Here are some quotes from the most recent Auryn quarterly update. I tend to trust the contents of Press Releases because I know that there can be consequences for management members that willfully mislead the investing public. I’m going to do a line-by-line analysis of this PR. My comments will be in CAPITAL LETTERS so that there can be no mistaking my thoughts from the words of management. I have heard that using CAPITAL LETTERS is found offensive to some, so I apologize in advance to those people.
On this forum, I think I’ve witnessed only one comment citing how Maurizio stood out as somebody willing to work with the University of San Sebastian in providing externships and thereby giving back (or perhaps “paying forward”) to the industry he participates in. This is very true, but I sense that if you read between the lines, you might discover that Auryn is appearing to be playing an interesting role in the obvious direction that this industry is heading, i.e. towards mandated environmentally responsible mining and the following of “ESG” protocols. Recent revelations almost indicate that they’ve been serving in some type of “poster child” role for this movement.
I started noticing this when Maurizio recently stated that he was considering deploying solar-powered mining equipment at the DL2 Mine. In the last quarterly update, all of a sudden it is revealed that various Chilean Mining Ministers were touring around the DL2 Mine while singing the praises of Auryn using technological advances and following the most stringent ESG policies. How did the Chilean Mining Ministers single out our project? In that same update, it was revealed that little old Auryn, was chosen to host a series of workshops which covered topics like the use of more environmentally friendly explosives and other technological advances. One of Auryn’s employees was interviewed and told of how excited he was to share the technology that Auryn is deploying with other industry participants.
In that same update we learned of how Auryn was receiving MEMORANDUMS OF UNDERSTANDING (MOUs), at least one with an attached TERM SHEET, from parties wishing to purchase the metal “concentrate” that Auryn would be producing. The attached mandate was that Auryn had to use the most environmentally friendly of all “beneficiation” methodologies (gravimetric plants using centrifuges to separate the gold from the waste material) as part of the agreement. Except for that one comment by Maurizio about solar-powered mining equipment, I didn’t see any of this coming. Apparently, a lot has been going on since Auryn finally, after many delays, intersected the DL2 Vein via the Antonino Adit.
HERE ARE SOME QUOTES FROM THE MOST RECENT QUARTERLY UPDATE AND SOME THOUGHTS
“AURYN has signed memorandums of understanding with different companies to find a higher margin alternative over what has been done in the past.”
INTERPRETATION: AURYN KNOWS WHAT ENAMI’S TERMS ARE AND THEY’RE OPENING UP A BIDDING PROCESS TO BEAT ENAMI’S TERMS. THE FACT THAT SEVERAL DIFFERENT COMPANIES HAVE SUBMITTED MOUs IMPLIES (BUT DOES NOT NECESSARILY 100% CONFIRM) THAT THESE COMPANIES ARE PROBABLY UNDER THE IMPRESSION THAT THE COMMENCEMENT OF PRODUCTION IS NOT TOO FAR AWAY. AURYN STILL HAS TO INTERSECT THE “OLD WORKINGS” VIA THE CONSTRUCTION OF A “VENTILATION/SAFETY EGRESS CHIMNEY. THIS WILL PROVIDE A SAFE WORKING ENVIRONMENT TO MINE THE DL2 VEIN SINULTANEOUSLY FROM SEVERAL SUB-LEVELS BELOW THE NEW LEVEL 3. IT IS TRUE THAT MOUs ARE OFTEN NOT LEGALLY BINDING. THEY ARE, HOWEVER, AN IMPORTANT FIRST STEP IN BUSINESS NEGOTIATIONS IN WHICH THE POTENTIAL PARTIES TO A DEAL CAN CLEARLY ARTICULATE THEIR INTENT AND WHAT THEY PERCEIVE THE INTENT OF THE CONTRAPARTY TO BE.
IF THE PARTY SUBMITTING THE MOU HAS CLEARLY SPENT SOME MONEY ASSOCIATED WITH THE SUBMISSION OF THE MOU AND ANY DUE DILIGENCE SURROUNDING THAT MOU AND AN ACCOMPANYING TERM SHEET, THEN THERE PROBABLY IS SOME LEGITIMATE INTEREST, BUT THERE CAN BE NO GUARANTEES AS TO A BINDING CONTRACT BEING ENTERED INTO.
“The most promising of these MOUs includes a term sheet with an international minerals trader who is interested in purchasing ore concentrate from AURYN’s production.”
INTERPRETATION: AN MOU WITH AN ATTACHED TERM SHEET IS A LITTLE BIT FURTHER DOWN THE ROAD THAN JUST AN MOU. DELINEATING THE TERMS OF A TERM SHEET, HOWEVER, TAKES A SIGNIFICANT AMOUNT OF DUE DILIGENCE IN ORDER TO IDENTIFY AND ADDRESS THE VARIOUS MOVING PARTS ASSOCIATED WITH THE ANTICIPATED BUSINESS DEAL.
THE PRODUCT THE “INTERNATIONAL MINERALS TRADER” WANTS TO PURCHASE IS A “CONCENTRATE”. THIS IMPLIES THAT SOME “BENEFICIATION” METHODOLOGY IS TO BE DEPLOYED TO INCREASE THE GRADE OF THE “RUN OF MINE” ORE BY REMOVING IMPURITIES. SO FAR, THIS PARTICULAR MOU WITH AN ATTACHED TERM SHEET SEEMS TO MANAGEMENT, AT LEAST AT THE TIME OF THE UPDATE, TO BE “PROMISING”. WHO KNOWS IF A BETTER BID HAS SURFACED BY NOW OR NOT? THE PARTY SUBMITTING THE MOU WITH THE ATTACHED TERM SHEET IS TECHNICALLY AN “INTERNATIONAL MINERALS TRADER” WHICH MAY OR MAY NOT IMPLY SOME SIZE TO THEM.
THE PURCHASER OF A METAL CONCENTRATE WOULD HAVE SEVERAL OPTIONS. THEY COULD SELL THE CONCENTRATE TO A ROASTING FACILITY, TO A “PRESSURE OXIDATION” PLANT, TO A “BIOX” PLANT OR PERHAPS TO A COPPER OR COPPER/GOLD SMELTER. NOWADAYS, A FAIR PERCENTAGE OF THE METAL CONCENTRATES BOUGHT AND SOLD INTERNATIONALLY END UP IN CHINA AT ONE OF THEIR RECENTLY REFURBISHED SMELTERS. APPROXIMATELY 12% OF THE METALS BOUGHT AND SOLD INTERNATIONALLY ARE IN THE FORM OF A “METAL CONCENTRATE”. IF YOU NEED THE SERVICES OF AN “INTERNATIONAL MINERALS TRADER” THEN PERHAPS THERE MIGHT BE A VARIETY OF CONCENTRATES LIKELY TO BE PRODUCED BY AURYN THAT MIGHT BE SENT IN SEVERAL POSSIBLE DIRECTIONS. IF IT WAS ALL DESTINED TO GO TO A SMELTER, THEN AURYN MIGHT PREFER TO DEAL DIRECTLY WITH THE SMELTER AND ELIMINATE THE MIDDLE MAN. THIS IS, OF COURSE, UNLESS THE MIDDLE MAN OFFERS OTHER SERVICES OF INTEREST TO THE CORPORATION SELLING THE CONCENTRATE.
IF THIS “INTERNATIONAL MINERALS TRADER” HAD ALL KINDS OF CONNECTIONS WITHIN THE MINING INDUSTRY OR WITHIN THE FINANCIAL INDUSTRY, THEN THIS PARTY MIGHT BE WILLING TO DESIGN A “WIN-WIN” SITUATION IN WHICH THEY WOULD ALLOW THE “FORWARD SALE” OF FUTURE CONCENTRATE FLOW IN ORDER THAT AURYN COULD QUICKLY RAMP-UP PRODUCTION SO THAT BOTH AURYN AND THE TRADER COULD BENEFIT BY INCREASING THE TONNAGE OF CONCENTRATE BEING BOUGHT AND SOLD BETWEEN THE 2 PARTIES. THE RISK OF A “FORWARD SALE” LIKE THIS MIGHT BE DE MINIMIS FOR THE TRADER ADVANCING THE FUNDS SINCE THEY ALWAYS HAVE THE CONCENTRATE FLOW TO HEDGE THEIR RISK AND THEY WOULD KNOW IF AURYN WAS APT TO GENERATE SIGNIFICANT CASH FLOW FROM THE MINING OPERATION.
A COMMENT MADE BY MAURIZIO BACK WHEN THE PLAN WAS TO FIRST PUT THE LARRISSA ADIT/MERLIN 1 VEIN INTO PRODUCTION HAS STUCK IN THE BACK OF MY MIND EVER SINCE. HE STATED THAT THE PLAN WAS TO PUT 6 LEVELS BELOW THE LARRISSA ADIT AS WELL AS 7 LEVELS ABOVE THIS ADIT INTO SIMULTANEOUS PRODUCTION. I DON’T BELIEVE HE HAS MENTIONED HOW MANY SUB-LEVELS BELOW LEVEL 3 (THAT OF THE ANTONINO ADIT) ARE BEING PLANNED TO HAVE SIMULTANEOUSLY MINED BUT AT THIS POINT NOTHING WOULD SURPRISE ME ESPECIALLY IF SOLAR-POWERED EQUIPMENT MIGHT BE INVOLVED.
“This will require AURYN to use a particular approach to concentrating the ore using gravimetric plants.”
INTERPRETATION: IF THE TRADER “INSISTS” ON AURYN USING GRAVIMETRICS, WHICH IS THE CLEANEST AND “GREENEST” OF ALL BENEFICIATION SYSTEMS, THEN I’M GOING TO ASSUME THAT AURYN’S OPERATIONS ARE GOING TO HAVE TO QUALIFY AS A “GREEN MINING PROJECT”.
THERE HAVE BEEN MASSIVE CHANGES IN THE MINING WORLD WITHIN THE LAST 10 OR SO YEARS. MINING HAS ALWAYS BEEN LOOKED AT AS A SOMEWHAT “DIRTY” INDUSTRY. A LOT OF FOSSIL FUELS ARE BURNED DURING THE MINING AND SHIPPING PROCESS. HARSH CHEMICALS LIKE CYANIDE, SULFURIC ACID AND MERCURY ARE OFTEN USED TO SEPARATE THE SOUGHT-AFTER METALS FROM THE WASTE MATERIAL. GOVERNMENTS ARE CLAMPING DOWN ON ENVIRONMENTALLY UNFRIENDLY PRACTICES. THE GOVERNMENTS HAVE IMMENSE POWER BECAUSE THEY RUN THE PERMITTING PROCESSES GOVERNING THE EXTRACTION OF THE METALS IN THEIR COUNTRY. THIS HAS CREATED PROBLEMS FOR THE MINERS PRACTICING “DIRTY MINING” BUT IMMENSE OPPORTUNITIES FOR THOSE PRACTICING ENVIRONMENTALLY RESPONSIBLE MINING. THE CATCH PHRASE NOWADAYS SUMMARIZING THESE CONCEPTS IS “ENVIRONMENT, SOCIAL, GOVERNANCE” OR “ESG”.
GOVERNMENTS ARE BEING PRESSURED TO LIMIT MINING ACTIVITIES TO THOSE INDUSTRY PARTICIPANTS WILLING AND ABLE TO ADOPT CERTAIN “ESG” PRINCIPLES. THE GOVERNMENT WANTS NOT ONLY CLEAN MINING BUT THEY WANT THE COMMUNITIES WHERE THE OPERATIONS ARE LOCATED TO BE TREATED WELL AND THEY WANT THE EMPLOYEES OF THE PRODUCER TO BE TREATED FAIRLY. INDIVIDUAL MINING CORPORATIONS ARE BEING PRESSURED BY BOTH GOVERNMENTS AS WELL AS THEIR OWN SHAREHOLDERS TO ADOPT STRICT “ESG” POLICIES. MANY INVESTORS WILL SELL THEIR SHARES IN A CORPORATION UNWILLING TO FOLLOW THESE PRINCIPLES. THE FLIP SIDE OF THAT IS ALSO TRUE. MANY INVESTORS WILL SEEK OUT INVESTMENT OPPORTUNITIES IN MINERAL PRODUCERS THAT DO STRICTLY ADHERE TO “ESG” PROTOCOLS. I THINK I CAN SENSE A MARKETING OPPORTUNITY HERE.
THERE IS A LOT OF MONEY OUT THERE IN VARIOUS ESG-ETFs (Environmental, Social, Governance Exchange Traded Funds) THAT MANDATE THAT ANY PROJECT THEY INVEST IN OR WILL HAVE ANYTHING TO DO WITH, BE CERTIFIED AS A “GREEN MINING PROJECT” IN WHICH THE “ESG” PROTOCOLS ARE STRICTLY ADHERED TO. THERE ARE A LOT OF TAX CREDITS AVAILABLE TO THESE PROJECTS. CERTAIN LEVELS OF CARBON EMISSIONS OR THE LEVEL OF THE CARBON FOOTPRINT MIGHT BE MANDATED DURING THE MINING PROCESS. SOMETIMES “RENEWABLE ENERGY CERTIFICATES” ARE ALSO INVOLVED. THE ENTIRE INDUSTRY IS NOW HEADED IN THIS DIRECTION.
FOR A NEW PRODUCER, GAINING COMPLIANCE WITH THESE EDICTS IS GOING TO BE A WHOLE LOT EASIER THAN FOR A VETERAN PRODUCER WHOSE EQUIPMENT OR PRACTICES ARE SOMEWHAT “OLD SCHOOL” FROM AN ENVIRONMENTAL SUSTAINABILITY POINT OF VIEW. PERMITTING ISSUES CAN BE EXPEDITED BY “GOING GREEN” RIGHT FROM THE GET-GO.
YOU MIGHT REMEMBER HOW THE VARIOUS MINING MINISTERS THAT RECENTLY VISITED THE DL2 VEIN PROJECT WERE SINGING THE PRAISES OF AURYN FOR THEIR “TECHNOLOGICAL AND ESG” ACCOMPLISHMENTS. AURYN’S GEOSCIENTISTS ARE EVEN GIVING “WORKSHOPS” TO INDUSTRY PARTICIPANTS IN SANTIAGO DESCRIBING HOW TO USE MORE ENVIRONMENTALLY FRIENDLY EXPLOSIVES AND OTHER TECHNOLOGICAL ADVANCEMENTS SUPPORTING “ESG” COMPLIANCE. I DON’T THINK MANY OF US INVESTORS COULD FORESEE MINING MINISTERS TOURING OUR FACILITIES OR OUR GEOSCIENTISTS LEADING “ESG” WORKSHOPS. THE SAME GOES WITH HOW MAURIZIO EMBRACED THE UNIVERSITY OF SAN SEBASTIAN’S MINING ENGINEERING AND GEOSCIENCES DEPARTMENTS WITH OPEN ARMS.
“To ensure that AURYN can meet the terms of the agreement with the minerals trader, a 120 kg (304 pounds) sample of the ore has been sent to two different specialist labs in Peru for comprehensive testing.”
INTERPRETATION: WHY 2 LABS? I DON’T KNOW. IF THERE IS A LOT OF MONEY INVOLVED IN THIS POTENTIAL RELATIONSHIP BETWEEN AURYN AND THE INTERNATIONAL MINERALS TRADER, THEN PERHAPS ALL TESTING MIGHT WANT TO BE CORROBORATED BY A SECOND SOURCE WITH DIFFERENT QA/QC PROTOCOLS. APPARENTLY, THE TERM SHEET MANDATED THAT THE ORE OR PERHAPS THE MINING PROCESS BE SOMEHOW “CERTIFIED” AS PER THE TERMS OF THE AGREEMENT. PERHAPS THE 2 LABS IN PERU HAVE BEEN PRE-QUALIFIED TO OFFER THIS “CERTIFICATION” PROCESS. IT’S NOT CLEAR TO ME IF THE GRAVIMETRIC METHODOLOGIES BEING TESTED OR THE NECESSARY LAB EXPERTISE NEEDED WAS AVAILABLE IN CHILE OR NOT.
SINCE THE INTERNATIONAL MINERALS TRADER” HAS NOT BEEN AWARDED THE DEAL YET (to my knowledge), AND IF THEY HAVE ACCESS TO SUPERIOR GRAVIMETRIC PROCESSING METHODOLOGIES FOUND IN PERU, THEN IT MIGHT MAKE SENSE THAT THEY MANDATED A CERTAIN PAIR OF FACILITIES, WITH WHICH THEY HAVE A RELATIONSHIP OF TRUST, TO DO THE TESTING. MAYBE THESE 2 FACILITIES CARRIED SOME KIND OF “CERTIFICATION” TO BE ABLE TO, IN TURN, “CERTIFY” THE CHOSEN METHODOLOGIES AS COMPLYING WITH THE SPECS.
THE OTHER POSSIBILITY IS THAT THE TRADERS THOUGHT THAT SECRECY WOULD BE BETTER KEPT IN FACILITIES THEY HAVE A TRACK RECORD WITH INSTEAD OF THOSE FOUND IN CHILE. WHO KNOWS? AS A PART-TIME FARMER, I’M AWARE OF THE HOOPS AND HURDLES NEEDED TO NEGOTIATE IN ORDER TO HAVE A CROP CERTIFIED AS BEING “ORGANIC”. THERE IS A LOT INVOLVED. ENVIRONMENTALLY CONSCIOUS PARTIES WILL MANDATE THE PURCHASE OF “GREEN COPPER” OR “GREEN GOLD” ON PROJECTS THEY’RE ASSOCIATED WITH. COMPLYING WITH THESE VARIOUS EDICTS CAN BE FINANCIALLY REWARDING IN THAT THE CONCENTRATES PRODUCED UNDER THESE VARIOUS PROTOCOLS DO TEND TO FETCH A HIGHER PRICE THAN NONCOMPLYING COMMODOTIES.
“The sample is expected to clear customs in Chile this week and will then be sent to the labs in Peru. These tests, including gravimetric and chemical assays, will provide crucial information for maximizing profitability under the agreement.“
INTERPRETATION: THIS SUGGESTS TO ME THAT “MAXIMUM PROFITABILITY” WILL BE ACCORDED TO ORE OR THE USE OF MINING PROCESSES THAT ARE THE MOST COMPLIANT WITH THE VARIOUS MANDATES LIKE NET ZERO EMISSIONS OR REDUCED CARBON FOOTPRINTS. KEVIN REFERRED TO THESE “INTERNATIONAL MINERALS TRADERS” AS BEING A “FUND”, SO I’M ASSUMING THERE IS SOME KIND OF PERHAPS “ETF” INVOLVED BUT THERE CAN BE NO GUARANTEE OF THAT.
I can’t help but sense that Auryn’s earning of their “ESG halo”, as it were, will pay off down the road. I could see where mining majors that might not be behaving in an environmentally responsible fashion might be attracted to sharing space underneath Auryn’s “halo”. Industry participants are now being “ranked” as to their ESG compliance. Countries are being “ranked” as to the percentage of the metals they produce that are being produced in an environmentally responsible fashion that follow the ESG protocols.
I’ve been doing a pretty deep dive into the role of ESG and the mining industry over the last 2 months. This is some pretty serious stuff going on here. From Auryn’s point of view, I think their donning of their “ESG halo” could directly benefit their ability to rapidly “scale up” production. The permitting authorities will appreciate the superior ventilation provided by accessing the “old workings” involving levels 0,1 and 2. They should also embrace the “halo”.
If Auryn does enter into an agreement with these “international minerals traders” demanding ESG compliance, and if they have deep pockets, then it only seems natural that they would do everything in their power to rapidly ramp up production. I’m assuming that the earnings of this “trader” will be tied to the level of concentrate production. What seems like a “no-brainer” to me is Auryn deploying, as soon as is feasible, a “jumbo” drill rig (preferably solar-powered or battery operated). Not only would the mining of each working face go a lot quicker but so too would be the accessing of the lower sub-levels through the drifting of the “decline spiral”. I’ve worked a little bit with a couple of the producers of these “jumbos” (Epiroc and Sandvik) and they have me convinced that the changeover of the current handheld “jack-leg” drills to “jumbos” would result in a night and day instant ramp up in production levels. The “jack-leg” drills were used during the “bootstrapping” days. In an update, Maurizio cited that the “feasibility” of converting to a “jumbo” is being studied.
Between your imaginative narratives and those provided by Baldy 
, I can’t choose who has been more entertaining! Everyone gets a good laugh out of a grown man’s tantrums 
, but a good humored story like your last one,The Greatest Mining Story Ever Told, is certainly more entertaining!
Now, in thanking all the good points Baldy has made over the past 20 years (yes, there are a number of shareholders that have been around since 2004, anyway) you state:
