Hi Jimmy P,
The topic of discussion that I’ve been addressing has been the PRODUCTION RATE that Auryn’s miners, with the equipment they use and the methods they deploy, are likely to have averaged or are currently averaging over the last 180-days since they have been “MINING AND STOCKPILING” the extremely high-grade DL2 Vein ore.
Whether the miners are drifting an adit like the Antonino Adit, in order to ACCESS the DL2 Vein ore or are actively “MINING” (exploiting) the DL2 Vein ore once it was accessed, the process is pretty much the same. You drill holes into the working face(s) of the adits, you stuff the ANFO/explosives into the holes, you wire up the det cord, you blast the ore, you scoop/”muck” it up, and then you deliver it to the surface.
If you put a giant watch dial on the ADL plateau with 12 o’clock being due north, the DL2 Vein would run from 11 o’clock to 5 o’clock, through the center of the watch dial i.e. from the NNW to the SSE. Picture the DL2 Vein as being bright gold-colored because of its high gold grades.
The Antonino Adit runs in a SSW direction from 1 o’clock to the center of the watch dial where it intersects the DL2 Vein. Picture this adit as being pink-colored because of the granodiorite present. Although the course of the adit encountered 24 previously unknown well-mineralized “veins/structures”, the grades of the rock removed during the drifting of this adit might be decent, but it would be exponentially less than the grade of the DL2 Vein ore because of the nonmineralized host rock in between those new veins.
The mining plan is fairly simple. Upon intersecting the DL2 Vein at the center of the metaphorical watch dial, one crew of miners makes a right hand turn to the NNW and starts mining the extremely high-grade ore within the “yellow” DL2 vein in that direction and another crew makes a left hand turn to the SSE and starts mining the extremely high-grade ore in that direction. From here on out, they’re in the vein proper, the “yellow” stuff, with extraordinarily high grades.
The ore removed during the drifting of the Antonino Adit becomes somewhat inconsequential although the assays taken from the individual 24 veins might represent future production opportunities but the grades of these veins will probably never match those of the DL2 Vein. The DL2 Vein is a bit of an anomaly; you just don’t see grades that consistently high very often. When you do, it is almost always in a MESOTHERMAL VEIN SYSTEM (like this one) and not the typical EPITHERMAL VEIN SYSTEM. The average grade in a MESOTHERMAL VEIN is up to 8-times that of the average grade in an EPITHERMAL VEIN.
During the drifting of the Antonino Adit, the miners only had 1 “working face” to mine and it was oriented to the SSW. Now that they have intersected the DL2 Vein, they have 2 working faces to simultaneously mine. Once the DL2 Vein was intersected, the plan became to operate 24-hours per day instead of the 10-hours per day experienced during the drifting of the Antonino Adit. During the drifting of the Antonino Adit, the workers would put in a 10-hour shift, do the blasting at the end of the shift, and let the dust and debris settle out overnight. Now, the new ventilation system, will clear out the blast debris much quicker allowing multiple blasts per day per working face.
In a recent post, I went through all of the numbers illustrating that the Auryn miners averaged about 24 tonnes per day of rock removal/”MINING” while drifting the Antonino Adit. The question then becomes what MINING RATE/PRODUCTION RATE might they average now that they are simultaneously mining 2 working faces during 24-hour workdays versus 1 working face during a 10-hour workday.
Theoretically, if you multiply the number of hours worked per day by 2.4 (24 divided by 10) and multiply the number of working faces being simultaneously mined by a factor of 2, they you might expect an increase in the MINING RATE/PRODUCTION RATE by a factor of perhaps 4.8-times that 24 tonnes per day rate or about 115 tonnes per day. I’m choosing NOT to take that route, but instead I’m following management’s very CLEAR GUIDANCE that they intend to have an INITIAL PRODUCTION RATE of 40 tpd that will ramp up over time.
Between the drifting of the Larrissa Adit and the Antonino Adit, we’ve got 6 years of data as to what the “MINING RATE”, in terms of tonnes per day, these miners have been accomplishing over time. I think that this is valuable data in estimating the “MINING RATE/PRODUCTION RATE” that these same miners, using the same equipment, within the same mountain, might be averaging TODAY as well as over the last 180 days since they went into “PRODUCTION AND STOCKPILING” mode.
All they did was make a 90-degree right hand turn and a 90-degree left hand turn at the intersection of the Antonino Adit and the DL2 Vein. If somebody doesn’t think that this historical information is valuable in predicting the MINING RATE that the miners likely averaged over the last 180 days at these 2 new working faces, then so be it. Then there’s nothing I can do for them. ALL THEY DID DIFFERENT WAS MAKE A RIGHT-HAND TURN AND A LEFT-HAND TURN AT THE INTERSECTION IN ORDER TO GET INTO THAT EXTREMELY HIGH-GRADE (“yellow-colored” vein). This is not rocket science.
Management has given SPECIFIC GUIDANCE as to the PRODUCTION RATE they felt they could achieve once they had accessed the DL2 Vein and can mine 2 working faces simultaneously instead of just the 1 available during the adit drifting process. They have been mining the extremely high-grade DL2 Vein ore from 2 working faces over the last 180 days. Their GUIDANCE was that they were certain they would be able to achieve the 40 tpd PRODUCTION RATE. Whether they are producing high-grade ore from the DL2 Vein or simply mining and removing rock within the Antonino Adit, in order to access the sought-after DL2 Vein, IT MAKES NO DIFFERENCE WHEN IT COMES TO “MINING RATE” OR “PRODUCTION RATE”. That’s why this historical data is so critical to incorporate into any estimate of TODAY’S production rate.
After advancing “level 3”, 20 meters to the SSE of the intersection point of the Antonino Adit and the DL2 Vein (towards the 5 o’clock position, management stated their intention to construct a “decline spiral” so that they could access “level 4” and open up 2 additional working faces bringing the total to 4 working faces being simultaneously mined. After level 4 comes levels 5, 6, 7, 8, etc. We have not had an update on where they are in this “decline spiral” process, but over the last 180 days of mining and stockpiling, they clearly have had plenty of time to advance the SSE branch of “level 3”, twenty meters to the SSE.
Until proven otherwise, I’m going to assume that when Auryn goes from mining 2 working faces simultaneously to 4 working faces simultaneously, then the number of tonnes per day might be expected to approximately double. Interested observers might want to keep an eye on production rates as a function of the number of working faces being simultaneously mined as well as the rate at which Auryn can add new production levels and the 2 new working faces that each “sub level” will add.
It doesn’t really matter where the product of the adit drifting process is being stored. That’s got nothing to do with the calculus. The product of the actual ORE MINING process, now that the DL2 Vein has been successfully accessed, is being stockpiled awaiting the construction of the froth flotation process.
The concept here is extremely straight forward. If management builds a froth flotation facility and thereby “takes control of the ore purification process” (management’s words), they will be able to bring in $5,000 per tonne over and above what the Enami DIRECT SMELTING facility was willing to pay, per tonne, for the “experimental batch” of DL2 Vein ore sent to them, which was about $4,500 per tonne.
I don’t fully understand why some forum participants have a problem with management stockpiling ore now, in order to access that $5,000 “bonus”. Recall that Maurizio, as the main creditor, is technically entitled to the money received by DIRECT SHIPPING ore TODAY to Enami’s smelting facilities. If the creditor says, no need to ship now, I can wait until later to be repaid, and if he is not charging any interest for the cash advances, then it seems like a no-brainer to cash in on the “bonus” $5,000 and Maurizio’s generosity. This way, later on, a lot less ore is going to need to be shipped in order to pay off Maurizio because Auryn will be earning almost two times as much money per tonne shipped.
The sample from the DL2 Vein ore sent to the Enami DIRECT SMELTING facility, came back with an EXTREMELY ROBUST “agreed to/settlement” grade of 57 gpt gold, 978 gpt silver, and 3.23% copper. This equates to a “gold equivalent” grade of 70 gpt “gold equivalent”. For reference purposes, the average grade being mined in similar underground “narrow vein” operations is 4.18 gpt gold.
Management did not release all of the data that went into the calculation of that $5,000 “bonus” figure. The efficacy of the froth flotation process on Auryn’s ore was obviously a huge component. The University of San Sebastian’s “Mining Engineering Department” has been testing the efficacy of a variety of froth flotation methodologies on the DL2 Vein ore for over 27 months. The product of this research will be the size of the crushed and ground particles leading to the highest recovery rates. Typically, this is somewhere around 75 microns. They also want to test the concentration of “xanthate” that leads to the highest recovery rates.
Baldy estimates that they have stockpiled about 500 tonnes to date now or about 2.8 tonnes per day since they started exploitation of the vein. He refers to my estimate that they are probably averaging about 40 tpd as being wildly on the optimistic side and “fanatical”. Baldy asserted that part of Auryn’s problems are that they have “limited storage space” on top of the mountain to stockpile very much ore because of the steepness of the mountain and how it comes to a share point at its peak.
May I remind you that the top of the mountain is actually a FLAT PLATEAU THAT IS 4 KM (2.5 miles) IN LENGTH AND 1.5 KM (1 mile) IN WIDTH. If need be, they could literally stockpile billions of tonnes within that space. The topographical map of the plateau shows exactly how flat the plateau is. Baldy also made the comment that Auryn doesn’t have a “crane” on top of the mountain to create stockpiles. Cranes aren’t used to create stockpiles in a situation like this. Conveyor belts are used and Auryn has theirs in place on top of the plateau near their crusher.
Recall the massive trenching program that Auryn completed on the plateau. You can’t do trenching with a back hoe on a steep mountain slope. That trenching program, done on the flat plateau, hit it out of the ballpark while identifying over 5,000-meters of mineralized veins making it all of the way to surface.
Baldy posits that after Auryn did all of that work to drift the Antonino Adit in search of the DL2 Vein, now that they have found the vein and confirmed the off the chart grades it features, that management is now going to slam on the brakes as to PRODUCTION RATES in order to conserve cash. Really? Is that what the owner of 60% of the Auryn shares is likely to do once finally reaching the “Promised Land”?
Where is the logic in assuming that Maurizio magically ran out of cash the moment Auryn intersected the DL2 Vein? Like Kevin recently posted, Auryn’s successfully intersecting the DL2 Vein and confirming the extremely high-grade nature of the ore, would have given Maurizio’s wallet a huge sigh of relief and measure of DERISKING going forward.
Management and Dr. Helmut Mischo, instead, seem to be indicating that they are going to hit the gas pedal, and not the brakes, in regards to PRODUCTION RATES, in order to cash in on the economic benefits of these high grades now that the preliminary work involved in accessing the vein and constructing the “haulage adit” (the Antonino Adit) has been completed. Extremely high-grade stockpiled ore is a balance sheet ASSET and it represents COLLATERAL and DIMINISHED RISK to any interested financier.
The numbers are pretty compelling. Assuming that Auryn has averaged that 40 tpd average they suggested, there would be about 180 days times 40 tpd equals 7,200 tonnes stockpiled to date. Assuming the grade averages the same as the smelting sample sent to Enami (57 gpt gold, 978 gpt silver and 3.23% copper) i.e. worth about $4,500 per tonne, then the ore stockpiled as of TODAY would be worth about $32.4 million in “nominal value”.
If it took 6 months from today to complete the FF facility, then there would be another $32.4 million worth of ore in the stockpile bringing the total to about $64.8 million. If it took 12 months from today to complete the construction of the FF circuit, then there would be about $92 million worth of ore in the stockpile.
Auryn still has the OPTION to ship ore to the Enami DIRECT SMELTING facility at any time it so chooses. That OPTION hasn’t gone anywhere, it’s still on the table. We haven’t heard what the budgeted amount is to construct the FF circuit. If it were, let’s say, $4.5 million to put in a 100 tpd facility, and if the $4,500 amount for DIRECT SHIPPING the ore to Enami holds true, then Auryn would have to ship about 1,000 of those 7,200 tonnes that are THEORETICALLY (wait for confirmation from management) stockpiled today.
SO, WHAT’S THE BIG DEAL ABOUT THE STOCKPILING OF THE DL2 VEIN ORE?
People don’t seem to be thinking of it in these terms, but AURYN CURRENTLY IS IN EXTREMELY HIGH-GRADE GOLD “PRODUCTION AND STOCKPILING”. Technically, the cash is not flowing yet, but it certainly could be if Auryn opted for it to flow starting TODAY. In a sense, what is “flowing” (as it were) is the level of “current assets” which are cash and other assets that are expected to be converted to cash within a year. I’d much rather have “current assets” which are about to almost double in value within a year (from $4,500 per tonne to $9,500 per tonne) flowing NOW than cash. Auryn has made it clear that they are seeking a higher listing than their current OTCMarkets Pink status. These new “current assets”, in the form of STOCKPILED ORE, might help in that endeavor.
Auryn is in an interesting situation. They could be making a fortune TODAY if they simply shipped a small portion of the ore they already stockpiled. But in their situation, if they opt to build their own FF plant, then the income will approximately double if they follow the plan the BOD unanimously agreed to.
Mining the ore and stockpiling it on-site, reminds shareholders and prospective investors of this OPTION. EXTREMELY HIGH-GRADE STOCKPILED ORE is a balance sheet ASSET. Auryn could hire a fleet of trucks tomorrow and have a big fat check in a couple of weeks. The problem with that wonderful OPTION (worse-case scenario) is the amount of money that would be left on the table.
STOCKPILED ORE is much further advanced than “Mineral Reserves/ Mineral Resources” (MR/MR) or unmined ore sitting in the belly of a mountain. Somebody with a superior view of the playing field has paid the bills to mine that ore. Most of the hard work has already been completed and the RISKS have been successfully dealt with.
The “on-site cash costs” have already been paid by Maurizio in the form of interest free cash advances. He still needs to be paid back, but after being froth floated, the amount of ore tonnage being directed back to his wallet will be about half of what it might have otherwise been.
STOCKPILED ORE can easily be assayed and the tonnage estimated. It’s not just tangible, it’s also fungible and capable of collateralizing a loan. When you’re dealing with STOCKPILED ORE that isn’t being shipped, it’s critical to determine WHY it’s not being shipped. Waiting for the completion of a FF facility in order to earn an “extra” $5,000 per tonne, seems like a pretty good reason to me. I look upon the stockpiling of the extremely high-grade ore over the last 180 days as a HUGE breakthrough that clearly nobody recognizes.
As far as pinpointing the exact TONNAGE of the stockpiled ore as of today, that’s not the goal. All estimates need to be written “in pencil” for now, until the numbers are confirmed by management. What is much clearer to me is that the PRODUCTION RATES are going to ramp up quickly over the next “X” amount of months or quarters as the various sub levels are opened up for production, as well as the Caren Mine/Larrissa Adit and whatever management was referring to in the recent press release citing: “In parallel (to the construction of the froth flotation plant), preparations are underway for the launch of new mining operations in the Lipangue area.”
Management has announced that the new FF circuit will have a “throughput” of 100 tonnes per day. I would use this figure to estimate what the production rate is expected to be in the not too distant future.
