Hi EZ,
This really is the most complicated yet refreshing set of circumstances I’ve seen in 44 years worth of studying junior miners and mineral deposits. From the MINERAL ECONOMICS point of view, I could easily see Auryn’s annual earnings at that $70 million/$1 EARNINGS PER SHARE within one to three years. Based on a 100 Tonnes per day initial throughput of the FF plant, an AISC of $1,000, an average grade of just 15.5 gpt (0.5 OPT), a recovery rate of 80%, 330 workdays per work year, 33,000 tonnes per year throughput (330 days times 100 TPD), 16,500 “contained ounces” in throughput, 13,200 “recovered ounces” after factoring in the 80% recovery rate, a POG of $5,000 per ounce, a “MARGINAL PROFIT” of about $4,000 per ounce, etc. you get a pre-tax income of $57 million. Think of it as “Heinz 57” in order to remember it.
Within 1 to 3 years, I’d guess the daily throughput will be somewhere around 150 TPD some of which might be associated with an oxide circuit/ gravity plant for the oxide ore especially at the Merlin 1 Vein where they found 26.9 gpt RIGHT AT SURFACE (volume weighted average-which is the accurate way to gauge averages). This ore was already deemed recoverable by a Sepro/Falconer (centrifuge) system at over 90% (free-milling coarse grained ore). At 150 TPD you need to multiply that $57 million pre-tax figure by a little over 1.5 because some of the costs are fixed. This puts the pre-tax income at a little over $85 million per year. You tell me where’s that going to be in Year #5 or #6.
So far we’re only talking about the 7 Main Veins. When you factor in the PN, the LDM, the breccias, the skarns, the 24 new veins intersected in the Antonino Adit recently, etc., where does that put you? The plant is probably good for perhaps 30 years or so. At 150 TPD, the ore in the 7 Main Veins will last for many decades.
Markets are “forward looking”, they can process this information once exposed to it. That 60,000 tonnes of ore already stockpiled will guarantee that the plant will never run out of “feed”. Management will constantly be feeding in the highest grade ore available as they go. This will keep upward pressure on the “AVERAGE GRADE”. Some of those 60,000 Tonnes is comprised of the 70 gpt material that Auryn mined “DIRECTLY FROM THE VEIN WITH MINIMAL DILUTION”. Auryn already completed that 66-meter ore bypass from level 3 (1,847 meters above sea level elevation) to the Fortuna 1,913 level at the 1,913 meter elevation level. This sets up the “sub-level stoping” aspect of the project. The ore mined from the intervening levels will be thrown into that ore bypass and it will come crashing down to level 3 where it will be removed. The beauty of SLS is that you can simultaneously mine from a bunch of different horizontal levels.
With production soon to be coming from 2 operating sites at the Caren Mine (Merlin 1 Vein) and 2 operating sites at the Fortuna 1,913, plus the 1,000 TPD already being mined at the Fortuna level 3, you’re going to overwhelm any 100 to 150 TPD plant. The big mystery is how is management going to ramp up production to perhaps 150 to 200 TPD. Dr. Mischo told us that once the FF plant is “dialed-in”, the ramping up process will be very “straightforward”. Are we talking an oxide circuit with centrifuges? Additional Denver/Serrano cells? Additional column flotation facilities? The thing to keep an eye on is some forward guidance on the throughput rate in Tonnes per day through time. Each 100 TPD might equate to about a pre-tax income of $57 million. Don’t forget that 60,000 Tonnes already stockpiled. If the plant gets overwhelmed might Auryn “DIRECT SHIP” some ore to Enami’s smelters or to Chinese smelters?
You don’t need huge daily throughput rates in order to make a fortune with gold at over $5,000 if every 100 TPD makes you somewhere around $57 million (once the FF plant is dialed-in). What people need to recognize is that a 100 TPD initial throughput rate is microscopic in comparison to where that number might be in “X” number of quarters or years.
What’s interesting is how we now look at $5,000 per ounce gold and kind of go “Ho hum”. Are you kidding me, $5,000 per ounce gold and we’re about to start producing it. A 1-ounce Krugerrand is a little bit larger than a quarter. That’s now worth $5,000? The artisanal miners of the ADL were averaging 64 gpt gold in an area up higher in the vein structure with noticeably lower grades than where we’re mining. The POG back then was $35 per ounce.
