly high grades the post-processing “tailings” left by these miners still contained a lot of gold that never got recovered probably due to the lack of technology available at the time.]
In total, AURYN has tunneled 190 meters into the mountain, beginning at an elevation of 1880 meters above sea level and is currently at an elevation of 1833 meters above sea level. Along the way the team encountered several ramifications and intercepted three clearly defined structures which are being assayed. [“Ramifications” are basically “branches” often projecting out at a 90-degree angle from the main strike/track of a vein. Veins are planar structures like a sheet of plywood. They are formed when ore-bearing hydrothermal fluids fill up “faults/fissures/cracks” in rocks where they can cool and solidify. “Faults” often have cracks that are “transverse” (at right angles) to the main strike of the fault. When these auxiliary cracks fill up with ore they’re sometimes referred to as “ramifications”. The analogy would be a branch projecting out of the sheet of plywood that used to represent a branch of the tree. The plywood metaphor breaks down when you factor in the presence of “ramifications”.]
Collaborating with the University de San Sebastian
On August 12, 2021, a group of professors and students from Universidad de San Sebastian spent the day with our mining team at La Fortuna de Lampa. The visit was multidisciplinary in scope and covered all aspects involved in our project transitioning to a producing mine including infrastructure, continuous mining operations, health and safety, and environmental and sustainability issues. AURYN ANTICIPATES SEVERAL REPORTS TO COME FROM THIS once all the analysis is complete. In the meantime, Luis de la Torre, one of the professors who visited, offered the following comments:
“The ore extracted and stockpiled from the old [“Fortuna Mine”] and new works [Antonino Adit but both within the same DL1 Vein] on AURYN’s La Fortuna de Lampa mining project strongly reminds me of the ore from El Peñon Project, owned by Yamana Gold Corp. They are very similar to the color and rock quality of the ore I personally observed during my time working on the development of El Peñon. I have the firm belief that once La Fortuna de Lampa project goes into production [this occurred on approximately October 18,2021 two months after the visitation] and a CORRECT EVALUATION OF THE ENTIRE PROJECT IS ACHIEVED [I assume this is part of the “several reports” cited above that Auryn is awaiting] , it will be a mining operation with very similar characteristics of El Peñon. [It is not clear to me if Auryn pays for the input from these Professional Geoscientists/Civil Mining Engineers that both work in the field and hold down professor positions at this university.]
Luis de la Torre HeadMaster
Civil Mining Engineering
Universidad de San Sebastian
On September 28, 2021, the Civil Engineering group delivered [past tense] a COMPREHENSIVE PLAN for the improvement of roads and access for the mining site. When implemented it will improve the overall safety conditions for shipping ore while increasing cargo capacity by over 50%. [Apparently the road improvements will allow the truck(s) to be filled to a higher level and still maintain safety standards. The capacity of the new truck is 22 Tonnes. Management’s 40 tpd introductory production rate might be referring to 2-twenty Tonne truckloads per day being shipped. I won’t review the math here but I put out a paper recently indicating that if management could average 40 gpt gold in their ore, and produce 40 tpd for 260 days per year with an AISC of $800 per ounce and using an EPS multiple of 30.21 then THEORETICALLY AUMC should trade at $5.77 just on the mesothermal production and not including the porphyries.]
THE MINING ENGINEERING GROUP [as opposed to the civil engineers cited above] is working on the feasibility of a flotation plant. [ A flotation plant will help process sulfide gold-bearing ores. A crude version helped SMFL enhance the grade of their ore from 64 gpt gold to 92 gpt gold ore. Note that the post-processing “tailings” left by the SMFL operation were still relatively rich in gold suggesting that their technology at the time was not very efficient EVEN THOUGH THEY AVERAGED 64 GPT OVER THE COURSE OF 30 YEARS.] They requested an additional 200 kilograms [440 pounds] of ore samples for their tests which AURYN delivered. [Clearly, there is a lot going on over and above the drifting of an adit to access ore. A decision has been made that the ECONOMICS are favorable. Management has been paying the bills on a zero-interest due basis and they will only be paid back out of any profits from the mining of the ore. This management team is not about to scream from the mountain tops that the economics appear to be extremely robust. It’s our job as shareholders and prospective investors to climb our own learning curves in this industry in order to evaluate the prospects. Management is not in promotion mode as of now. I realized how anti-promotional (the sleazy type) management is from their request at the informational meeting in Las Vegas several years ago. They asked a favor of the 70 or so attendees, if you share any information you learn at this meeting please append a copy of the “Safe Harbor boilerplate statement” you see on press releases of pretty much all companies. I’ve never seen a management team be that concerned about the welfare of investors that might not realize that mining is a risky business.]
Other items
AURYN purchased a wheel loader in the beginning of Q3 and widened various portions of the tunnel to accommodate it. [The Caterpillar XC 928 wheel loader has a 3 meter-wide bucket which hold 2 cubic meters of ore or about 6 metric tonnes]
On September 15, 2021, the National Geology and Mining Service (SERNAGEOMIN) ISSUED A DEFINITIVE PERMIT FOR AURYN’S EXPLOITATION AND CLOSURE PLAN. AURYN received this on September 30, 2021. [As is their style, management announced this pivotal accomplishment in a ho-hum fashion. The processing of these documents in Chile is notoriously slow but insanely slow during the Covid crisis. This document is the definitive “mensura” or exploitation permit. This was a “spike the football” accomplishment that nobody noticed. The “value” of this project just increased a great deal. The concept at play here is the DERISKING OF AN ASSET. For me, this was the mother of all RISKS. What if this document got delayed for another year or more as many mining firms have experienced? There are two types of pre-producers in the mining sector. There are those with their definitive mensura on file and those without. Auryn recently accomplished 4 things in order to get into production. They got a bigger wheel loader. They got the new ventilation system installed with a new generator. They got their definitive exploitation and closure permit and they bought a new 22-tonne truck. Nothing could happen until all 4 were achieved.]
AURYN purchased a new truck for shipping ore to ENAMI. The team anticipates the truck will arrive on site sometime during the first two weeks of October 2021. It will be put to immediate use shipping the stockpiled ore to ENAMI. [The first truckload headed down the hill on or about 10/20/21.]
Q4 2021 – OBJECTIVES
Ship all stockpiled ore to ENAMI for processing. [The fact that management was able to mine and stockpile ore while waiting for the definitive permitting and certain pieces of equipment is a plus.]
Begin implementation of Universidad de San Sebastian’s suggested plans for improving roads and access to the mining site.
Poor ventilation within the system prevents us from scaling development. Connecting with the existing tunnels to improve natural ventilation and implementing forced ventilation is a priority. We expect to accomplish both this quarter.
Confirm interception of the Don Luis vein to begin exploitation on multiple fronts and, once consistent production is achieved, DEVELOP A FINANCIAL FORECAST [having a pro forma financial forecast in hand will allow us to finally take pencil to paper and hopefully calculate appropriate share price levels based on accepted industry metrics], and BEGIN TO OUTLINE RESERVES on La Fortuna and Lipangue mining district.[Small institutional investors like some MR/MR on the balance sheet. It allows the fund manager to cover their rear ends a bit. A lot of people don’t realize that you don’t need a formal drill program costing mega-millions in order to block out MR/MR. You just need to be able to construct a 3-dimensional “block model/wireframe model” with information derived from a variety of sources. Others are happy to judge the merits of an investment without MR/MR via the profits it can spin out over a projected amount of time. I think a sophisticated mining investor could study the data accumulated to date and with very high statistical probability come to the conclusion that there are at least a couple of million ounces of gold present at the ADL mesothermal vein system. The “MINERAL RESERVE” component of “MR/MR” (the first “MR”) only applies to ore that is determined to be ECONOMICALLY MINEABLE via studies referred to as “prefeasibility and feasibility studies”. If the grades, widths and projected costs are at certain levels that leave no doubt about ECONOMIC VIABILITY, then many investors will not wait until formal studies are completed before contemplating an investment. This is especially true if the preliminary operational results are in and clearly show ECONOMIC VIABILITY. Blocking out ounces of MR/MR that might not be mined for 10 years used to be the norm. Shareholders of mining firms have made it clear that they’d rather that money went to shareholders as dividends. As far as Auryn being able to “begin exploitation on multiple fronts”, part of the “blast cycle” is waiting for the post-blast dust to settle and for air quality to return to pre-blast levels. When working on more than one front, the crew can do the blast and go to the other front to do their work WHILE THE DUST IS SETTLING.]
Continue developing the tunnel to intersect two massive, known structures encountered during previous trenching operations. (See: trenching program update.) These structures are each greater than 2 meters width in the trench. [We’ll have time to evaluate this if and when it happens. But if management were to intersect two veins each of somewhere around 3-meters width and they were of the same grades we’ve grown accustomed to, then I would suggest that management would instantly invest in more wheel loaders and trucks to put production into overdrive. If the entire width of the 3-meter-wide adit is vein material without any barren wall rock, then the grade of the post-blast rubble is going to be that much higher. Further, an extremely wide vein or pair of veins like this could be mined simultaneously at different levels stacked upon each other. Theoretically, one intersection with one of these veins could result in 4 to 6 new extremely rich working faces becoming operable. This entire concept is referred to as SCALABILITY with one Antonino Adit providing a production adit for many working faces.]
Explore the feasibility, timing, and permitting requirements for the development of an on-site concentration and processing plant. [This would depend upon how reasonable Enami’s fees are for performing a function that Auryn might be able to do on site more economically. Being able to produce a more concentrated ore would result in less truckloads needing to be delivered in order to deliver “X” number of ounces of gold. Enami will pay “by-product credits” for ore grading over 25 gpt gold. They refer to this as “Direct Shipping Ore”. With on-site concentration facilities, a greater percentage of the ore being shipped off of the mountain would qualify for the by-product credits. Keep in mind that Maurizio also owns the next door neighbor mine to the north in Colliguay. At some point, mill facilities might be able to be shared between these two operations.]
Evaluate the timing and cost-benefit of purchasing a drilling jumbo and adding an additional mining crew. See the link below:
OTHER ITEMS
David Brownrigg stepped down from his position as CEO and board member of AURYN to lead a MASGLAS owned, producing project, in Colombia. Nevertheless, Mr. Brownrigg will remain instrumental in AURYN’s development as an advisor to the board. Currently, Maurizio Cordova has assumed the responsibilities of CEO.[“Masglas” is one of Maurizio’s other mining companies. They own and operate a variety of mining projects in Chile, Peru and Colombia. Having a second producing mine opens up all kinds of possibilities for strategic alliances. Masglas was contemplating going public in 2020 but they didn’t.]
OUTLOOK
Communications
AURYN will continue to publish required financial disclosures at OTC Markets. Quarterly shareholder updates will also be released on OTC Markets and on our website(Notifications | AURYN Mining Corporation) during the first week of each calendar quarter along with a gallery of images and videos. To receive notification of these via email, subscribe on our website. For occasional intra-quarter updates, follow @aurynmining on Twitter [I’m trying to find a way to have a Professional Geoscientist to work on the “Gallery” section to provide captions to help non-mining investors to appreciate what these photos are showing.]
Weather
Two atypically harsh winter weather events forced the team to evacuate the camp for several days. Once the team was able to return to the mountain, they cleaned up and rehabilitated the roads. With Spring season beginning, we do not anticipate any further weather-related delays.
Mining
Management remains extremely bullish. We continue to uncover new structures and learn more about the district as we head toward regular production and cashflow [Recall that this is the “ADL Mining District”.It exists within a “Regional setting”. The mesothermal vein system is likely to produce a significant amount of cash flow and profit for decades and put Auryn/Medinah and the ADL on the map. In the long-term view, it may well end up being the “appetizer” acting as a catalyst to confirm the existence of the “main course”. The “main course” is likely to be the porphyries, breccias, mantos, skarns and other adnexal structures of this overall hydrothermal system.] This has been confirmed by unrelated third parties who have visited the site.[I’m not sure if this is a “tease” or not but one would sure surmise that any party interested in the porphyry structures at the ADL would be tuned-in to any and all developments within the Antonino Adit. Magma chambers underlying porphyries, skarns, breccias, mantos and mesothermal and epithermal vein systems are huge. The hydrothermal fluids and gases emanating upwards out of these behemoths periodically are what gives these adnexal structures their value. All of these structures become repositories for these fluids and gases and provide a location where these fluids and gases can cool and precipitate out of solution the metals they bear.]
Financial
A third party is paying for AURYN’s exploration efforts. AURYN’s Board of Directors is monitoring expenditures with a commitment to reimburse the third party (without interest) from production. There are 70,000,000 shares outstanding and AURYN does not anticipate any dilution from our exploration efforts. [The Auryn share structure is being protected from dilution. The critical point here is that Auryn made the transition from exploration/development at the mesothermal vein deposit into PRODUCTION without the massive amount of dilution that most miners incur while making this transition. Most development stage miners have a weak share price compared to where their share price is about to go at the time of going into production. They typically need to sell shares often at a deep discount to the current weak share price in order to fund going into production. Maurizio’s generosity bridged this gap so that the outstanding share count could remain at a very tight 70 million shares during the transition. Further, he only gets paid back after the company becomes profitable and this is WITHOUT the sale of shares. The share price will end up being somewhere around 30.21 (the EPS multiple for miners) times the Earnings Per Share (EPS). The EPS figure will be relatively high because the denominator “S” (number of shares outstanding) remained artificially low due to Maurizio’s generosity. It is the TIMING of this generosity that needs to be appreciated as well as the scaffolding it provides for shareholder rewards. Maurizio’s willingness to advance funds under these conditions might also reflect that he knows a lot more about the contemplated grades and production rates than shareholders and prospective investors do.]
