Hi JimmyP,
You were right in attempting to “crunch the numbers” in order to get some insight into the economics present at Auryn’s mining operations. The simple act of “crunching the numbers” with the most accurate data available provides the best learning experience in revealing the mineral economics. My suggestion would be to “customize” your analysis to Auryn a little more and to break down things like estimated AISC by using industry standard metrics juxtaposed next to Auryn specific data.
For example, the average AISC for 2025 in the mining sector is $1,510 per ounce produced. AISC IS HIGHLY RELATED TO GRADE BUT IN AN INVERSE FASHION. A miner with an average grade in the top decile (10%) of all miners (like Auryn appears to be) will almost always have an AISC in the lowest decile of all miners. Think of the formula as: HIGH-GRADE=LOW AISC (per ounce)=HIGH MARGINAL PROFITS PER OUNCE (HMPPO) produced. HMPPO times the number of “recoverable ounces” equals pre-tax profits. In other words: “GRADE IS EVERYTHING” in mineral economics because AISC, when subtracted from the price of gold, determines MARGINAL PROFITS.
The average grade being mined in an underground “narrow vein” project is currently 4.18 gpt gold equivalent and it is dropping markedly year over year primarily due to the lack of new discoveries. Let’s “customize” our analysis to Auryn and the 60,000 Tonnes that Auryn has mined, brought to the surface, stockpiled, and ALREADY SEGREGATED BY GRADE. From the 10/13/25 quarterly update: “Geology and metallurgy teams continued evaluating and segregating stockpiled material at Fortuna by grade.”
How did they already segregate it by grade? They’ve had their own on-site geochemical assay lab for over a year. Prior to building the lab, Auryn would bring their samples to Santiago and hand deliver them to the lab. There the samples would enter into a queue behind everybody else’s samples that landed earlier. Five or six weeks later, you get your assay results. Now the turnaround time is measured in hours. This makes both exploration and production much more streamlined, and now critical decisions can be made on the fly.
There are plenty of standards and guidelines available for the assaying of stockpiled ore. Recall from a past Auryn quarterly update citing that “MANAGEMENT IS IN POSSESSION OF DETAILED CASH FLOW ANALYSES”. By definition, you need to have a pretty good idea of “average grade” before you can make a “DETAILED CASH FLOW ANALYSIS”. Auryn’s management and the funders have access to this information, but the shareholders won’t gain access to it until a certain amount of ore has been run through the processing plant in order to firm up the accuracy of the data.
In “customizing” this analysis for Auryn’s stockpiled ore, we need to remember how a certain percentage of this ore was mined. Between early 2023 and early 2024, Auryn made a series of three quarterly updates bragging about how they had been mining “DIRECTLY FROM THE DL2 VEIN WITH MINIMAL DILUTION VIA THE USE OF PERCUSSION HAMMERS AND JACK-LEG DRILLS”.
In their 10/30/24 quarterly update under the paragraph entitled “LAB TESTING AND GRADE EXPECTATIONS” Auryn finally gave us some “GRADE EXPECTATIONS”. They cited that when the ore is “DIRECTLY MINED” from the vein (without blasting), we should expect average grades equal to the grades received from Enami during their smelting tests of the DL2 Vein ore. These averages, determined from a 2,200 pound smelting sample, were 57 gpt gold, 978 gpt silver, and 3.23% copper or 70 GPT GOLD EQUIVALENT.
In that same paragraph, Auryn clarified matters by citing that for normal course (indirect) mining involving blasting, expect average grades of “AT LEAST 10 GPT GOLD”. Even without “Direct” mining, mining “AT LEAST 10 GPT ORE” represents a huge accomplishment in underground “narrow vein” mining with the average being just over 4 gpt gold. The DL2 Vein is and has always been a very high-grade gold vein.
Keep in mind that Auryn knows a lot about the average grades contained in the DL2 Vein, which is where most of the stockpiled ore came from. However, in the future, Auryn is going to be mining from several of their 7 Main Veins which they don’t know nearly as much about as they do their DL2 Vein. That guidance of 70 gpt gold equivalent was “backward looking” with 20-20 hindsight. They already knew the average grades of the ore mined “DIRECTLY FROM THE VEIN”. This management team would never have given the 70 gpt gold equivalent guidance without the data to back it up in their hip pocket. The Auryn management team is the least promotion-oriented management team I’ve ever witnessed in this industry.
As far as “FORWARD LOOKING GUIDANCE” on what they might encounter in the other Main Veins in the future, management no longer has 20-20 vision. They may or may not be able to mine “DIRECTLY FROM THE VEIN WITH MINIMAL DILUTION” on any given vein. The furthest management was willing to go out on that “forward looking” limb was “AT LEAST 10 GPT GOLD EQUIVALENT”. Keep in mind that the artisanal miners at the DL2 Vein averaged 64 gpt gold from levels 1 and 2. Auryn is now mining from level 3 where the grades are much stronger than they were at levels 1 and 2, and the vein width has increased.
One question that arises is, with the technology now available, how can Auryn not at least MATCH the performance of the artisanal miners that mined the vein from 1940 to 1970 up higher in the vein structure where the grades are weaker.
In regard to estimating the AISC, when we know that mining 4.18 gpt gold results in an average AISC of $1,510, and that there is a strong INVERSE RELATIONSHIP between GRADES and AISC, you know darn well that Auryn’s AISC FOR THE 60,000 TONNES OF ORE MINED AND STOCKPILED FROM PRIMARILY THE DL2 VEIN, IS GOING TO BE A HECK OF A LOT LOWER THAN $1,510 PER OUNCE. Miners with their own on-site ore processing facilities will have much lower AISCs than miners forced to enter into expensive “tolling agreements” with parties that do own those processing facilities.
In regard to “customizing” your AISC estimations for Auryn and the 60,000 Tonnes of stockpiled ore, you need to keep in mind that Maurizio already paid for the “C-1 cash costs” (labor, diesel, consumables, maintenance, etc.) for mining that ore as well as all of the “General and Administrative” costs therein. That’s built into the $10.3 million figure owed to Maurizio. DON’T DOUBLE COUNT THOSE PAST EXPENDITURES, if you’re going to use that $10.3 million figure for Maurizio’s debt. When you estimate the AISC for the stockpiled ore, you’re going to need to subtract out what Maurizio already paid towards the mining and stockpiling of that ore.
In studying all of the historical sampling done of the DL2 Vein ore, I personally have the average grade of the stockpiled ore pegged at somewhere around 23 gpt gold equivalent or 0.75 OUNCES PER TONNE. You can’t use that 70 gpt “gold equivalent” figure as an “average” because we don’t know what percentage of the stockpiled ore was mined “DIRECLY FROM THE VEIN WITH MINIMAL DILUTION”.
As far as that 70 gpt gold equivalent grade received from the Enami smelting test, a sample of that very same ore (from level 3) was also sent to the smelter testing facilities of the Plenge Lab in Lima, Peru. Those results came back at an average GOLD GRADE of 128 gpt gold not even factoring in the contribution from the silver and copper.
In essence, Enami was only willing to pay 42% of the actual grade of the “contained gold”. The rest they were going to keep as “tolling fees”. Think about it for a moment, Auryn said “no, thank you” to 70 gpt gold net of tolling fees. Auryn instead opted to bypass Enami and build their own ore processing facility and thereby capture the differential. Having their own ore processing facility on-site will MARKEDLY drive down Auryn’s AISC for the entire mine life. With the prices of the 3 metals that Auryn will be selling ALL TRADING AT ALL-TIME HIGHS, Auryn’s ore processing facility will quite likely pay for itself in less than a year even though it may have a lifespan of 30 years. Another concept to appreciate is being able to commence production at a time in which that which will be sold is trading at all-time historical highs.
If you have 60,000 Tonnes of ore with an average grade of 0.75 ounces per tonne (23 gpt), this means that you have around 45,000 “CONTAINED OUNCES” of gold (60,000 times 0.75) within the stockpiled ore. The problem is that froth flotation facilities do not have a 100% “RECOVERY RATE”. The average worldwide “recovery rate” for an FF plant is between 70% and 90%, so let’s tentatively set the “recovery rate” at 80%. This means that of those 45,000 “CONTAINED OUNCES” in the already stockpiled ore, about 36,000 are “RECOVERABLE OUNCES”.
If we weren’t talking about the stockpiled ore, I’d estimate that Auryn’s AISC for normal course mining is about $1,000 per ounce. Because of the high-grade nature of the ore, as well as Auryn having their own on-site mill and FF plant, by definition, it has to be a heck of a lot lower than the average AISC of $1,510 which equates to ore grading 4.18 gpt gold and not approximately 23 gpt ore. Keep in mind that the price of DIESEL is critical for AISC and it is inexpensive right now. Because Maurizio already paid a big percentage of the AISC for that stockpiled ore, the “EFFECTIVE AISC” (my term) might only be around $500 per ounce or so. Don’t forget, however, that Maurizio still needs to be reimbursed later. When you do the math, I think you will agree that Maurizio’s debt will be de minimis when compared to the free cash flow generated even during the first year of operations. Auryn was able to MASSIVELY LEVER Maurizio’s cash contributions in order to lower current and future AISC costs.
Auryn was fortunate in that they had several HIGH-GRADE, NEAR SURFACE, EARLY PRODUCTION OPPORTUNITIES. With the prices of the metals being mined breaking out to the upside, Auryn did not have to take the “standard approach” to building a mining company.
The “standard approach” involves selling hundreds of millions of shares, usually at steep discounts to already low share price levels, in order to raise the funds needed to fully drill out all of the mineral prospects. This is then followed by executing a series of feasibility studies ranging from a PRELIMINARY ECONOMIC ASSESMENT, a PRE-FEASIBILITY STUDY, and then a BANKABLE FEASIBILITY STUDY. The time requirements for taking the “standard approach” is approximately an extra 5 years. The damage from the associated SHARE STRUCTURE DILUTION is typically massive. When you have HIGH-GRADE, NEAR SURFACE, EARLY PRODUCTION OPPORTUNITIES at a time in which the prices of the sought after metals are trading at their all-time highs, YOU JUST DON’T VOLUNTARILY TAKE A 5-YEAR “TIME OUT” AND ENDURE ALL OF THAT SHARE STRUCTURE DILUTION. Who knows where the price of those metals might be trading at in 5 years? If the miner feels the need to do all of that drilling and execute all of those studies, then it would be much wiser to do it later and pay for it with the profits from the EARLY PRODUCTION OPPORTUNITIES.
With the price of gold at about $4,200 and you’re dealing with an “EFFECTIVE AISC” of perhaps only $500 per ounce (just for the already stockpiled ore), then Auryn might be able to clear somewhere around $3,700 per ounce of gold produced. If you multiply this by 36,000 “RECOVERABLE OUNCES”, you get a VERY, VERY ROUGH ESTIMATION of $133 million worth of pre-tax profit from just the processing and sale of the currently stockpiled ore.
Since it will take right at 2 years to process that ore based on the nominal throughput rating of 100 TPD or about 30,000 Tonnes per year, you need to divide that $133 million figure in half to get an estimated pre-tax annual profit for each of years #1 and #2 at about $66.5 million. When you divide this by 70 million shares outstanding, you get an estimated ANNUAL pre-tax EARNINGS PER SHARE of about 95-cents. If you multiply this by the industry average “multiple” of 30.1, you get a THEORETICAL appropriate price for Auryn of about $27 per share. NOTE, THIS IS NOT A PREDICTION AND DO NOT PLACE ANY INVESTMENT BETS ON THIS. I am simply presenting this information on an “If…then” basis, “IF” the correct input variables are “X” THEN the result would be “Y”. You should put in whatever variables YOU feel to be the most accurate. Even better yet, it might be wise to wait until the definitive data is released prior to placing any investment bets. What the “crunching of the numbers” NOW might accomplish is to generate enough interest to follow the story as it plays out.
