It seems like management anticipated that shareholders might be headed towards a point in time at which they demanded more information from management. In 2 of the last 3 quarterly updates, in a preemptive fashion, management interjected a new paragraph:
“Commitment to Transparency and Engagement
AURYN is dedicated to maintaining open and transparent communication with our investors and stakeholders. We understand the importance of keeping you informed and engaged with our progress.”
I’m wondering if management anticipated that shareholders would want to know more information about the funding than management was either allowed to give or prepared to give.
The structure of the funding was a bit atypical. One part of the funding appears to be a fairly straight forward note with a 10-month grace period and payments due over a 5-year timeframe. The funders advanced $500,000 out of a potential $1 million. Later management referred to this as a “good faith advance” when they stated: “ This follows the good faith advance of $500,000 received after the agreement on May 28th.
With financing now fully secured, we can begin the construction and operational launch of a 100-ton-per-day flotation plant. We anticipate the plant will be fully operational by May 2025.”
My assumption is that this “advance” was then “advanced” to the manufacturers so that they could start “constructing” or possibly “assembling” the FF plant. When the price of gold is going nuts then, all of a sudden, everything becomes an emergency because there’s no guarantees as to how long these prices may last. I’m going to guess that the time clock started ticking the second the up front money landed at the manufacturers.
Kevin made the post a while back that Auryn had 2 options. They could go into production and sell the previously stockpiled ore as well as freshly-mined ore to Enami, over an undisclosed period of time, i.e. self-fund the FF plant, and hope that Enami didn’t screw Auryn or they could go to a funder and get some “quick money” (which might be more expensive money), in order to get the FF plant up and operating in a shorter amount of time. The behind-the-scenes financial gurus could pencil out where the breakeven point was and which path should be chosen.
With the price of gold at or near all-time highs, either option became a viable option. Selling previously stockpiled ore to Enami at a time when the POG was going nuts made good sense, but so too did getting some “quick money” in order to get the FF plant fired up that much quicker.
Before making a decision, Auryn went into “mining and stockpiling” mode at the DL2 Mine for a period of a little over 200-days. This made good sense no matter which of the 2 paths they chose. It made sense if they opted to ship the ore to Enami because they could sell that much more ore that much quicker. If they went for the “quick money” via a funder, then the stockpiled ore could serve as “ore feed” for the new plant just in case it took Auryn a while to ramp up production to the 100 tpd “throughput” level of the FF plant. They were mining ore “directly from the vein” which suggests that the grade is going to be extremely high since the surrounding, nonmineralized wall rock granodiorite, was apparently avoided.
As far as how much ore they stockpiled, all management stated was that the mining and stockpiling occurred at a “modest” pace over this timeframe. Whether or not they had an engineer estimate the “grade and tonnage” of the stockpiled ore, we don’t know. If I were the funder, I sure would have had the stockpiled ore checked out for both grade and tonnage. In fact, I would have mandated that Auryn do a bunch of “mining and stockpiling” just as a means to “derisk” their funding. You might recall how a recent press release cited that the funders had more due diligence to do, EVEN AFTER THEY ADVANCED $500,000 IN CASH. That extra due diligence might have had something to do with the funders measuring the grade and tonnage of the stockpiled ore. Who knows?
In the press release announcing the funding, management kept using the term “up to …”. Auryn could borrow “up to” $1 million up front i.e. another $500,000 was available, after the first $500,000 was tendered, if they so chose. As far as the “EQUITY FINANCING”, Auryn could borrow “up to” another $3 million. The payback was “capped” at $20 million over the course of 5 years payable as cash dividends attached to preferred shares.
I think we can all agree that Auryn is not going to draw down much money on that $3 million line of credit, if that is how it was set up, if there were better options available, like shipping to Enami or waiting on a superior offer from a new party happy to see Auryn about to have a new FF plant. If Auryn is using the current funder as a “bridge” funder that could be rapidly replaced, then it might make sense not to expand too much open releasing the terms if that might be seen as misleading shareholders. I think all of us might have assumed that there was more to the story than Auryn paying $20 million to secure $4 million. The use of those “up to’s” in the funding press release might suggest that Auryn could access any amount of that capital that they so chose, and that there was no mandate to access it all. It would make sense to me that the terms of any funding deal were likely to get better once any potential funder saw that a new FF plant was en route.
Once again, Kevin made a comment stating that: if the funders are able to max out on that $20 million payback, just imagine what we shareholders would be receiving as our share of these cash dividends. I can’t speak for Kevin, but this suggests to me that the profits of the mining operations are going to be dividended out to the funders and shareholders, as per an agreed upon “split”, over the first 5 years (or less if the funders can max out sooner) and then the funders are out of the equation. There was absolutely no share structure DILUTION to be suffered by the Auryn/Medinah shareholders. Maurizio kept his word because he had stated many times that the 70 million shares outstanding figure was not likely to go anywhere.
All of the “up to’s” included in the press release suggests that Auryn is going to be allowed to draw down on this financing facility at their option.
My question is, is there a POG at which management says to heck with it, let’s start shipping that extremely high-grade stockpiled ore to Enami, in order to lessen the amount of money we need to tap into via that other facility. For me, the key here was accessing that QUICK MONEY, in order to engage the manufacturers, and get the construction and/or assembly going sooner than later. I don’t have a good feel for what the “lead times” are, other than the estimated timeframe to commission the plant “by May”.
just until better explanations come along soon. Out of curiousity, maybe part of the transportation costs include the “…roads stacked with snow for half the year” according to a recent post.