I wonder how much ore has been processed and what was made from it.
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WHAT DID AURYN MANAGEMENT JUST TRY TO TELL US AND THE MARKETS BUT NOBODY HEARD IT?
First of all, the independent smelter in Peru and the Codelco/Enami smelter were sent samples of the same ore taken from near the intersection of the Antonino Adit and the DL2 Vein. Both received ore grading OVER 128 gpt gold which is 4 ounces per tonne. The Peruvian smelter took out a modest fee netting Auryn an insanely high 128 gpt gold, and the Codelco/Enami smelter took out a much larger fee, leaving Auryn with an agreed to āsettlementā of 57 gpt gold, 980 gpt silver and 3.3% copper.
WHAT CAN WE LEARN FROM THAT $5,000 DIFFERENTIAL BETWEEN WHAT ENAMI WOULD PAY FOR DIRECT SMELTING (57 GPT GOLD) ORE AND WHAT AURYN COULD EARN IF THEY FROTH FLOATED THEIR OWN ORE?
Letās start with 1 tonne of ore coming out of the Auryn adit. It has $āXā worth of gold contained in it from a nominal point of view (ounces per tonne times the price of gold per ounce). When Auryn froth floats the ore, nobody is adding gold to that 1 tonne of ore. The FF process only removes the waste material that coexists with the gold. This cleaning up process makes the gold material worth more money.
Froth flotation procedures average a 4-fold increase in the grade of the gold. This translates into 1 tonne of ore resulting in three-fourths of a tonne of āgangueā being discarded to the ātailingsā pile and one-fourth of a tonne of ore, now referred to as a āfloat concentrateā, having its āCONCENTRATIONā going up 4-fold. But again, no gold was added to the original amount of gold contained in that 1 tonne of ore.
If Auryn can improve the ECONOMICS by $5,000 per tonne by froth floating the ore and perhaps do other steps they now plan on doing, then BY DEFINITION that 1 tonne of ore must have had a nominal value of OVER $5,000 PER TONNE in the first place. Note: if you have a 1 tonne sample of gold ore with only $10 worth of nominal value to it, there is nothing in the world you can do to it in order to improve the economics by $5,000 per tonne. If the nominal value of the ore is somewhere around $8,000 per tonne (4 ounces per tonne times $2,000 per ounce), then by all means, you could improve the ECONOMICS by $5,000 if you did a lot of the concentrating of the ore on-site rather than send it to Enami.
Based on the current price of gold, this means that the original 1 tonne of gold must have graded out at 2.5 ounces per tonne at a minimum. Now we need to add the amount of money that Enami would have paid Auryn for the DIRECT SMELTING of their ore. Remember that the $5,000 figure āDIFFERENTIALā was over and above what Enami would have paid for DIRECT SMELTING.
Ore grading 57 gpt gold represents ore grading 1.8 ounces per tonne since there are 31.1 grams per Troy ounce of gold. If you add this to the 2.5 ounces per tonne figure you get 4.3 ounces per tonne as the MINIMUM grade of the original 1 tonne of ore. This equates to 133 gpt gold ore which is in line with the Peruvian smelterās 128 gpt offer after taking their fees out.
What management was trying to tell us, but we didnāt hear, was that the current grades are literally through the roof. The average grade being mined worldwide in similar underground vein operations is 4.18 gpt gold. I donāt think that management wanted to throw around grades like 133 gpt gold because this may have led to unreasonable expectations. They basically gave us this same information in a manner that was less dramatic and necessitated that we do a little work. I donāt think for a minute that Auryn can AVERAGE grades like this for any extended amount of time but, for now, the facts are what they are.
Management has cited at least 5 or 6 times that they are āMINING DIRECTLY FROM THE VEINā. This implies to me that there is very little GRADE DILUTION from the less well-mineralized wall rock lateral to the vein proper. This could be associated with the vein width dilating out or perhaps the deploying of narrower equipment at the working faces.
The average cost for owners of froth flotation systems to float 1 tonne of ore on their premises is $10. This includes CAPEX and OPEX (operating expenses). Putting in an extra $10 per tonne to access a $5,000 per tonne ābonusā seems a bit odd UNLESS ENAMI WAS REALLY GOUGING AURYN ON THEIR FEES IN COMPARISON TO THE INDEPENDENT PERUVIAN SMELTER. Note that Auryn sending their ore to the Peruvian smelter probably makes no sense due to the TRANSPORTATION COSTS.
What are we missing here? Weāre missing the fact that about 3 months ago, Codelco/Enami operated 4 smelters in Chile. Their gigantic Las Ventanas smelting facility in Valparaiso was recently shut down permanently for environmental reasons. How can the Peruvian smelter pay so much more for the same ore? What Iām told is that it has to do with the remaining 3 Codelco/Enami smelters gaining āpricing powerā due to supply/demand reasons. Now many of the smaller Chilean gold producers are switching to Plan B which is froth flotation (FF) and perhaps carbon in leach (CIL) methodologies to purify their ore. In a recent quarterly update, Auryn management cited that, after comparing the fees charged by the Peruvian smelter to those of the Codelco/Enami smelter, they found the need to ātake controlā of their ore processing procedures. The construction of a FF facility is the first step in that direction. Enami does offer CIL facilities, which hopefully arenāt nearly as expensive as their smelting facilities.
FF and CIL are inexpensive yet very effective. CIL can enhance the grade by 200 to 600-fold (not a misprint). The name of the game is to remove as many of the impurities as early on as possible during processing, and as inexpensively as possible. FF and CIL, if done on-site, will result in a lot of the waste material associated with the adit heading to the on-site discards/tailings pile. These discards will never have to be TRANSPORTED anywhere. Nor will they have to go through a FF plant, CIL facility or smelter. If some ore absolutely has to go to the smelter, then you want to keep the tonnage as low as possible.
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Andā¦ if you speak with them they would tell you that they are targeting 20gpt
Butā¦if you donāt speak with them you may have unreasonable expectations.
This doesnāt seem overly complicated.
Would it be nuts for investors to request a call (Q&A) with the AUMC BOD to get some clarity? Its been over seven years of the loyal flock trying to parse through company updates to find some meaning. Iād be happy to assist in organzing a call but maybe the Wizard, who has a good relationship with Maurizio can take the torch. Its pretty clear the Good Doctor is not willing nor wanting to get a reality check.
20gpt would be great on average. And if they were willing to tell you that was the target, then we can even assume a bit higher given MC seems to prefer taking the more conservative projection
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Thanks for the reminder, doc. I recall that you posted about this before, but now youāre providing more detail, like the dynamics between various smelters (and more), to back up your observations. Thatās not complicated at all ā¦ for those who follow the bouncing ball.
Yes, of course they will. Thatās precisely the point BB is making.
Agreed. Its a good if not great grade. Something they can aspire to. Just keep in mind, the difference b/w 133gpt and 20gpt (or 3.3oz) is $6500 per ton. Point being, AUMC is not trying to convince investors that there is any possibility for this insanely high graden (100gpt+) despite efforts to reverse engineer the wording of the recent PRs. Again, why wouldnāt investors want to engage with the company to seek clarification?
First of all, nearly all gold ore being mined today goes through a āfroth flotationā process during ābeneficiationā. The vast majority of gold ore being mined today is āsulphide oreā. Nearly all āsulphide oreā has a ārefractoryā nature to it. āRefractoryā ore refers to ore that needs special treatment. Often it has to do with the gold being tightly bound to certain āsulphidesā like arsenopyrite. Sometimes the gold particles are very tiny and referred to as āfinesā and āultra-finesā. Sometimes ārefractoryā gold ore is tightly bound to carbon. āFroth flotationā is the treatment of choice to address many of these conditions.
The above link does a very good job at explaining how ārefractoryā gold ore is treated. The processing of refractory ore starts with āRUN OF MINEā (ROM) ore being taken out of the adit. This ore then goes to the crushers and grinders until it has a particle size deemed to be the size leading to the greatest ārecovery rateā by the froth flotation (FF) process. The determination of this optimal āgrind-sizeā was Job 1 for the University of San Sebastianās testing facilities i.e. determine the āgrind sizeā maximizing recovery.
āFroth flotationā (FF) results in an average of quadrupling the original āRUN OF MINE grade or āhead gradeā. The range of results goes from 2-times to 20-times the original head grade. In the FLOW SHEET shown at the link, if you draw a straight line from Step 1 COMMINUTION (crushing and grinding) to Step 10 āSMELTINGā, this represents the process of āDIRECT SHIPPINGā of the ore to a SMELTER. This is what Aurynās experiment involving the 2 smelters involved. The DL2 Vein ore responded EXTREMELY WELL to āDIRECT SMELTINGā.
This presents Auryn with an enviable OPTION to just mine the ore and ship it directly to the smelter and make a great deal of money in the process. These funds could be deployed to purchase a froth flotation plant. This OPTION, which is still on the table, becomes the new āworse-case scenarioā i.e. make a fortune and buy your own FF plant. The problem is that the $5,000 āBONUSā associated with Auryn being willing to froth float the ore and to store the discards/ātailingsā on-site at the ADL Plateau, would be left on the table. The Auryn BOD unanimously voted to build their own froth flotation facility so that they wouldnāt leave the $5,000 āBONUSā on the table.
In MINING ECONOMICS, Aurynās ability to DIRECT SHIP the ore to a smelter becomes the DEFAULT EARNINGS SCENARIO. That option is always there. So too is the OPTION to deploy any of the 8 beneficiation methodologies listed in the FLOW SHEET. The rule of thumb is that if any of the various beneficiation methodologies EARN MORE THAN THEY COST, then you might consider deploying that methodology.
Itās all about LEVERAGE and FROTH FLOTATION packs a very strong punch when it comes to LEVERAGE. How is that? For the miners that have their own froth flotation facility, it costs an average of $10 per tonne to float your own ore. This includes amortizing the cost of the facility (CAPEX), over its life expectancy, and it includes OPERATING COSTS or āOPEXā. Note the LEVERAGE present when it comes to āfloatingā the DL2 Vein ore specifically because of this $5,000 per tonne situation. You spend $10 per tonne in order to increase earnings by $5,000 per tonne, but, of course, itās more complex than that.
Note that management has not told us what other beneficiation methodologies, shown on the flow sheet, they may be planning to deploy. The next destination for nearly all gold ore that has been froth floated is a CARBON IN LEACH (āCILā) circuit. These are often part of the FF facility. Instead of averaging a 4-fold increase in the grade of the gold ore, these circuits average a 200-600-fold increase in grades. For example, if you start with intra-adit gold ore with a āhead gradeā of 40 gpt gold, after the ore is froth floated you would expect the resultant āfloat concentrateā to grade out at about 160 gpt gold (40-times the head grade). This āfloat concentrateā is often āregroundā to a smaller particle size matching the ideal size resulting in the maximum recovery from the CIL process. The product of the CIL circuit, the āCIL concentrateā can be expected to grade out at 200 to 600-times the concentration of the āfloat concentrateā. You can see the LEVERAGE present and how that $5,000 figure comes about. Both FF and CIL circuits are inexpensive. Auryn could conceivably opt to put in their own CIL circuit on-site as part of the FF circuit or ship the āfloat concentrateā to Enamiās CIL facilities.
A lot of the LEVERAGE present depends on the CHEMISTRY of the ore being mined. The artisanal miners at the DL2 Vein had a terrible time, 75 years ago, recovering the āfinesā and āultra-finesā they were mining YET THEY STILL AVERAGED 64 GPT GOLD WHILE MINING OUT 5% OF THE DL2 VEIN. What could that number have been if they had todayās FF or CIL technologies? The artisanal miners also had trouble with a certain sulphide known as ARSENOPYRITE or āARPā which binds tightly to gold making it tougher to recover. The methodology of choice for breaking the tight bond of gold to ARP is also froth flotation.
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40gpt x 40 = is 1600gpt (not 160gpt)
1600gpt x 400 (average concentration of CIL)= 640,000gpt
640,000 grames -= 20,650 ounces per ton of concentrate.
Now youāre talking my language!!
I would love to be included in a call or zoom with management!
ā madmen
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This is an image and not an active link. Is it supposed to lead to information on a trade show?
Thanks
Correct. This is their Booth # for anyone wants to head to Toronto
What dates?
PDAC 2024: The Worldās Premier Mineral Exploration & Mining Convention in Toronto
March 3 @ 8:00 am - March 6 @ 5:00 pm. (Prospectors and Developers Association of Canada)
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How many PDACs have come and gone now since Auryn has taken over? Still no positive cashflow. 
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I wouldnāt even show my face until Iām in production. Then Iāll flex my muscles.
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DD. Youāve always been āin productionā in my book. Iāll be there. Maybe BB and I can sit down for a beer with Maurizio and get some answers/clarifications. What a novel concept.
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Youāve got two more to go if they execute on their current initiative (to reach positive cash flow). Seems like even small scale production via Enami would have piqued some interest but that ship has sailed
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If we were to fund the repayment of MC ($6million) and the plant ($10million) by sending the ore to Enami without any debt or or dilution (selling shares to fund) this is the number of weeks it would take based on various grades and truckloads per week. Assume $1,000 profit per ounce. 20 ton trucks. 28.35 grams /ounce. 5 day work week.
| profit/tl | 10 tl/wk | 20 tl/wk | total tl | |
|---|---|---|---|---|
| $7,000 | 10 g/t | 229 | 115 | 2,286 |
| $14,000 | 20 g/t | 115 | 58 | 1,143 |
| $21,000 | 30 g/t | 76 | 38 | 762 |
| $28,000 | 40 g/t | 57 | 29 | 571 |
| $35,000 | 50 g/t | 46 | 23 | 457 |
| $42,000 | 60 g/t | 38 | 19 | 381 |
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Hi Done Deal and Zotron,
Below is a snip-it from a chapter Iāve been working on with some accounting guys regarding the proper accounting for stockpiled ore in the mining industry. In mining, you have to value the ore in a stockpile by using NET REALIZED VALUE OR āNRVā. What youāre basically calculating is the future sales price depending on the level of purification of the ore.
Z, in your analysis, donāt forget that what is going to be shipped on those 20-tonne trucks is either a āfloat concentrateā grading out at about 160 gpt gold or a CARBON IN LEACH āconcentrateā grading out at about 400-TIMES that 160 gpt figure.
If you start with intra-adit ore with a āhead gradeā of, letās say, 40 gpt and you run it through a froth flotation circuit you will average producing a āfloat concentrateā of about 4-times the original head grade or 160 gpt. A CIL circuit takes that 160 gpt āfloat concentrateā and further concentrates it by a factor of 200 to 600-times (not a misprint). The next stop for most froth floated ore is a CIL circuit, often located right next door to the FF circuit. Recall that Auryn management told us that we will get a bonus of about $5,000 per tonne if we do the preliminary ore processing (probably FF plus CIL) on-site. They never gave us the breakdown of just what was going to be done on-site.
Both FF and CIL are extremely inexpensive. The average FF facility built by a miner on-site, costs $10 per tonne to float the ore. The average payback for a miner that put in its own FF facility and that mines ore with an āaverageā grade of 4 gpt gold, pays off that purchase in 158 days. If youāre mining 40 gpt gold and magnifying that head grade 4-fold, youāre going to pay off that FF facility (CAPEX AND OPEX) in a hurry.
SOME SHAREHOLDERS REMAIN UNCONVINCED THAT BUILDING A FROTH FLOTATION PLANT WAS THE PROPER CHOICE FOR THE AURYN BOD TO MAKE
Some shareholders, frustrated by the share price, have made the argument that what they want is CASH FLOW NOW instead of a TREMENDOUS AMOUNT OF CASH FLOW LATER. The reality is that due to how mining accounting works in regards to NET REALIZABLE VALUE (NRV) they can have market moving news NOW in association with the Auryn balance sheet reflecting the āestimated future sales priceā OF THE STOCKPILED ORE and still take advantage of that $5,000 āBONUSā. The key is allowing shareholders and prospective investors VISIBILITY of the significant value of the stockpiled ore. People forget the powerful combination of EXTREMELY HIGH-GRADE ORE at a time in which the price of gold is approaching all-time-highs. That reality is sitting in those stockpiles that have been growing for the last 170-days of production and stockpiling.
SOME SHAREHOLDERS REMAIN UNCONVINCED THAT THIS WAS THE PROPER CHOICE FOR THE AURYN BOD TO MAKE
Some shareholders, frustrated by the share price, have made the argument that what they want is CASH FLOW NOW instead of a TREMENDOUS AMOUNT OF CASH FLOW LATER. The reality is that due to how mining accounting works in regards to NET REALIZABLE VALUE (NRV) they can have market moving news NOW in association with the Auryn balance sheet reflecting the āestimated future sales priceā OF THE STOCKPILED ORE and still take advantage of that $5,000 āBONUSā. The key is allowing shareholders and prospective investors VISIBILITY of the significant value of the stockpiled ore. People forget the powerful combination of EXTREMELY HIGH-GRADE ORE at a time in which the price of gold is approaching all-time-highs.
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