ON AN INVESTMENT FORUM LIKE THIS, WHY DO PARTICIPANTS WANT TO, IN A RESPONSIBLE FASHION, FILL IN THE INFORMATIONAL VOIDS, WITH “PENCILED IN” ESTIMATES OF THINGS LIKE ESTIMATED PRODUCTION PER DAY, ESTIMATED GRADES OF STOCKPILED ORE, ESTIMATED TONNES OF STOCKPILED ORE, ETC.?
Whether we like it or not, we Auryn/Medinah shareholders are operating in an INFORMATIONAL VOID. Management’s communication style is what it is and the best we can do is to communicate to them that we would like MORE GUIDANCE on a variety of issues.
The problem with operating within an INFORMATIONAL VOID is that those meaning harm to a corporation, for whatever reason, are going to “paint” every situation in which clarity is lacking with the most damaging interpretation they can think of.
In order to expose this kind of behavior for what it is, it is critical to carefully study all of the facts that you do have access to, and put together models, supported by the facts, even though they may be still lacking corroboration from management.
You do this “model building” because it allows an investor or shareholder the ability to see the interrelationships between things like STOCKPILE TONNAGE, STOCKPILE AVERAGE GRADES, EFFICACY OF BENEFICIATION MEASURES, etc. on the potential economics of a mining project. The model building allows you to recognize the formula, that you can fill in the blanks to later on, when the definitive information becomes available. Just because there’s a current INFORMATIONAL VOID, doesn’t mean that the due diligence process comes to a screeching halt. WE KNOW MORE THAN WE THINK WE KNOW.
Let’s address the topic of estimating the AVERAGE DAILY PRODUCTION RATES for Auryn over the first year of production at the DL2 Mine. The Auryn miners have been doing an awful lot of MINING, day in and day out, over the last 6 or so years at the ADL Mining District. We know how many tonnes per day they have been averaging over extended periods of time. The extended timeframe provides statistical validity.
A while back they were drifting the Larrissa Adit over at the Caren Mine/Merlin 1 Vein. Management kept us up to speed fairly well on the progress being made. More recently, the Auryn miners drifted the approximately 450-meter long “Antonino Adit”. The dimensions of the adit are 3-meters in width by 3-meters in height. We know that the SPECIFIC GRAVITY (SG) of that granodiorite ore is about 2.6 Tonnes per cubic meter. If you don’t know what SG refers to or if you don’t know what the SG of granodiorite is, or if you didn’t know that our mountain is made up of an intrusive rock known as granodiorite, then you’re 100% dependent on there being no INFORMATIONAL VOIDS in regards to DAILY PRODUCTION TONNAGE. Thankfully, we have all of that information at hand.
The cross-sectional measurement of the working face of the Antonino Adit is 3-meters by 3-meters or 9 square meters. The VOLUME of a 450-meter adit with a width and height of 3-meters is 450-meters times 9 square meters or 4,050 CUBIC METERS. The TONNAGE of the ore that was removed is 4,050 CUBIC METERS times 2.6 TONNES PER CUBIC METER equals 10,530 METRIC TONNES of rock.
After reaching out to the company many months ago, I was informed that the miners were working four 10-hour shifts and one 5-hour shift on Fridays. This represents a 45-hour work week. We know that the drifting of the Antonino Adit commenced in February of 2021. They finally intersected the DL2 Vein on Jan. 3 of 2024.
Going by the calendar, the miners worked about 94 weeks but they were forced to take off several weeks due to Covid, weather, mechanical breakdowns, water issues that were later addressed, etc. I have the actual number of weeks worked at about 85 weeks or 425 days averaging 9-hour days. When you divide 10,530 tonnes of rock removed by 425 days it equals 24.7 tonnes per day being “mined”, WHEN YOU CAN ONLY MINE 1 WORKING FACE DURING A 10-HOUR WORKDAY.
The question then becomes, after intersecting the DL2 Vein and the miners are given the ability to simultaneously mine 2 working faces for 24-hours per day, as opposed to 1 working face for 10 hours per day, (as stated by management), what might the average production rate be on a tonnes per day basis? Note also that with the new ventilation system being in place, the amount of time post-blast to clear the air of debris will be much less. Management has also cited the intent to deploy a “jumbo” drill rig to prepare and fill the blast holes once cash flow permits it. In the past and even now in the present, while “bootstrapping” their way along, Auryn used somewhat archaic handheld “jack-leg” drills to prepare the blast holes.
I feel like I could make the case that Auryn could have been averaging 60 tonnes per day since they successfully intersected the DL2 Vein. I’m not going to, I think that the 40 tpd figure is plenty conservative.
The next question becomes what guidance has management provided in regards to forecasting an INITIAL PRODUCTION RATE now that they have successfully intersected the DL2 Vein. In their April of 2021 update, management cited: “AURYN’s objective for Q1 was to achieve a mining rate of 40 tons per day (in the “old works” of the DL2 Vein which they thought they had just intersected but were wrong). However, this was not possible without completing the tunnel (which was completed 1/3/24). With the tunnel being completed shortly, AURYN will hit the 40 tons per day target this quarter.”
I’d say that this is pretty clear GUIDANCE as to what INITIAL PRODUCTION RATES to expect. They knew what they could do because they had been doing it for 6 years. This GUIDANCE is very consistent with their past mining efforts in a new environment where they could be simultaneously mining from 2 working faces during longer workdays.
WHAT ANTICIPATED AVERAGE GRADE MIGHT WE “PENCIL IN” FOR NOW, UNTIL WE GET DEFINITIVE RESULTS FROM MANAGEMENT?
Once again, we have a huge volume of information available as to the average grades to expect within the DL2 Vein.
- The artisanal miners mining the exact same DL2 Vein, in the exact same area where Auryn is now mining, averaged 64 gpt gold over the course of 30 years while producing 2,000 tonnes of ore. They had no beneficiation techniques. Their mining was so technologically challenged that their discards/”tailings” were running as high as 14 gpt gold. The “discards” were running at a grade of 3.5 times the average grade of gold being mined in similar underground “narrow vein” operations which is 4.18 gpt gold.
- After finally intersecting the DL2 Vein, Auryn ran 2 sets of “channel sampling” programs. The first one averaged 164 gpt gold over a width of 0.6-meters. The second came in at 150 gpt gold.
- Auryn did a sampling program of the DL2 Vein in the “old works” (levels 0,1 and 2). The average came in at 85 gpt gold. This is consistent with a 64 gpt historical average involving 14 gpt gold in the “discards/tailings”.
- Auryn executed 2 smelting tests of the DL2 Vein ore found at the intersection of the DL2 Vein and the Antonino Adit. This is where they have been producing from over the last 170 days. The first shipment was made to a Codelco/Enami smelter. The “settlement” results came in at 57 gpt gold, 978 gpt silver, and 3.23% copper. The “gold equivalent” grade came in at 70 gpt “gold equivalent” or about $4,500 per tonne of ore AFTER ENAMI TOOK OUT THEIR FEES. The second smelting test was done at the Plenge lab in Lima, Peru. The results came in at 128 gpt gold (4 ounces per tonne) for just the gold. The same ore was shipped to each smelting destination. The disparity between the results told management that shipping ore directly to Enami was not giving Auryn the best bang for the buck. The “Mining Engineering Department” at the University of San Sebastian, had been collaborating with Auryn for several years. They had been testing the efficacy of the froth flotation process on the DL2 Vein ore for over 27 months. Management made a brief press release stating that the lab results were “EXTREMELY ENCOURAGING”. This should not have come as much of a surprise in that the artisanal miners, mining that same DL2 Vein ore had a difficult time in separating the gold from the arsenopyrite (“ARP”) that it coexisted with. They also had difficulty with recovering the small-particled “fines” and “ultra-fines”. Both of these difficulties are now easily treated with specially-designed froth flotation circuits.
- People need to understand the critical information contained in management’s comment that there is a DIRECT FINANCIAL IMPACT of $5,000 per tonne involved if Auryn were to “take control of their ore processing procedures” and build a froth flotation circuit on-site.
- Management knows that if the grade of the ore shipped to the Codelco/Enami stays consistent with the earlier shipments, they can realize approximately $4,500 per tonne. After running all of the numbers associated with the testing data available to date, they know that if they froth float the ore on-site they can improve the economics by another $5,000 per tonne. Management did not disclose what “beneficiation” methodologies were to be deployed after froth flotation. Usually, the next step is a CARBON IN LEACH circuit perhaps followed by smelting. For now, it’s not really critical to know the exact “flow sheet” for purifying that ore. The important thing is the enhanced ECONOMICS, which is significant.
The Plenge lab smelting results basically told Auryn management that Enami was taking a big piece of the action via their fees.
As I’ve said before, I’m currently “penciling in” an average of 40 gpt gold until I hear more definitive results involving larger sample sizes. The historical results from the artisanal miners, however, did involve a significant sample size (2,000 tonnes).
Again, the estimated 40 tonnes per day INITIAL PRODUCTION RATE as well as the estimated 40 gpt average projected gold are “penciled in” for now.
WHAT ARE THE TRUE ON-SITE “BRAINIACS”, WITH MUCH BETTER VISIBILITY OF THE PLAYING FIELD, AND MUCH SUPERIOR LEVELS OF TRAINING, SAYING IN REGARDS TO THINGS LIKE FUTURE PRODUCTION RATES AT THE DL2 MINE?
Dr. Helmut Mischo, the author of 258 scholarly articles on mining issues, is intimately familiar with the DL2 Mining operations. He recently stated this about future production rates:” Once the most efficient recovery method is established, production scaling would be straightforward and highly effective.”
Professor Luis de la Torre, the Headmaster of the University of San Sebastian’s Mining Engineering Group and the former Head of Underground Operations at Yamana’s immense El Penon Mine, who is also intimately familiar with operations at the DL2 Mine, had this to say about the project: ““The ore extracted and stockpiled from the old and new works on AURYN’s La Fortuna de Lampa mining project strongly reminds me of the ore from El Peñon Project, owned by Yamana Gold Corp. They are very similar to the color and rock quality of the ore I personally observed during my time working on the development of El Peñon. I have the firm belief that once La Fortuna de Lampa project goes into production, and a correct evaluation of the entire project is achieved, it will be a mining operation with very similar characteristics of El Peñon.”
(The El Penon Mine is currently mining ore from 6 veins via 38 different working faces.)