The Mining Play

Cerro/Medinah/Auryn- 2018 Q2 General Discussion ⛰

This has got to be a record for you Doc!

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There you go! I spoke too soon LOL

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well, “venerated” seems a bit much … but on the Caren topic …

It is a mystery. But I am not convinced it’s a big one. Timeline:

Jan 2016: Bonanza grades reported by Auryn in the Caren [1]

June 2016: Auryn estimates 2 months to prepare the Caren for mining and then, after government approvals, the commencement of mining [2]

Sept 2016: Announcement that a new adit was discovered while working on the Caren preparation [3]

Jan 2017: a first shipment of material has occurred and money received by Auryn of 12 tonnes of 11.5 gpt. An additional 64 tonnes had already been shipped. Additional parts of the high grade adits have been opened up. [4].

After this, for a while, the ADL presentation on Auryn’s website made mention of some samples from the Caren > 100 gpt and then later in 2016 it was changed to “> 200 gpt”.

As late as Oct 2017, Maurizio was interviewed and mentioned ongoing development in the Caren, including the statement that “We are currently constructing escape tunnels and chimneys, to comply with Sernageomin requirements. We believe that we could begin to ramp up production in November.” [5]

Only a few weeks later, in December Auryn announced the sale of the properties to Cerro along with the indication that production was still very much in the plans [6], saying,

we will be “focusing our resources on becoming an active gold producer by reopening the Fortuna gold mine and actively exploring and mining the gold veins found in the Larissa tunnel.”

Note this was already over a year later than what they originally anticipated. It was also only 5 months ago. So a year late. But the plans remained unchanged. Now it’s five months later.

When you invest in small mining companies you find delays for everything are common, almost universal. “a few months” turning into one or two years is completely typical. So given the fairly recent clear statement in December along with a major reorganization, and the recent activity around the ADL in terms of claims just discovered, I think the most obvious explanation is “everything takes longer than expected.”

Auryn admitted in Dec they need to focus their “resources” on the Caren production. Their resources are not limitless. But I don’t think the last five months immediately after a major reorganization of the claims, and ownership etc., a process that is still not complete, are convincing evidence that they are unable to proceed with the Caren and their plans have suddenly changed. It is much more likely , IMO, that “everything is hard” and “government approvals are slow” and it is just taking a long time and perhaps there is some interaction with a potential JV, as also mentioned in Dec.

But we won’t know for sure until we hear from them again. …

CHG

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  1. https://petragaia.cl/_files/200000061-b9795ba718/20160106_Discovery%20of%20Bonanza%20Gold%20Grades%20at%20Caren%20Mine%20within%20the%20Altos%20de%20Lipangue%20Project.pdf

  2. http://aurynmining.com/caren-mining-preparation-commences/

  3. http://aurynmining.com/more-adits-uncovered-during-caren-mine-preparation/

  4. http://aurynmining.com/adl-project-update-january-2017/

  5. http://cexr.cl/altos-de-lipangue-waits-ramp-up-production

  6. http://aurynmining.com/auryn-sells-mining-claims-cerro-dorado-inc/

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To add to that, David Brownrigg appears to be still employed by Auryn/Cerro. He was brought in specifically for mining development.

“Christian Hub will lead our geological team and David Brownrigg will lead our mining development team.”

https://www.linkedin.com/in/david-brownrigg-b5460945/

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Does anybody have a picture of corporate ownership these days? I remember CHG used to have a very detailed flowchart.

Thanks for the timeline format.

Coming from my own (admittedly lay) perspective, we started working on mining the Caren in late 2016, only to discover a new adit which required the construction of escape tunnels and chimneys, which stopped progress. Then in October 2017 Maurizio says we’re STILL building escape tunnels and chimneys and could start production in November 2017. Then, in December 2017, a reorganization of the companies is announced.

(1) Our guys started out focusing on production and then all of a sudden we needed a reorganization? Why not proceed with production, get that going, and THEN think about a reorganization? Seems to me something new was introduced to the mix, because I’m thinking our guys wouldn’t play reorganization games for the sport of it.

(2) If we’re building escape tunnels and chimneys on the property, is that not in conflict with “open pit”? We recently learned the issues engendered at the Soldado Mine to the north of the ADL, where they had both underground and open pit at the same time. Maybe obtaining government approval for both is what we are waiting for?

(3) In the meantime (early 2017), Dr. Sillitoe appears on the scene. I’m wondering exactly who is funding his work, us or some major, or both. At the time he got involved, we had ALREADY made the decision to mine at the Caren. Something must have changed due to the discovery of the new adit at the Caren. Was it so prolific that we then had to get Dr. Sillitoe involved at that point? Just above, Mike Gold refers to the fact that we have a Mr. Brownrigg on our mine development team. So, it seems reasonable to conclude that things are a little bigger than what we originally thought.

Sorry if I seem like I’m just throwing things out there or am otherwise confused - just trying to put things together in a way that makes more sense … and which could maybe help anticipate what will happen in the “near” future.

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The open pit would most likely be on the other side of the mountain; the side where the Moly can be found. Other open pit possibilities include the LDM and perhaps even the Fortuna.

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Prepare yourselves for zero communication until Chilean spring (Sept) while they do their thing. Clearly they are tying down properties and claims for the area play and my BET is there is a JV at least being discussed for part of the area.

Faith is blind and Patience is a real bitch…

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MUCH appreciation to all you doing the DD here!

Looks like there’s some accumulation going on with both stocks the last couple days.

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Never a bad thing…
Hopefully we can get Baldy out of this thing before December.

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Q1 report is due May 15. MDMN is going to be late again and has filed notification as such:

https://backend.otcmarkets.com/otcapi/company/financial-report/193421/content

This gives them 5 extra days.

Nothing from Cerro in regard to an attorney’s letter for 2017 annual report or for Q1 reports

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Say Doc is there any known cobalt mining concessions in this area of Chile?
Thanks in advance.

I find it strange that MDMN is current and CDCH isn’t especially since CDCH should now be Auryn. . I thought Auryn was going to be a more responsible company I guess I was wrong!

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I still find it hard to believe that Auryn can transfer only the titles to the property into CDCH and I also find it absurd to believe since MDMN is a minority shareholder we have no rights, because all shareholders have the rights to be treated equally.

For example this would be the same thing as if we own 25% of a Auryn, CDCH owns 5% of Auryn and Masglas owns 70% of Auryn. Now lets assume Auryn has $100M million in cash from mining operation on their books and a bunch of titles to properties. So Maglas decides to have Auryn move 100% of all the titles into CDCH and give 5% of the titles to CDCH and 25% of the titles to MDMN and Auryn keeps 70% of the titles via their ownership in CDCH in return for their previous ownership in Auryn. So Auryn gets to keep 100% of of the $100M and now Maglas owns 100% of Auryn and Auryn gets to keep the $100M in cash and still owns 70% of CDCH. This is totally absurd since shareholder Masglas gets a different deal than the other shareholders so I can’t wait until this situation is rectified or explained in a way that makes sense to all shareholders by treating them equal pre and post transfer of our ownership in Auryn into CDCH. JMO

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https://www.corfo.cl/sites/Satellite?blobcol=urldata&blobkey=id...true

I haven’t heard anything about cobalt in our area. Mainly copper, gold, moly, silver, lead, and zinc. Sometimes there’s rhenium associated with the molybdenite and I’m not sure if the tourmaline breccias have any gem quality tourmaline.

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I get it Karl. But your statement assumes there was $100M (or whatever) cash in Auryn, employees in Auryn (beyond those listed on Auryn’s and Cerro’s websites), and equipment or other assets.

None of those things is known. They are assumptions. It is unlikely to me that Auryn has any other equipment or employees and it is unclear what amount of cash they may or may not have had in the company since it has been all outbound so far with almost zero known income other than those few truckloads of test ore from the Caren a year ago. For all we know there could still be significant loan liabilities for Auryn, as they discussed when the original JV was formed, and MDMN didn’t end up with any portion of such obligations (so far) either.

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No I do not assume they have a $100M, that was only for the purpose of making my point, especially since we never saw any statements for Auryn which MDMN as a shareholder is entitled to !

It does not matter what they have, but it matters that they did not transfer the entire operating company over to CDCH. It also matters that we reduce our interest for prepayment of a note and the money from that note went into Auryn as well as the the money from the CDCH note as well as the cash from Maglas or Auryn Holding Company. Yes I do assume Auryn was an operating company with expenses, drilling, road construction, and other investments in the properties that were some how not transferred. The whole point is we own more than just titles to the properties, so where did all the money go from CDCH and MDMN, as well as the money from Masglas (AHC). That should all appear on an expense statements, cashflow statements and balance sheets. The entire company with people and operations, capital, and expenses is what should be transfer. We own more than just titles to properties in Auryn unless Auryn has done nothing all this time, but we all know that is not the case.

I guess I am just frustrated by the whole situation especially when we thought all the bad news is out and we just seem to get more. I get it too CHG!

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Last try:

  1. re. the $100M, I said “or whatever”: it could be $100M, $0, or a $10M loan obligation (i.e. minus $10M in cash). So … whatever there is , if anything, is unknown. Recall Auryn claimed to arrange for at least a $10M loan when they started the original JV. They could very well have got another loan for more development past what has been settled to date and it could all be spent it all by now. We just don’t know.

  2. I don’t think Auryn had any employees beyond those listed on the web site (or few). Mining development was via contractors. And all (most) equipment was rented or brought with the contractors. No assets there.

CDCH gave up their 5% ownership as part of the deal so nothing to discuss there. Again I get your Medinah argument. My point is that you’ve demonstrated your argument with ‘we are obviously getting screwed’ examples, e.g. ‘where is our portion of the enormous amount of cash?’ But one could equally validly argue there is probably little to no cash or even negative cash (i.e. loan liabilities), no equipment, and no employees.

But byond that, I do know Auryn was under no obligation to “reverse merge” into Cerro. They chose a path to sell the properties to a public company for shares. That’s all they did so far. Medinah still owns 23+% of Auryn and they will receive their share of the incoming Cerro shares. How they settle for the 23% of whatever else there is on the balance sheet of Auryn (if anything) remains to be seen. But it didn’t have to be via the Cerro transaction.

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CHG I get all that, but it is up to them to demonstrate exactly what they did, with financial statements, what was capitalized, what was expensed, and what and where all the money went to. It is simple, transfer 100% of Auryn to CDCH and not just the claims. Auryn had to have a balance sheet, and expense statement. Yes a reverse merger was expected of private Auryn company into public CDCH and not just the transfer of titles. We get 25% of titles for giving up 25% of the company Auryn, Masglas gets 100% of Auryn and Auryn get 70% of the titles. It simply does not cut it without detailed explanations. If there is nothing left in Auryn then why not transfer the whole company and not just the titles? Not too difficult to make things transparent, just state Auryn is a blank shell company without any assets, liabilities, or capital after the transfer of the titles. If that is the case where is Auryn today or better yet where is CDCH, since it has no assets other than title to the properties so how will this move forward…

Yes for all we know Auryn only has liabilities, but that too would be more informative than a transfer of just titles. We should own more than just titles, otherwise we would have never done the deal with Auryn.

We started with 100% ownership in the property titles, of course Auryn did added some additional properties, Say 10 M was spent of which we were on the hook for about 2M. Where is all the missing accounting of where was all the money spent. Not too difficult to understand. .

The reverse merger was suppose to be a way of taking Auryn public as an operating company, but what I see is CDCH as a shell with ownership only in titles. How does this get Auryn capitalized to go into production, if it has no money. How is CDCH going to pay for taxes on the titles without cash . It appears like we took one step forward only to take two steps backward. I just hope there is a second step to this reverse merger that I am missing and I sure hope it simply isn’t more and more dilution to all shareholders except Auryn/Masgals . JMO

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We can agree on that last part.

Ultimately it wasn’t a reverse merger. I don’t think the “RM” words were ever used by Auryn. They were used here on TMP in anticipation of a RM.

The transaction was a sale of assets for shares just as Auryn’s announcement says “AURYN has sold its mining claims to Cerro” (http://aurynmining.com/auryn-sells-mining-claims-cerro-dorado-inc/)

You’re right. $21 isn’t going to put the Caren into production or execute exploration. So some source or method of funding is still required, no doubt.

In the meantime, today MDMN still owns $23+% of AMC shares and thus 23+% of whatever AMC has, e.g CDCH shares and other assets / liabilities. It has obviously and clearly been hinted that MDMN’s life remaining is short with a primary purpose of getting those CDCH shares distributed to MDMN shareholders. But you’re right too, the question of what else does MDMN own 23+% of and how will that be handled remains to be seen. But I don’t think the fact that this question remains in play is evidence of a defective RM. It just wasn’t a RM.

Alright … I’m tired of this topic. Going back to running deep and silent …

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