As far as the planning for the upcoming drill program, as usual Auryn holds their cards very close to the vest which I actually respect at this stage of development of the ADL. Any comments being made need to be couched in the reality that WE INVESTORS are all somewhat in the dark but HOCHSCHILD, SILLITOE AND MAURIZIO aren’t. Hochschild’s $7 million program over 5 years represents expenditures of over $115,000 per month for 60 straight months if fully executed on. You can get a lot of drilling done and a lot of results (and press releases) generated for those kinds of bucks.
Prior to the commencement of drilling which is scheduled for January, Hochschild will probably be working on “drill target definition” at the ADL. Since there is a fair amount of “lead time” before any drilling program I would assume that the powers that be already know quite a bit about what’s going on. The phase involving the consolidation of a large group of mining concessions appears to be somewhat completed but as development efforts proceed other mining concessions of strategic importance may well be identified and pursued.
I can’t help but think of a regional study done by DeGana et. al. back in 1996 which identified a massive area of hydrothermal exploration contiguous to the LDM on its western border. I assume Hochschild is on the mountain right now as they were reportedly to start “in early September” but we might want to wait until the definitive agreement is signed and announced before doing any cartwheels related to Medinah/AUMC finally “breaking the ice”. The formal signing was again reportedly to occur “in the coming weeks” as stated back on or about August 23.
The importance of a signed JV to a company like Medinah holding a quarter of the action on the entire ADL Mining District with its past credibility/corporate governance issues cannot be underestimated even though past management is long gone. CREDIBILITY in both the deposit and in Auryn is what was lacking the most and this deal helps a lot. Medinah’s tainted history may have a tendency to linger and have effects on the market cap well past any offenders exited the stage a few years ago. This might be in evidence with the AUMC and Medinah share prices currently at a ratio of about .0028 compared to the .00558 ratio explained to us by Kevin.
I don’t think we mining investors realize just how complex geology is and how important it is in our own due diligence process for a mining major with its technical superiority and superior resources over and above ours to put its imprimatur on the merits of a project by committing significant time and resources to it. Let Sillitoe and Hochschild do the heavy lifting in the due diligence department.
From here on out I would think that the merits of the ADL will be front and center as opposed to Medinah’s past corporate governance issues. My sense is that the “stench” associated with Medinah’s past corporate governance miscues will outlast any possible negative repercussions for those activities. I would assume that the distribution/conversion of the AUMC shares to the Medinah shareholders will pretty much do it for removing the “stench”. I have to admit that I’m a little jealous of new investors who can take advantage of the “stench” but won’t face any untoward dilution like the old Medinah shareholders did. It must be kind of nice to enter into a deal after the property was given a thumbs up by a major and when all of the previous shareholders are so far underwater that they probably won’t be selling until the new investors score a “4-bagger” or so without much risk. It is what it is.
Since drilling is relatively expensive geologists typically start their exploration/development efforts on a broad scale and use less expensive means like geophysics and geochemical sampling in order to narrow down areas of interest and carefully define their drill targets. Their various geophysical techniques and geochemical sampling programs will no doubt outline “anomalies” i.e. areas with properties that stand out as being different from the rest of the surrounding rocks. They already know the properties of the rocks that are associated with the deposit type they are going after.
What they’ll do is overlay the various anomalies found via various techniques and see where the anomalies coincide. You might have a UTM (similar to latitude and longitude) location where geochem sampling found high copper and gold values at surface that coincides with a spot where there was an IP/IR anomaly that “lit up” (high chargeability)nicely when electricity was injected into the ground. This same location may represent a “magnetic high” anomaly as detected by the previous airborne electromagnetic testing done by AMC on 22,000 hectares. An iron oxide called “magnetite” which happens to hang out in certain types of deposits with the sought after metals happens to be the most magnetic mineral on the planet. The hyperspectral satellite imaging survey which detects surface alteration has already identified “about a dozen intrusives along a 7 Km swath oriented in a SE to NW direction”. It’s the layering upon previous informational layers in a GIS database that tightens up the statistical probability for drilling success before the big bucks are spent on drilling.
After overlaying all of the results upon previous results in a computer (“GIS”) database, various locations will share these anomalies in an “X marks the spot” fashion. These would represent promising drill targets. We’re not sure how far along in this process Hochschild and Auryn are but if they’ve already signed a binding LOI and plan to drill in about 4 months then they’ve already done a lot of work I would assume primarily in the various adits already in place at the LDM and elsewhere on the mountain.
Drilling typically occurs in phases which have certain informational goals set. After a phase, the results are studied and the next phase is planned. The drill results will give us some information as to the depth of the mineralization, the thickness of the oxide and sulfide layers, the presence or absence of “supergene enrichment” with chalcocite, grade information and a sense for the overall geomodel being developed. A talented P. Geo. studying a split drill core under magnification can learn a lot about the “paragenesis” of the deposit. This means the sequence of the various mineralizing events over time as this deposit clearly has had several mineralization episodes. This was confirmed with the petrographic analyses done with high powered microscopes. The drill results will be analyzed by computer software and preliminary mineral reserves/mineral resources (MR/MR) estimates will be made and geomodels developed. The tighter the spacing of the drill holes the more statistically accurate will be the estimates of MR/MR. Often the joint venture agreement will include the production of an NI 43-101 compliant report.
The Hochschild deal allows them (I assume with “exclusivity” and no risk of competition) to explore the western third of the ADL Mining District. This is where the host rock is referred to as “andesite” an extremely common volcanic rock type in South America. This is an “extrusive igneous” rock i.e. think lava periodically “extruding” out of a volcano and flowing down the sides in a 360-degrees fashion resulting in a “stratovolcano” with distinct layers. The eastern two-thirds of the district is hosted by quartz monzodiorite. This is a “plutonic” intrusive rock from way down deep. The high grade Merlin 1 Vein (Caren Mine) traces from the northeast in andesite and crosses over in a SW direction into the quartz monzodiorite.
By definition, the cracking in the rocks that got filled by hydrothermal fluids that then were allowed to cool and form the Merlin 1 Vein must have happened AFTER the andesite and quartz monzodiorite were already in place i.e. it’s a “late stage cross-cutting” vein. Whatever program is agreed to at the quartz monzodiorite/Pegaso Nero deposit it will no doubt be much larger than the LDM deal. If there is one concept that I think is underappreciated after following TheMiningPlay for all of these years I would think it is the POTENTIAL SIZE of the Pegaso Nero copper-moly porphyry and adnexal structures as suggested by the findings secured to date.
Sr. Letts of Volcan fame who posted as “Volcan” and Sr. Perez the hyperspectral satellite imagery “remote sensor analyst” threw around the concept of the PN “clearly representing a world class deposit” as well as “quite possibly the last WCD to be discovered in South America”. I don’t think they made these rather bold statements in a haphazard fashion. To me, Dick Sillitoe’s involvement is partially corroborative of these assertions. I think that we can assume that London-based Hochschild and London-based Sillitoe have crossed paths before and have respect for each other’s achievements. A recent PR stated that Hochschild will be following Sillitoe’s recommendations.
As far as how many drill holes and drill rigs might be involved, I couldn’t give you a number. Instead, I like to look at today’s macro mining scene and think in terms of how many drill holes MIGHT IT TAKE to induce an attempt to acquire the property by a major or group of majors. We’re at a 25-year low in new discoveries. The amount of MR/MR on the balance sheets of the majors is at a 30-year low. The majors have to replace the ounces of MR/MR they’re currently mining constantly just to survive. The question is how much “derisking” needs to be done before somebody makes a move? One might suppose that in a mining industry characterized with this huge supply and demand dislocation in regards to new discoveries a lesser amount of drilling might suffice to induce a move by a major. I think that Hochschild was smart to acquire at least a toehold on a portion of the overall ADL Mining District in order to get a front row seat.
If Maurizio is intent on building a major miner which I think is a fairly accurate assumption and beyond that a fairly probable result after studying the various activities of Masglas and Masglas Peru, could Medinah with 25% of the action of the entire ADL go into play? I can’t handicap that. I assume it would have to happen before the distribution/conversion of the unrestricted AUMC shares to Medinah shareholders occurs. After the record date that 25% “block” gets essentially dissolved and that block of shares will blend in with the other AUMC shares. I can’t help but think how much more desirable it would be for Maurizio to have a major miner holding that 25% stake in the entire ADL Mining District than for us Medinah shareholders holding it. There’s nothing quite like being an overnight success in just 21 years!