I think as far as doing due diligence on the DL2 Vein project of Auryn/Medinah, the next step for most of us is to get an appreciation for the “beneficiation/concentrating” methodology known as “froth flotation”. You saw how Auryn being willing to build their own “froth flotation” plant and store the tailings/discards on-site at the ADL, would result in a “DIRECT FINANCIAL IMPACT” to Auryn of $5,000 per tonne or $100,000 per 20-tonne truckload. That’s a great deal of money, arguably a “COMPANY MAKER”, so, it might make sense to study “froth flotation” and make sense out of the economics.
Most ores being mined today are called “sulfide” ores. They almost always are considered at least partly “refractory” (difficult to extract the desired metals from) , and are therefore in need of “froth flotation” or some other methodology to remove impurities like POX, BIOX or ROASTING. This is the norm, not the exception. On the contrary, “oxide” ores, located closer to the surface, are typically easier to process. What POX, BIOX and ROASTING do is to convert the tough to process “sulfides” into easier to process “oxides”. Even if “gravity” methods find some success, you almost always still need “froth flotation”. It’s usually “one then the other” instead of “one or the other”.
Even though they were able to average a stellar grade of 64 gpt gold “agreed to/settlement” grade (after Enami took out their fee), the artisanal miners of the DL2 Vein had a difficult time in recovering the gold consisting of very small particles known as the “fines” or “ultra-fines”. “Froth flotation” is the process of choice for removing these “fines” and “ultra-fines” which are too small to respond to gravity beneficiation methods.
The ore at the DL2 Vein has a lot of arsenopyrite (“arp”). This is a “sulfide”. Arp has a very high affinity for gold and if you have a lot of arp in a deposit, you are likely to have high-grade gold near that arp. The problem with arp is that it likes gold almost too much, and it binds to it very tightly.
A “froth flotation cell” is basically a water-filled tank with an agitator to keep the crushed ore with a sandy-like consistency, in suspension. Attached to the base of the “cell” is an air bubble producer. Chemicals that dissolve in water and are attracted to water are called “hydrophilic”. Chemicals that hate water and stay separated from it (like oil) are called “hydrophobic”. The gold portion of the gold-arp molecular complex is “hydrophobic” and it hates water. Arp loves water and is heavily “hydrophilic”. There is a chemical called “xanthate” that is typically introduced into the froth flotation “cells”. It is EXTREMELY “hydrophobic” (hates water but loves gold) and it binds tightly to the lining of the air-filled bubbles being generated.
The gold end of the gold-arp complexes will bind tightly to the bubble and its xanthate lining. The arp end of these chemical complexes, binds tightly to the water. The bubbles rise and a tug-of-war ensues. The bond between the gold and the arp is broken, which is a good thing, and the gold floats to the surface bound to the bubbles. They form a gold-tinged “froth” which is swept by a series of paddles into a gutter-like collecting structure. The arp “discards/gangue” stay at the bottom of the tank and are later stored in “tailings ponds” on the ADL plateau surface. The “concentration” of the gold in this new frothy “flotation concentrate” is MUCH HIGHER than it was in the crushed and ground ore that came out of the mine. The concentration of the gold will typically go up in between 2 and 20-times after froth flotation.
Enami doesn’t want to store these “discards/tailings” on their limited property holdings. They will pay a producer like Auryn handsomely to “float” their own ore on, in this case, Auryn’s land holdings, and store the tailings on Auryn’s land holdings. This is partly where that $5,000 in EXTRA profits per tonne mined ($100,000 per 20-tonne truckload) comes from. It was the differential between the independent smelting test done at the Plenge Lab in Peru, which came in at 128 gpt for just the gold and the Codelco/Enami smelting “agreed to”/settlement” price of 57 gpt for just the gold after Enami took out their fees, that told Auryn that Enami’s terms were no bargain. Note that Enami’s froth flotation facilities treat a lot of different types of sulfide ore in somewhat of a “one size fits all” manner. When a producer has its own froth flotation facility it can, “dial in” more of a customized approach to the specific ore type of the producer.
Removing the contaminants from gold ore takes several steps. When the trucks start rolling down the North Road at the ADL, one truck might make a left hand turn to a “CARBON-IN-LEACH” (CIL) facility and another a right hand turn to perhaps the Caletones Smelter. You use the less expensive methodologies, like gravity and flotation, first, to remove as many contaminants as possible inexpensively. Part of this “DIRECT FINANCIAL IMPACT” of $5,000 per tonne has to do with this lesser need for the more expensive beneficiation processes. At the end of the day, the processing costs will be the sum of the costs associated with the various steps needed to be taken to maximize the “recovery rate”. The hope is that the earlier/cheaper steps got most of the contaminants removed.
Originally, the plan was to have Enami do the “floating” of Auryn’s sulfide ore at their premises. In the 10/4/21 quarterly update of Auryn (over 2 years ago), management cited that the University of San Sebastian’s Mining Engineering Department “had taken AN ADDITIONAL 200 Kg of ore for froth flotation studies”. It is not clear how much they had originally taken. When the cost savings were calculated, after all of the relevant data had been obtained mainly from the University of San Sebastian’s Mining Engineering Department, as well as the data from the 2 smelter tests, the plan was changed to Auryn building their own froth flotation facility on-site and storing the tailings/discards on-site. The enhanced ECONOMICS were pretty obvious. The “ALL IN SUSTAINING COST” (AISC) is strongly inversely related to the grade of the ore within the trucks coming down that North Road.
In the quarterly update dated 7/6/21, Auryn first cited that The University of San Sebastian had been commissioned to study the feasibility of a froth flotation facility at the ADL (This was the same update that cited that the reports from BOTH Richard Sillitoe and Rob Cinits of ACA Howe Mining Consultants, confirmed that the DL2 Vein was both becoming richer with depth and wider with depth). The University’s task was to find out the particle size, after the crushing and grinding of the ore known as “comminution”, that led to the maximum “recovery rate” of the sought-after gold, silver and copper. This is called the “classification stage”. They would also test the concentration of the xanthate (or other hydrophobic chemical used) that led to the maximum recovery of the gold, copper and silver. The magnitude of the enhanced ECONOMICS suggests that the University was able to “dial-in” the process fairly well. With these enhanced ECONOMICS now known, namely an EXTRA $100,000 per 20-tonne truckload, you can only imagine the incentive Auryn has to rapidly ramp up the TONNAGE being produced and sent to their on-site “froth flotation” facility. After all, each additional tonne represents a $5,000 boost in profits. The foundation for this potential rapid ramp up in PRODUCTION, known as SCALABILITY, was laid down by Auryn’s ability to access the fresh air contained in the “old workings” (levels 0,1 and 2) via their new “ventilation/safety egress chimney” that was recently signed off on by SERNAGEOMIN. The increasing of the grades and widths of the vein with depth provides a concept known as OPTIONALITY. Auryn will have the OPTION to concentrate their mining efforts on the sub levels with the highest grades and widths to the vein.
From an ECONOMIC point of view, you need to appreciate the SYNERGIES associated with #1, ALREADY EXTREMELY HIGH-GRADE ORE in the adits, #2, the enhanced Economics associated with “floating” your own ore and storing the tailings on-site, and #3, the ability to rapidly ramp up production via accessing the various sub levels under the new level 3 of the mine, and #4, the OPTIONALITY just cited.
Each new sub level will provide another 2 “working faces” to mine from simultaneously. I feel that for all of these realities to be present at a time when the price of gold is approaching all-time-highs, represents VERY FORTUITOUS TIMING. Keep in mind that when the artisanal miners of the DL2 Vein were achieving their outstanding grades averaging 64 gpt gold (after Enami took out their fees), the price of gold (“POG”) was $35 per ounce. It has since gone up about 56-FOLD. From the point of view of MANAGED EXPECTATIONS, there’s still a lot of work to do and keep in mind that nothing in this sector goes very quickly.
“PER TONNE” VS “PER OUNCE”
I’ve posted many, many times that in the mining industry, the saying goes that “GRADE IS EVERYTHING”. Why? Because EARNINGS PER SHARE IS EVERYTHING and TOTAL EARNINGS=THE AMOUNT PAID PER OUNCE OF GOLD MINUS THE COST TO PRODUCE AN OUNCE MULTIPLIED BY THE NUMBER OF OUNCES PRODUCED. Everything is related to “OUNCES” mainly because the price of gold is quoted in terms of “OUNCES”.
The problem is that sometimes costs, like “froth flotation” costs, are quoted in terms of “PER TONNE”. When this happens, you need to figure out how many gold ounces are contained in each tonne of ore. This is also called the “GRADE”. The average COST for flotation is about $10 PER TONNE OF RAW ORE. If you’re mining the average grade ore worldwide in a vein deposit, which is 4.18 gpt or .134 ounces per tonne (there are 31.1 grams per Troy ounce of gold), then in terms of COST PER OUNCE it would be $10 divided by .134 ounces which equals $74 per ounce of gold for ore with a “head grade” of 4.18 gpt gold.
If, however, Auryn is mining, let’s say, 62 gpt gold, which is 2 ounces PER TONNE, then the cost per ounce to “float” that ore is only $5 PER OUNCE of gold. It does not cost very much PER OUNCE, to “float” 62 gpt gold. Nor does it cost very much PER OUNCE to transport 62 gpt gold. But wait a minute, if what you are transporting has been “float concentrated” to perhaps 248 gpt gold (8 ounces per tonne i.e. a 4-fold increase) and a 20-tonne truck is carrying 160 ounces of gold, then the COST TO TRANSPORT THIS “FLOAT CONCENTRATE” is de minimis on a PER OUNCE basis, which is the basis that counts. TRANSPORTATION COST (measured on a PER OUNCE basis) is one of the larger components of the ALL IN SUSTAINING COSTS to produce an ounce of gold.
Likewise, it does not cost very much to smelt 8 ounces per tonne “float concentrate” on a PER OUNCE basis. The very act of “froth flotation” of your ore diminishes the costs sustained FROM THAT POINT ONWARDS. I think you might be able to appreciate where that $5,000 per ounce DIRECT FINANCIAL IMPACT comes from.
So, you have the COST to float your ore minus the savings accrued because you “floated” the ore on-site, and opted to store the tailings on-site, versus having Enami store them. FLOATING YOUR OWN ORE AND STORING YOUR “TAILINGS” ON-SITE IS A NO-BRAINER. STOCKPILING YOUR PRODUCTION OF ORE WHILE THE FLOTATION FACILITY IS BEING CONSTRUCTED IS ALSO A NO-BRAINER UNLESS THE MONEY RAISED TO PAY FOR THE FLOTATION FACILITY IS DEPENDENT UPON THE SALE OF SHARES AT A LOW PRICE. THEN AND ONLY THEN, MIGHT IT MAKE SENSE TO SHIP THE EXTREMELY HIGH-GRADE ORE FOUND IN THE ADITS, FOR A WHILE, IN ORDER TO EARN THE MONEY NEEDED TO CONSTRUCT THE FACILITY. WITH THIS OPTION ON THE TABLE, THERE IS NO WAY THAT MANAGEMENT, THE LARGEST SHAREHOLDERS BY FAR, ARE GOING TO SELL CHEAP SHARES AND DILUTE THEIR SHARE POSITION AND THE COMPANY’S SHARE STRUCTURE, TO DEATH IN ORDER TO BUILD THE FACILITY.
Below is a link to an article on the ECONOMICS of “froth flotation”:
Costs of froth flotation? - Thunder Said Energy
The highlight of the article is: “A good rule of thumb is $10/ton costs to concentrate an ore by over 4x (this excludes underlying ore costs) ……. commercial flotation processes will make a valuable mineral 2x more concentrated, sometimes over 20x more concentrated, which greatly reduces the waste and energy cost of further processing. It is for this reason that flotation has been lauded as one of the most important innovations in the modern materials industry.”
