Hi Jimmy P,
In regard to your comment: “I’m challenging BB to explain why the market is going to so easily see what he claims is so easy to see which is that there is multiple decades worth of mineralization that is only increasing in grade at depth.”
I saw an interview of Eric Sprott a while back where he commented on how disappointed he was in the investors in mining stocks that are developing underground vein deposits, not being able to ROUGHLY estimate things like “contained ounces” and “mine lives”.
His suggestion was to simply take the “strike length” of the vein at surface and multiply it by the known depth. If you think of a vein as a “planar” buried “sheet of plywood”, this will give you the square meterage of the sheet of plywood. Then if you multiply that figure by the perceived average width of the vein, lets say, 0.75-meters, you’ll get the “volume” of the vein in cubic meters. Then you need to multiply that “volume” by the “specific gravity” or density of the rock material (approximately 2.75 tonnes per cubic meter for the “granodiorite” at the ADL Mining District), then you’ll get the approximate “tonnage” of the ore contained within that vein/”sheet of plywood”.
For Auryn’s DL2 Vein, the vein has a “strike length” at surface of about 1,000-meters. It has a known depth of 700-meters. Let’s set the average width at 0.75-meters for now. This means that the “volume” of the ore contained in the vein is approximately 525,000 cubic meters. With an “SG” of 2.75 for granodiorite, this translates into 1.44 million tonnes of ore contained within just the DL2 Vein.
To get the approximate number of “contained ounces” of gold within the vein, you need to multiply that 1.44 million tonnes figure by the average grade in “grams per tonne” or “ounces per tonne”. If you set the average grade at one-half ounce per tonne, which is 15.5 grams per tonne, then the number of “contained ounces” of gold in the vein is about 720,000 ounces in just the DL2 Vein.
There are 8 Main Veins at the ADL Mining District. The Merlin 1 Vein, which we know a fair amount about, has a known strike length of 1.9 Km which is about twice that of the DL2 Vein There are 2 veins at the ADL with average widths of over 2-meters even at surface. During the drifting of the Antonino Adit, prior to finally intersecting the DL2 Vein, which was the target, Auryn’s geoscientists ran into 24 new “structures, veins, faults”.
At the end of the day, the number of “contained ounces” held within the Pegaso Nero copper-moly porphyry prospect and the LDM gold-copper stratabound copper prospect, are probably going to dwarf that of the 8 Main Veins combined, but they need a lot of work to be done to confirm this. For me, “mine life” is not an issue whatsoever. Keep in mind that “mine life” is really “economic mine life”. At a $3,300 per ounce price of gold, the amount of rock in that mining district that is “economic” is very impressive.
When you’re mining 8 Main Veins simultaneously at some point down the road, you’re going to hit some “ore shoots”. These are areas within a vein that have extremely high concentrations of sought after metals like gold, silver and copper. The conditions within “ore shoots”, like the ambient pressures and temperatures present during formation of the vein, the chemistry of the hydrothermal mineralizing fluids, the chemistry of the surrounding rock, the salinity, etc., were ideal for the laying down of hyper-concentrated metals. When you hit an “ore shoot” you simply track it down wherever it goes.
A SIMPLISTIC “BACK OF THE NAPKIN” ESTIMATE FOR POTENTIAL EARNINGS DURING AURYN’S FIRST YEAR OF OPERATIONS
Knowing that Auryn is on track to have 20,000 tonnes of ore stockpiled and ready to go on Day 1 for the commissioning of the new froth flotation plant allows us to make some prognostications. The “daily throughput” of the original FF plant was 100 tonnes per day. Then Auryn cited that they were “commissioning the fabrication of other individual units”. These would be FF “cells” or “banks of cells”. They never indicated the “throughput” of these “individual units” so we don’t know what the actual “daily throughput” might end up being.
When you “dial in” a new FF plant, you’re not going to average the rated “daily throughput” right from the get-go. I’m going to guess that it will take several months to reach “rated throughput” and end up taking about 10 months to process that initial 20,000 tonne stockpile. Note that the mining of the ore will continue after Day 1, on or about July 1 of 2025, and there will be a new stockpile of ore ready to go after the initial 10-month period and the initial 20,000 tonne stockpile is exhausted.
If the average grade of the stockpiled ore is somewhere around 15.5 gpt “gold equivalent” or one-half ounce per tonne, there would be about 10,000 ounces of gold in a 20,000 tonne stockpile (20,000 tonnes times one-half ounce per tonne). FF plants are very good nowadays, but they still don’t feature 100% “recovery rates”. Let’s set the average “recovery rate” at 80%, which is a fairly standard rate of recovery for an FF plant. This means that they might only “recover” 8,000 ounces of gold, contained in what is known as a “float concentrate”, in that first 10-month period. If we “annualize” the production in that first 10-month period to 12 months, then we might expect about 9,600 gold ounces recovered in Year #1. That is a miniscule number in comparative terms for mining operations BUT IF YOU CONVERT THAT NUMBER INTO “THE NUMBER OF GOLD OUNCES PRODUCED PER MILLION SHAREs OUTSTANDING” YOU’RE GOING TO TURN SOME HEADS. The math is 9,600 ounces divided by 70 (million shares outstanding) equals 137 ounces per million shares outstanding.
The equivalent would be a mid-tier miner with 1 billion shares outstanding i.e. 1,000 “million”, producing 137,000 ounces annually. Investors own these things called “shares” of the invested in corporation. The important metric is how many gold ounces does each “share” of ownership produce. I’ve said this many times before, the “crown jewel” of Auryn is doing everything they’ve accomplished WITH ONLY 70 MILLION SHARES OUTSTANDING. The most important metric for any corporation is “EARNINGS PER SHARE”.
I have been modeling the ALL IN SUSTAINING COST (AISC) for quite some time and I’m estimating it to be right around $800 per tonne. This includes “Off-site ore process and refining” which some other party will likely be doing. Based on an average price of gold of $3,000 per ounce (today it is about $3,300), Auryn should be able to clear about $2,200 in operational profits per ounce produced. This would suggest operational profits of somewhere around $21.1 million for Year #1 UNDER THE ASSUMPTIONS OUTLINED WHICH NEEDED TO BE WRITTEN “IN PENCIL” FOR NOW, UNTIL WE GET CONFIRMATION FROM AURYN MANAGEMENT.
NOTE: When you study the text of the quarterly updates made over the last several years, you’ll note that a significant percentage of the ore in that 20,000 tonne stockpile of ore was mined “DIRECTLY FROM THE VEIN WITH MINIMAL DILUTION FROM THE SURROUNDING WALL ROCK”. This type of mining is done with “percussion hammers” or “jack-leg” drills without blasting. It is more of a “surgical” method of removing ore while leaving the sterile “wall rock” on the walls of the adit.
The question becomes what kind of “GRADE EXPECTATIONS” should we have for ore mined from the DL2 Vein in this fashion. The DL2 Vein was mined for at least 270-days in this fashion and that should represent a significant portion of the stockpiled ore. In their 10/30/24 quarterly update, under the paragraph heading of “LABORATORY TESTING AND GRADE EXPECTATIONS”, management cited how they had sent a 2,200 pound “experimental batch” of ore to the Enami smelting facility. This ore was mined in this same “DIRECTLY FROM THE VEIN WITH MINIMAL DILUTION FROM THE SURROUNDING WALL ROCK” fashion. The results came back at 57 gpt gold,978 gpt silver, and 3.23% copper. When you do the math, this comes out to 70 gpt “gold equivalent” which is a heck of a lot more than the 15.5 gpt I penciled in. This is what management had to say about this particular 2,200 pound sample: ”This sample represents vein ore with minimal dilution, PROVIDING A SOLID BASELINE FOR GRADE EXPECTATIONS.”
OK, so 70 gpt “gold equivalent” “SHOULD PROVIDE A SOLID BASELINE FOR GRADE EXPECTATIONS”. But there’s a caveat attached. This only applies for ore mined “DIRECTLY FROM THE VEIN…”. You should know, however, that in the very next line of that very same update, Auryn cautioned investors to expect grades of “AT LEAST 10 GPT GOLD” in the normal course of mining i.e. from a variety of veins being mined under a variety of conditions. Unfortunately, we don’t know the exact percentage of the 20,000 tonnes of stockpiled ore that was mined in which fashion, “DIRECTLY” or via blasting.
Veins tend to dilate and constrict as they work their way through the surrounding host rock. In areas where the vein has constricted, the miners almost have to use blasting which will release both the high-grade vein ore as well as some of the surrounding, somewhat sterile, surrounding wall rock. Don’t expect 70 gpt “gold equivalent” grades under these conditions. During that 270-day period of mining “DIRECTLY FROM THE VEIN…”, they must have been in a relatively dilated section of the vein.
The worldwide average grade being mined in similar underground “narrow vein” operations is 4.18 gpt gold AND DECREASING BY 6% PER YEAR. The average grade being mined in “open pit” operations is about 1 gpt gold, so, expecting “AT LEAST 10 GPT GOLD” is quite an accomplishment, in and of itself. Note that the “SAMPLE SIZE” of the ore shipped to Enami for testing in their smelter i.e. 2,200 pounds or 1 metric tonne, is a significant “SAMPLE SIZE” which provides statistical validity.
It should not be forgotten that a 264-pound sample of DL2 Vein ore, also mined “DIRECTLY FROM THE VEIN…” that was shipped to the smelter testing facilities of the Plenge Lab in Lima, Peru came back at 128 gpt gold JUST FOR THE GOLD CONTENT OF THIS ORE i.e. not including the “by product” contributions from the silver and the copper which were extremely “economic”. This ore was sourced from the same area as was the 2,200 pound-sample that was sent to the Enami smelter. The Plenge Lab smelter test came back at 2.2-times the gold grade that Enami came up with, which is why Auryn opted to bypass Enami and do their own on-site ore processing via froth flotation.
After successfully intersecting the DL2 Vein via the Antonino Adit, Auryn’s original “channel sampling” of the DL2 Vein via 4 separate groupings of samples, came back at an off the chart 164 gpt “gold equivalent”. A second round of “channel sampling” was then completed which came back at 150 gpt “gold equivalent”. These figures are much more in line with the Plenge Lab results than the Enami smelter results. It’s confusing, but I guess the bottom line here is not to be surprised if the production results SURPRISE TO THE UPSIDE. We’ll know soon enough.
. We need to start seeing this company hit its targets now!