In the last Auryn update dated Aug. 10,2023, under the “ACCOMPLISHMENTS-Antonino Tunnel” section management said the following:
“ACCOMPLISHMENTS
Antonino Tunnel
AURYN Mining Corporation has successfully extended a 40-meter ventilation chimney, connecting our Level 3 tunnel to the historic Level 2 tunnel structures. This SIGNIFICANT ENHANCEMENT (my emphasis, to be explained in further detail in a moment) accelerates ventilation after drilling and blasting events within the Antonino Tunnel, STREAMLINING OPERATIONS (my emphasis). Notably, this development has substantially improved our safety standards. Following a RIGOROUS EVALUATION (my emphasis), the mining authorities have FORMALLY ACCEPTED (my emphasis) our updated ventilation measures.”
I was especially curious about this “RIGOROUS EVALUATION” by the SERNAGEOMIN inspectors and what it involved. If you’ve ever waded through the hundreds of pages of Chilean Mining Regulations (this is the price one pays for being an OCD detail freak), you’ll know that they are very detailed. A lot of this has to do with the legislation passed after the 33 Chilean miners were trapped 700-meters below surface at the San Jose Mine back in August of 2010. The problem there had to do with the LACK of what Auryn just installed i.e. a “ventilation/safety egress chimney”.
Prior to completing this “ventilation/safety egress chimney” (also called a “ventilation raise”), in the past, if there were to have been a cave-in, let’s say, along the course of the Antonino Adit, any miners in between the cave-in site and the outside portal to the adit (the entrance) could escape but those deeper in the mountain than the cave-in site would have been trapped. Now, all miners will have a pathway to escape if such an event were to occur. In this Aug. 10,2023, update management cited “This development (the linking of level 2 and 3) has substantially improved our safety standards”. I would say that this was an understatement.
MINE VENTILATION RULES
The new rules mandate that any place that miners operate needs to have at least a 19% oxygen level and no more than a 0.5% carbon dioxide level. The percentage of “flammable gas” cannot exceed 0.75% in the “general body of the RETURN AIR” of any “ventilating district” and 1.25% in any place in the mine. Large fans are put in place to both draw in clean air from the plateau and exhaust out “dirty” air from the blast sites.
The mining engineers of SERNAGEOMIN have determined the “VOLUME”, expressed in cubic feet per minute, of air required to ventilate Auryn’s new mine. The rule is that you are not allowed to have less than 6 cubic meters per minute of air per person in the mine on the largest shift, or not less than 2.5 cubic meters per minute of air PER DAILY TONNE OF OUTPUT, whichever is larger.
ENHANCED ECONOMICS
You can see that PERMITTED DAILY TONNAGE is tied to the supply of fresh air. That’s what a mining firm wants when it has previous mining excavations including 7 shafts and 5 chimneys directly above where it is about to commence production. This accomplishment is not just about safety it is also all about ECONOMICS. Less time will now be required to clear out the post-blast noxious gases. This leaves more time to PRODUCE and higher PRODUCTION LEVELS. I’m not sure if Auryn management has received the requisite paperwork citing the newly calculated PERMITTED DAILY TONNAGE figures or not. The PERMITTED DAILY TONNAGE will represent a target for Auryn to go after in order to maximize profits. With the extremely high-grade ore being mined, one would hope that the PROFITS might allow Auryn to procure whatever equipment is needed to rapidly reach that PERMITTED DAILY TONNAGE. What comes to mind immediately is the deploying of a “jumbo” drill rig which will make the currently-used “jack-leg” drills a thing of the past. Being in extremely high-grade production also facilitates any outside financing that might be desirable to expedite production ramp ups. Financiers like to have visibility of how they’re going to be paid back.
The quarterly update cited that “the mining authorities have FORMALLY ACCEPTED our updated ventilation measures. This forum has been recently inundated with claims that “management never accomplishes anything”. Might this qualify as a “significant accomplishment” by management? Until I did a little extra digging and started to appreciate the ECONOMIC implications, I have to admit, I didn’t appreciate the significance other than the safety issues.
The result of the recent SERNAGEOMIN sign off was Auryn being allowed full access (for the first time) to the CHILEAN MINING REGISTRY which now, due to the ventilation and safety enhancements, authorizes the full-scale delivery and sale of minerals from Auryn’s mine to BOTH the Enami/Codelco flotation and direct smelting facilities. In the Antonino Adit, Auryn had already had in place a “forced air” ventilation system consisting of a blower and ducts made of fabric. This allowed Auryn to deliver a small amount of ore to Enami as per the regulations and the calculations of mandated air flow in order to allow a certain level of production. Again, allowed production tonnage is tied directly to air flow.
The quarterly update cited that this accomplishment will “STREAMLINE OPERATIONS”. What does this mean? You may have noted in a past update that Auryn had some issues in regards to clearing the air post-blasting and this slowing down the process of drifting the Antonino Adit.
The previous system was naturally less and less efficient as the Antonino Adit got longer and deeper into the mountain. After blasting, the miners are not allowed back to the blast site until the blast residue had been cleared to allowable levels of air contaminants. In the past, Auryn miners were blasting at the end of their shift and the air would clear overnight. There was only one working face back then at the terminus of the Antonino Adit, so another shift of miners couldn’t go elsewhere in the mine to work another shift like they can now.
Now there are 2 separate working faces within level 3 of the mine. One is oriented to the NNW and one to the SSE. This plus the new enhanced ventilation system allows 24-hour workdays (as indicated by management to be the plan), which should greatly enhance the PRODUCTION RATE and therefore the ECONOMICS. There is now even enough airflow to allow Auryn to extend the Antonino Adit straight ahead (to the SSW) in an effort to intercept, what management refers to as the 2 “monster veins”, that measured over 2-meters in width at surface.
On a watch dial, the DL2 Vein “strikes” from the NNW to the SSE i.e. from the 11 o’clock position to the 5 o’clock position through the center of the watch dial. The Antonino Adit came in from the NNE, i.e. from the 2 o’clock position to the center of the watch dial where it intersected the DL2 Vein at a right angle. Management will be not only mining the 2 working faces of level 3, they will also be extending the Antonino Adit towards 8 o’clock on the watch dial. The new “ventilation/safety egress chimney” (“ventilation raise”) is located at the center of the watch dial and it allows all of this mining to occur simultaneously in a safe manner. A tiny percentage of mines have “old workings” with 7 shafts and 5 chimneys above it to provide the ventilation and safety egress system to permit multi-level mining activities.
All PRODUCTION operations are now within the extremely high-grade DL2 Vein material itself. While drifting the Antonino Adit, Auryn was mining their way through the less well-mineralized and sometimes extremely hard barren granodiorite host rock. They were fortunate enough to have intersected 24 new “veins/structures” which are no doubt less well-mineralized than the DL2 Vein but for now these may only represent EXTENDED MINE LIFE possibilities. These veins DO NOT have the “old works” above them providing ventilation allowing the lower sub levels to be simultaneously-mined.
After Auryn mines the first 20-meters of the NNW branch of level 3, they will construct a “decline spiral” in order to access the various sub levels below. This will provide SCALABILITY to the mining operations and an enhanced PRODUCTION RATE. The RATE OF GROWTH in the PRODUCTION PROFILE is what many observers will key in on. There will be an INITIAL PRODUCTION RATE. Share prices are typically determined by the EARNINGS PER SHARE figure multiplied by an industry standard “MULTIPLE”. The “MULTIPLE” for any given issuer, will be upwardly adjusted for issuers able to accomplish impressive PRODUCTION AND PROFIT GROWTH PROFILES. The majors cannot replicate the DYNAMIC GROWTH PROFILES that a junior producer can achieve when it can regularly add new working faces via accessing sub levels that have good ventilation.
Mesothermal Vein systems like these, are famous for increasing in BOTH width and grade with depth. Management will have the OPTION to concentrate their mining efforts on the widest and richest levels within the DL2 Vein. This is referred to as OPTIONALITY. Inevitably, perhaps a decade or two down the road, the growth profile will plateau out and lesser and lesser grade ore will be mined as this OPTIONALITY diminishes.
The single event that might markedly increase PRODUCTION RATES would be the deploying of a “jumbo” drill rig. These not only prepare the drill blast holes very rapidly (especially when compared to handheld “jack-leg drills) but they also insert the explosives into the drill blast holes. This, in addition to the enhanced ventilation system, will permit more “blast cycles” per unit of time. The INITIAL PRODUCTION RATES are not likely to be around for very long as the cash flow generated by mining EXTREMELY HIGH-GRADE ORE permits the deploying of these “production enhancers”.
WHAT SHOULD OUR DUE DILIGENCE GOALS BE FROM HERE ON OUT?
- We want to get a feel for how many truckloads of ore/concentrate will be headed out to the ENAMI FLOTATION FACILITY as well as to the ENAMI/CODELCO DIRECT SMELTING facility, per unit of time, with just one truck at first. This will represent the INITIAL PRODUCTION RATE until more trucks are added. The cost per 20-tonne truck is about $100,000.
- We also want to get a feel for the PROFITABILITY of each truckload heading to those 2 destinations. This would involve some insight into ALL IN SUSTAINING COSTS (AISCs) including things like TRANSPORTATION CHARGES, diesel, electricity, labor, processing, etc.
- We want to get a feel for how PRODUCTION RATES will likely ramp up as the inevitable bottlenecks get worked out and as new sub levels are opened up and new equipment is deployed.
- We want to get a feel for the cost of an on-site FLOTATION FACILITY and what cost savings this might represent over using Enami’s facilities for this purpose, after amortizing out the cost over the projected life of the equipment. Management noted the use of any on-site flotation facility for other “lucrative” areas of the mining district.
- Since Auryn is going to be advancing the Antonino Adit straight forward towards the SSW, we want to monitor for progress there and whether or not they can intersect the 2 “monster veins” that showed widths of over 2-meters at surface. Is the ore in these veins amenable to “gravity plant” beneficiation? If yes, what are the approximate costs to install a “gravity plant”.
- We want to monitor for GRADES and WIDTHS as the lower sub levels are opened up.
- We want to monitor for progress in Auryn’s plan to become “fully reporting” to the SEC and moving on to a higher trading venue. A fully-reporting issuer will have a much easier time in regards to the distribution of Medinah’s “AUMC” shares.
- We want to monitor for any potential JVs on some of Auryn’s other assets. This might include the Pegaso Nero, the LDM, and other Main Veins within this overall VEIN SET. There will likely be new discoveries made as production ramps up.
- Keep in mind that it took 20 days from shipping to get the results from the DIRECT SMELTING shipments.
- Did the accomplishments regarding the admission to the MINING REGISTRY and the enhanced ECONOMICS associated with the new ventilation system attract the attention of any observers who had been seeking further DERISKING? Did the formal signing off on the new ventilation system and prescribing of PRODUCTION ALLOWANCES represent enough DERISKING to catch anybody’s attention?
- What have the 2 new BOD appointees been doing?
- Did the recent stellar results from the DIRECT SMELTING testing (73 gpt “gold equivalent”) catch anybody’s attention?
- Is management still able to extract the ore “DIRECTLY” from the DL2 Vein proper without blasting? If so, what ECONOMIC impact might this have and how might this effect the PRODUCTION GROWTH PROFILE?