Hi JimmyP,
THE FINANCING: The terms of the financing are: a $4 million debt financing, the interest rate is SOFR (Secured Overnight Financing Rate) plus 4% (a little over 8% today but keep in mind that the Fed is hinting at starting to cut rates in as early as 17 days), 5-year (60-month) term, no payments due for first 10-months, equal monthly payments due over the next 50 months after the 10-month grace period.
The funder goes by the name “Strategic Investments, SAC”. You might think of them as “SISAC”. MOST IMPORTANTLY: They are an “affiliate” of “The Ashmore Group/Stracon/Ameco, SA” which is our “mine operator”. Did the funders say: if you hire us as your “mine operator” (instead of one of our competitors), we’ll loan you $4 million under great terms? I couldn’t tell you. What I can tell you is that of the 3,000 other junior miners out there currently, most of which couldn’t even dream of landing a debt financing like this, about 2,999 wish they were in Auryn’s shoes.
MAURIZIO’S CASH ADVANCES: Maurizio has advanced $10.3 million to date (as per the Q-2, 2025 financials). There are no interest charges (zero cost of capital), no payments need to be made until after production commences and Auryn can comfortably afford to pay him back but only after Maurizio asks to be repaid.
The question you should be asking is this: did Maurizio have to, or voluntarily agree to, “subordinate” his debt behind that of SISAC. The answer is “yes”. Think about it, the financiers are sitting at the negotiating table with Maurizio. They have a check for $4 million in hand, but they know that Maurizio is owed $10 million. What if Auryn had $10 million in the treasury and Maurizio decided, as CEO, to pay himself off and tell the financiers to go pound sand?
The financiers need to protect themselves against something like this. What usually happens in a situation like this is Maurizio agrees to “subordinate” his debt to theirs before the check is handed to Maurizio. They get paid, over the course of 5 years, what they are owed. Then Maurizio can get paid what he is owed.
Does this make sense to Maurizio? Of course it does. Maurizio still owns 62% of the shares of Auryn. After being put to work that $4 million will probably enhance the value of Maurizio’s shares by a heck of a lot more than the $10.3 million Maurizio is owed. That’s called “leverage beta”. IN A SCENARIO LIKE THIS, EXPECT CASH DIVIDEND DISTRIBUTIONS TO BECOME THE PRIMARY ROUTE TOWARDS “SHAREHOLDER REWARDS” FOR ALL OF US.
Remember that Maurizio’s shares are “Control” and/or “Restricted” securities as per Rule 144. He can’t sell many shares per quarter because of this BUT HIS SHARES EARN CASH DIVIDENDS JUST LIKE OUR “FREE TRADING” SHARES DO.
A froth flotation circuit has immense “leverage beta” especially when the prices of the 3 metals being “concentrated” are trading at or near all-time highs. An FF plant markedly drives down the AISC cost per ounce to produce each ounce of gold contained in the “concentrate”. Extremely high-grade ore also markedly drives down the AISC. The amount of “leverage beta” in a scenario like this is totally insane because of the prices of the metals being sold.
THE HIRING OF AMECO, SA AS “MINE OPERATOR”: Auryn signed a 5-year deal with Ameco, SA. They are to act as the “mine operator” over that 5-year period. In a “sub level stoping” operation, the mine operator is going to have a lot of work to do. They will earn their keep and then some. The maximum amount they can earn is $20 million over the life of the 5-year contract, which equates to a maximum amount of about $4 million per year.
Some people on TheMiningPlay forum are trying very hard to convince you that there is some kind of a $20 million debt CURRENTLY on the books that needs to be serviced immediately. They’re also trying to convince you that shareholders can’t make a penny until Maurizio is fully paid off. Please don’t fall for that.
Think about it, we’re going to go through probably $4 million worth of diesel over the next 10 years, is that a debt that is due today also? No. “Ameco, SA” used to be a subdivision of the engineering behemoth “Fluor” until “The Ashmore Group/Stracon” took them out.
Ashmore/Stracon is the “mine operator” at 51 mines in Chile, Peru, Colombia, and Mexico. Several of these are “World Class Tier 1” mines like Los Pelambres, for example.
The Ashmore Group is a London-based consortium that manages $65 billion in assets. They bought out Stracon. Although you’ve probably forgotten it by now, approximately 5 or 6 years ago Auryn appointed Dan Dumas, of Dumas Contracting, to act as Auryn’s VP of Engineering. Ashmore/ Stracon bought out Dumas Contracting, who was one of the premier underground mining contractors in the world. Ashmore/Stracon is extremely acquisitive and has been buying out high tech firms with connections to the mining industry.
Maurizio has been associated with “Dumas, Ashmore/Stracon, etc. for many years. Maurizio recently bought, out of bankruptcy, what was previously the second largest underground gold mine in Colombia. The project ran into some “geotechnical” issues years ago that apparently some engineers discovered the solution to. Who are his partners in that endeavor? None other than Ashmore/Stracon. He was on-site there when I communicated with him about 72 hours ago, informing him that the Auryn website went down. He didn’t know about it, and he said he’d rectify it immediately and he (or perhaps Kevin) did just that.
I believe that the mine in Colombia will serve as a nice template for us shareholders of Auryn/Medinah. I personally want to get some expectations as to how the “fine tuning” process goes for a new high tech FF plant with all of the bells and whistles. They are a couple of years ahead of us in installing their new froth flotation system which is perfect for us from a learning point of view.
When I last chatted on the phone with Maurizio, he reviewed the stats from the “fine tuning” process at the Colombia mine. I believe their plant is rated at 200 tonnes per day, whereas ours was originally set at 100 tpd but then Auryn management mentioned in an update that they added to the original order in mid-fabrication. I do not know the current rating and if the new additions added to the original throughput number or not.
The month over month improvements in production at the Colombia mine blew me away. Apparently, the daily throughput ratings get exceeded fairly regularly which I didn’t realize. Maurizio is a bit of a “brainiac”. He can, and will, rattle off production numbers and statistics like nothing I’ve ever witnessed. He’s both a technology entrepreneur and a mining entrepreneur. I can see the fit between Maurizio and Stracon quite easily i.e. extremely high-tech mining. Some very, very powerful mining people now have a whole bunch of “skin in the game” with Auryn. All of these parties will benefit especially if Auryn can rapidly ramp up production rates. Auryn has already listed 8 potential production sites each doing 1,000 tonnes per month. They include: the DL2 Vein at level 3, the Caren Mine, Merlin 1 Vein north, Merlin 1 Vein south, Merlin 4 Vein north, Merlin 4 Vein south, and 2 separate sites at what is known as “Fortuna 1913”.
In order to model potential earnings through time, you need to get an appreciation for how long it takes to incrementally add each new production site. Might it take a quarter to add each new sit? I have no clue. Because of the INSANE profit margins available with a very low AISC, and metals prices through the roof, you can safely bet that this overall “team” is going to go balls to the wall to rapidly crank up production.
Maurizio already has inventions out there in use in the industry. When Chile’s permitting authority “SERNAGEOMIN” was recently on-site at the DL2 Mine, their rep kept talking about the advanced technology that was present at the DL2 Mine. Shortly thereafter, SERNAGEOMIN asked Auryn to give some workshops to the wider mining community in Chile, regarding technological advances especially related to new blasting techniques. Chile’s Minister of Mining even attended one.
When Kevin first flew up to meet Maurizio at the PDAC Mining Convention several years ago, he commented to me: Doc, you’re not going to believe this guy. As they strolled through the convention floor, everybody recognized Maurizio and called him by name, and he would whisper to Kevin that’s “Bob” over there, he is head of South American operations for Newmont or Barrick or whomever.
In the South American mining industry, apparently everybody knows everybody else. Maurizio also “hangs out” with some South American mining powers a lot bigger than Ashmore/Stracon.
I asked Maurizio once if he would ever sell Auryn. His answer was at first “NEVER”. Then he immediately came back to qualify that with “never say never”. As it turns out, the ability to rapidly ramp up production is kind of a freebie in this industry. You commence operations and you diagnose “bottlenecks”, and you address them. One of Auryn’s collaborators is Dr. Helmut Mischo from Freiberg University in Germany. He’s written over 185 scientific articles in the various mining journals.
He made the comment that once Auryn gets the FF plant “dialed-in”, then the ramping up process will be very “STRAIGHT-FORWARD”. The Professor of Mining Engineering from the San Sebastian University in Chile, Senor de la Torre (sp?) who is also a close collaborator with Maurizio, and who used to be Head of Underground Operations at Chile’s gigantic El Penon Mine for Yamana Mining (later bought by Pan Am Silver), said that he could see Auryn’s vein operations sharing many of the characteristics of the El Penon Mine. At El Penon they are also mining 7 Main Veins, currently from 38 operational sites. Over time the miners generate these “cross-cuts” that end up connecting all of the veins together. We have one vein, the Merlin 3 Vein, that nicely connects several of the 7 Main Veins together. This might keep the grades fairly “homogenous” due to the intermixing of the hydrothermal fluids during the paragenesis of the deposit.
I’ve studied the El Penon project fairly well over the years partly because my ex-college roommate/fraternity brother was with “Meridian” when they first made the discovery. (Don’t tell him, but my brother ended up marrying his old girl friend from college). What I do know is that the grades at the DL2 Vein blow away those found at El Penon. Pan Am is currently making a fortune there but they’re currently mining only 4.5 gpt gold, which is just above the worldwide average of 4.18 gpt gold.
In reading the posts on TheMiningPlay forum, what I think people don’t yet realize is just how much money can be made mining ore with the grades that Auryn has, when the prices of gold, silver, and copper are ALL trading at or near all-time highs like they currently are, and you have a very low AISC. The artisanal miners at Auryn’s DL2 Vein were averaging 64 gpt gold which is wonderful but the price of gold at the time was $35 per ounce. The price of gold has gone up 100-fold since then.
We participants of this forum watch gold go up in price day after day, and we think that’s fine, but it sure doesn’t seem to be affecting our investment. There are 3,000 junior mineral explorers/developers in existence right now. They’re all competing for attention from a finite number of potential investors.
The way you put some distance between yourself, and the rest of the pack is to first make a discovery and then do what is necessary to put it into production. The World Gold Council tells us that it takes an average of in between 17 and 24 years, from the commencement of exploration to Day 1 of production, for the 1-in-1,000 junior explorer able to not only make a discovery but to also put it into production. This is exactly why this is an investment sector characterized as being composed of investors/speculators assuming ULTRA-HIGH RISKS while searching for ULTRA-HIGH REWARDS.
Keep in mind that the incremental increases in the POG in this industry tend to drop straight down to the bottom line. I’ve been extremely active in this sector for 45 years and I’ve never seen a miner able to comfortably clear around $2,200 to $2,300 per ounce of gold mined. As the POG goes up, the “mine life” also goes up as more and more of the ounces in the ground become “economic”. With the prices of gold and silver going up 25 to 30% year over year, the NET PRESENT VALUE of Auryn’s mineral assets, like the stockpiled ore and the ounces still in the ground, have gone up markedly. But you can’t expect the share prices to go up UNTIL you irrefutably prove to the world that you are one of those 1-in-1,000 juniors that really are funded and about to go into production. Until that time, the other 2,999 are going to block visibility of you, and absolutely NOBODY would ever believe that those knuckleheads from Medinah could ever own 24% of the shares of somebody that did pull this off.
