In the recent quarterly update, dated Aug 10, 2023, there was a lot of information presented that needs to be layered upon information acquired earlier, in order to understand the significance of it, but there is definitely a common theme to this information. That common theme is that Auryn is FINALLY commencing extremely high-grade production, in earnest. We will know the INITIAL PRODUCTION RATES soon enough. How it ramps up with the addition of new crew members and equipment as well as the various sub levels being put into production is anybody’s guess at this point in time.
When you juxtapose the previous quarterly update, dated April 6, 2023, you might notice that there was still a heck of a lot of tasks yet to complete (thereby representing RISKS, should they not be completed) prior to the commence of production in earnest. By production “in earnest”, I’m not referring to the past shipping of “bulk samples”, “test samples” or even the recent “experimental batch” sent to Enami in order to test the DL2 Vein ore’s amenability to Enami’s “DIRECT SMELTING” process.
Instead, I’m referring to FULLY PERMITTED and FULLY REGISTERED (with the CHILEAN MINING REGISTRY) commercial shipments of ore after SERNAGEOMIN approved of the new ventilation system allowing development of level 3 and the various sub levels. This will provide “SCALABILITY”. Management referred to the recent shipment to the DIRECT SMELTING FACILITY as being the “inaugural mineral consignment to Enami”. If you’re new to the mining sector or to Chilean mining specifically, when you see a reference to an “ENAMI SMELTER” you should know that Enami, a branch of the Chilean government, doesn’t own any smelters. “CODELCO”, another branch of the Chilean government, owns 4 of the 7 smelters in Chile. They are mandated by Chilean law to provide smelting services to any Enami client if they are part of the CHILEAN MINING REGISTRY which Auryn was just accepted into. The nearest CODELCO/ENAMI smelter to the ADL is a 98-mile drive away (157 Km). There is another one that is a 103-mile drive away.
How did this DIRECT SMELTING “experiment” go? As we’ve pretty much gotten used to, the DL2 Vein ore performed extremely well. This is just like it performed for the artisanal miners, for 30 straight years, as reported by Enami and SERNAGEOMIN. Even after any penalties levied for the presence of contaminants, Auryn is still going to get a check based on 57 gpt gold, 978 gpt silver and 3.3% copper (73.53 gpt in terms of “gold equivalents) multiplied by whatever tonnage was submitted. In terms of dollars per tonne in terms of today’s prices, that equates to $4,522 per tonne). The tonnage amount for this particular EXPERIMENTAL BATCH has not been released. AN EXTREMELY IMPORTANT QUESTION HAS TO DO WITH WHETHER OR NOT THESE SMELTER FIGURES INCLUDE ENAMI’S FEES. WERE THESE GRADES ACTUALLY HIGHER BUT WERE “NETTED” DOWN TO ACCOMMODATE FOR ENAMI TAKING OUT THEIR FEES?
When you’re getting paid for 3 separate metals with varying grades, you need to start talking in terms of “gold equivalent” grades. When you do the math and include the contributions from silver and copper, this “experimental batch” averaged a “gold equivalent” grade of 73.53 grams of gold per tonne (hopefully AFTER Enami took out their fees). The DL2 Vein ore obviously responded extremely well to this “DIRECT SMELTING” process. As noted, we do not know the tonnage of this “experimental batch”/”inaugural consignment to Enami”. What we do want to know is whether or not these results are REPRESENTATIVE of what Auryn will be accomplishing in the very near future.
The price of gold has been under pressure recently and it now trades at about $1,913 per ounce which is $61.5 per gram (there are 31.1 grams per Troy ounce of gold). Auryn ships via a “20 tonne” truck that is typically filled to about 16.7 tonnes per truckload. With these grades, one truckload would equate to about $75,518 in value AFTER factoring in any penalties for contaminants. BUT AGAIN, ARE THESE GRADES “NET” AFTER ENAMI TOOK OUT THEIR FEES? Maybe Kevin could chime in here. You still have to pay the Auryn miners for mining that ore, crushing it and loading up that truck. There are also TRANSPORTATION FEES involved. There are other corporate expenses as well. Management promised to PROMPTLY report the details of their shipments.
What we want to know from management is what are the PROFITS, net of ALL expenses, from shipping a truckload of extremely high-grade ore to the DIRECT SMELTING facility of Enami and also what are the profits from shipping a truckload of less well-mineralized, wall rock ore, to the Enami FLOTATION FACILITY. Once we know the approximate number of truckloads being shipped to these two facilities per unit of time, then we have the basis for making some rough projections as to PROFITS. UNTIL YOU RUN THE NUMBERS IT’S TOUGH TO APPRECIATE THE ECONOMIC EFFECTS OF THESE EXTREMELY ATYPICALLY HIGH GRADES.
HO-HUM, WE’RE MINING 64 GPT GOLD ORE
It’s funny how things go in this sector and especially with this stock. We’ve been talking about the 64 gpt HISTORICAL SHIPPING GRADES achieved by the artisanal miners at the DL2 Vein for a long time now in a somewhat nonchalant fashion. Until you actually commence production IN EARNEST, and get a feel for how the ore does in, for example, a DIRECT SMELTING or FLOTATION FACILITY environment, you just can’t appreciate the ECONOMICS involved until THEORY becomes REALITY and there’s a paycheck and net profits involved.
I can tell you that the average grade of gold being mined in a similar underground vein mining environment is 4.18 gpt gold until I turn blue in the face, but until you read some reports covering ACTUAL COSTS and ACTUAL PAYMENTS made for delivering Auryn’s ore, then it just doesn’t resonate for many. I think we’ve finally made it to the MOMENT OF TRUTH phase of development i.e. turning the corner into “production in earnest”. The point we want to get to, is to be able to calculate the profits from 1 truckload of the DL2 actual VEIN ORE (the high-grade stuff that’s going DIRECTLY to the smelter) and 1 truckload of the lesser-grade ore in the surrounding wall rocks which is destined for the FLOTATION FACILITY. Then we want to be able to project how many truckloads of each ore type that can be delivered per unit of time. As noted, we also want to get a feel for the PRODUCTION RATE ramp up as a function of time. We’ve never been this close to learning about that which really matters. We have arrived at the MOMENT OF TRUTH.
IN REALITY, PRODUCTION COULDN’T HAVE BEEN STARTED “IN EARNEST” UNTIL A VERY LONG LIST OF TASKS WERE COMPLETED. BONA FIDE, EXTREMELY HIGH-GRADE PRODUCTION, IS LIKE A LIGHT SWITCH, IT’S EITHER ON OR OFF. THAT SWITCH GOT FLIPPED TO THE “ON” POSITION A COUPLE OF DAYS BEFORE THE AUGUST 10 UPDATE. (The DIRECT SMELTING results arrived August 9, 2023.)
Management published their DL2 Vein MINE PLAN on 4/5/22 in one of their quarterly updates. Below is a link to that update:
April 2022 – Shareholder Update | AURYN Mining Corporation
You can see the 7 stages outlined within the MINE PLAN. Stage 7, which involves advancing the Antonino Adit straight ahead, in order to intersect what management refers to as the “2 monster veins”, was reconfirmed as still being the plan in this most recent, August 10, 2023, update.
THE FOLLOWING TASKS JUST GOT COMPLETED VERY, VERY, RECENTLY:
- The “gallery” needed to be constructed to allow the wheel loaders to turn around and to load LHD (Load, Haul, Dump) trucks if they are deployed.
- The “ventilation/safety egress chimney” needed to be completed before Auryn could commence production “in earnest” on level 3.
- This chimney and the accessory ventilation equipment needed to be inspected and approved by SERNAGEOMIN prior to the commencement of production.
- In order to make regular shipments of ore to Enami, Auryn needed to be approved and put on the CHILEAN MINING REGISTRY. This occurred on July 4, 2023. Shareholders were asking why Auryn didn’t ship the ore they were stockpiling at surface to Enami. Now we know.
[As an aside, just like that Goldlogic group does, Enami also gives cash advances, at very favorable rates, to their REGISTERED MEMBERS as long as they’re on the CHILEAN MINING REGISTRY. This is how the artisanal miners at the DL2 Vein were able to do what they were able to do with the DL2. Enami (then known as CCM) funded them. Enami takes a certain percentage of their profits and throws it back at the miners that use their facilities to process their ore. It’s a Win-Win for Enami and the people of Chile needing employment. When Enami throws money at a miner so that they can ramp up production, they know the miner is going to hire more workers and send more ore to them for processing. “Goldlogic” has no patent on scratching the back of those that scratch their back. I have no idea if management is the least bit interested in having Enami fund any production ramp ups. I do have a very strong sense that management is not about to sell shares to raise funds at anywhere near current share prices in order to put in a FLOTATION FACILITY. They could simply stockpile the low-grade ore UNTIL the receipts from the SMELTED HIGH-GRADE ORE permitted the purchase of one of these facilities. Shipping already beneficiated (via flotation) ore would decrease the TRANSPORTATION CHARGES. I suspect that when the mining community sees the kinds of grades Auryn is shipping to the smelter, other financing possibilities might appear BUT I DO NOT KNOW THIS FOR A FACT NOR COULD I PREDICT ANY TIMING. I would venture a guess that no potentially interested parties know what Auryn just accomplished in the last couple of weeks.]
- An “experimental batch” of DL2 VEIN ORE needed to be shipped to Enami in order to see how Auryn’s ore fared with their DIRECT SMELTING process. It did beyond fine. For future reference, we might note that this ore was shipped on July 19th and the results came in on Aug. 9. It looks like a 20 or so day turnaround time in order to get results.
- The COMPREHENSIVE METALLURGICAL ANALYSIS needed to be completed before Auryn could learn WHICH beneficiation process would result in the highest recovery rate. Now we know that the lesser grade ore will go to a flotation facility (that of Enami’s until Auryn installs its own if that becomes the plan) and the higher-grade ore (“DIRECT SHIPPING ORE”) will go to Enami’s DIRECT SMELTER.
MORE FROM THE August 10, 2023 UPDATE
The Aug. 10, 2023 update cited: “Our dedicated team is currently active at the mining site, focusing on producing and accumulating minerals DIRECTLY FROM THE VEIN (my emphasis). Our goal remains to consistently dispatch these HIGH-GRADE MINERALS (my emphasis) to the DESIGNATED FACILITY (my emphasis) at ENAMI.” TRANSLATION: We are in the INITIAL STAGES OF EXTREMELY HIGH-GRADE PRODUCTION FROM THE DL2 VEIN ITSELF (level 3) AND ALSO FROM THE SURROUNDING LESS WELL-MINERALIZED WALL ROCK. We should expect an INITIAL PRODUCTION RATE from just level 3’s two working faces and then a ramp up in production as crews and equipment is added and the various sub levels are put into production.
The HIGH-GRADE MINERALS are contained in the VEIN ORE itself and not the wall rock ore. The “DESIGNATED FACILITY” is, of course, the DIRECT SMELTER. The phraseology “DIRECTLY FROM THE VEIN” is interesting in that Auryn made a press release on January 3, 2021 citing the fact that, within the “old works”, they mined 54 tonnes of ore with average grades of over 62 gpt gold WITHOUT THE NEED FOR ANY BLASTING WHATSOEVER.
IS AURYN ABLE TO “SCRAPE” THE EXTREMELY HIGH-GRADE VEIN ORE OFF OF THE WORKING FACES OF THE LEVEL 3 ADIT WITHOUT BLASTING?
The question arises as to whether or not this “ACCUMULATING MINERALS DIRECTLY FROM THE VEIN” phrase refers to the continued lack of a need to blast the vein ore (not necessarily the wall rock ore) where they are mining from right now about 20 meters below where they mined ore without blasting, up near level 2 of the “old workings”. If you were ACCUMULATING MINERALS “INDIRECTLY” FROM THE VEIN (as opposed to DIRECTLY from the vein), then this might suggest blasting the entire working face and picking up the rubble containing both low and high-grade ore that are intermixed. If this were the case, how do you separate the two types of ore in order to determine which truck it goes into? I can only assume by visual inspection.
Elsewhere in the update Auryn cited: “we’ll be extracting the mineral DIRECTLY FROM THE VEIN and transporting it to ENAMI for processing through Direct Smelting”. This might also support this “scrapeing” theory without the need for blasting. If this is true, the obvious advantage would be a lower cost to mine the ore.
When you use ANFO or dynamite to blast the working face of an adit, the VEIN ORE and the less well-mineralized wall rock ore get mixed together. They would need to be sorted and separated by appearance, I assume, prior to being shipped to their destination. If the vein ore only needs to be “scraped” from the working face of the adit, perhaps there is a 2-step mining process going on in which the high-grade ore need only to be “scraped” and the more-dense wall rock ore (granodiorite, which, with a HARDNESS of 6 and a compressive strength of 175/N mm 2 can’t be “scraped” to my knowledge) gets blasted.
I am picturing a working face with the VEIN ITSELF on one side of the face and the surrounding wall rock to the other side of the working face. You “scrape” to a depth of “X” amount of meters on the vein side and collect the ore and send it to the DIRECT SMELTER and then blast the other side, collect the ore, and ship it to the FLOTATION PLANT, either on site or that of Enami until Auryn has its own on-site. The entire working face will have advanced by “X” amount of meters after each round of “scrapeing and blasting”, if this theory is true. Then it’s lather, rinse, repeat.
WHAT KIND OF “PRODUCTION RATE” CAN WE EXPECT INITIALLY AND THROUGH TIME?
We’ll know soon enough how long it takes to fill up one truckload of ore no matter where it is being shipped. Management’s comment was that, starting now, (actually last week) they will “CONSISTENTLY DISPATCH” these high-grade minerals to Enami. The use of this phraseology doesn’t tell us much about anticipated PRODUCTION RATE. It basically tells us that EXTREMELY HIGH-GRADE PRODUCTION, IN EARNEST, HAS COMMENCED.
Management also promised to “PROMPTLY REPORT” financial results from these “dispatches” (shipments). Now that the game has officially started, this brings us the VISIBILITY needed to gauge potential earnings over time. WE’VE NEVER BEEN ANYWHERE NEAR THIS POINT OF DEVELOPMENT OR THIS LEVEL OF VISIBILITY. We need to also keep an eye on the PRODUCTION GROWTH RATE over time as more and more sub levels are put into production. For example, once the “decline spiral” to the lower levels has commenced construction (if it hasn’t already), can we assume that perhaps one new sub level could be put into operation every “X” number of months? When the 4 working faces located on 2 levels are being simultaneously mined, should we expect a doubling of the INITIAL PRODUCTION RATE from just level 3’s two working faces?
I hope this helps to answer some of the questions recently asked on the MININGPLAY forum. As far as if this ore is so fancy, why no shipments of it for the last several months. I suppose it would have to do with the lack of completing the “ventilation” chimney and getting SERNAGEOMIN’S official blessing to mine level 3. There was also the need to complete the COMPREHENSIVE METALLURGICAL ANALYSIS in order to figure out where to ship the ore in order to get the maximum recovery rate. There also is the lack of the legal approval to ship regular consignments of ore to Enami until being granted membership in the CHILEAN MINING REGISTRY. I’m going to guess that this necessitated that sign off by SERNAGEOMIN on the right to mine level 3.
Another comment had to do with why the majors aren’t crawling all over this thing. The litany of tasks needing to be checked off on prior to commencing production JUST GOT COMPLETED DAYS AGO. The majors want everything to be DERISKED prior to showing any interest. What if SERNAGEOMIN refused to sign off for another 6 months or if the CHILEAN MINING REGISTRY needed more time to evaluate our application? Right now, things are a little slow on the Chilean mining front. The smelters and processing facilities need “feed” in order to keep their employees employed. I’m not suggesting that anybody expect a tender offer by morning. These developments are extremely fresh. Those stellar SMELTER results are a whopping 5 days old.
