Cornhuskergold game summary Part 2:
The afternoon presentation was by Auryn esp. Maurizio (and Kevin). Lots of good stuff. Lots of things to be excited about.
A. Most important is that production started yesterday! They are 71m into the mountain, progressing 8 m / day now. They are working in Adit #3. But recall the recent discovery of what is now called Adit #2a. Production tonnage will be slow at first. But their initial grades are 150g/t, 10 times what was originally forecasted. They have seen grades over 200 g/t or over 6 Oz / t. That’s pretty sick. They are still working on the “mine plan” in light of adit #2a, that is, which adit to focus on first, etc. He did say that there are presently 7 people working full time on the mountain (I think this is production guys) and that’s as many as you can do because of the narrow vein. But he stated they had in mind eventually getting to 4 operating levels and having 28 guys working at once. It was not stated how much tonnage per month per level they could do with 7 guys. So I don’t know how that exactly relates to 5000 tonnes per month. Anyway, the exact plan is still under development.
They are going to do 3 truckloads (3 weeks?) and do metallurgical tests to decide what the best way to process the ore is. They are still considering a. building their own processing facilities, b. just trucking to a third party. They are also considering using concentration machines before shipping.
The most important point is that at a rate of 5000 tpd, if the grades hold up anything like that, then the gold production will be significantly greater than the 5,000 Oz in 2016 and 25,000 Oz in 2017 previously forecasted.
B. They have estimates, made in Jan 2016, of 664 KOz of gold in the top 200 meters of the Merlin 1 and Fortuna veins. Note these veins could go deeper than that. Also the grades experienced so far could very well not be average. So there are plenty of unknowns. They have three or four geologists’ opinions on what the veins will look like at depth. Some think they could go down to 1000m and if anything improve in size and perhaps even grade. Others think that they are not likely to go that deep and possibly not improve with depth. So Auryn will be doing some drilling just to test these ideas. But right now the 664 KOz is considered conservative. It assumes about 32 g / t. It assumes 200m of depth. And it only considers the two veins. There is considerable potential upside to that estimate and considerable positive data that has been collected since January. If all the variables turn out for the positive it could become a “world class” gold deposit - that’s without the PN, the LDM, the Gordon etc.
There is no permitting in place for the Fortuna yet. They are still considering ‘open pit’ versus underground. This seems definitely like a second half of 2017 thing.
C. The Pegaso Nero has the interest of 3 major companies, one of them being Freeport McMoran (the other 2 being “as big or bigger” than FM, but remained unnamed). Auryn expects / hopes to negotiate a JV deal for the PN hopefully as soon as Q1 2017. It will be a “standard” deal where the JV partner spends money to gain percentage of ownership, probably in 2 or 3 stages ending potentially in a PFS for the PN. Altogether it could be 7 to 10 years from JV to production should the PN be economic.
D. Auryn is not satisfied with the historical “dream holes” on the LDM and the interpretation of the LDM. They are re-interpreting what is going on there as they have previously stated publicly. Obviously the LDM is not front and center as we thought it might once be. However Auryn seems quite optimistic about it in the longer term. Maurizio said there is plenty of work and plenty of unknowns and risk there but it not impossible that Auryn could eventually put the LDM in to production themselves.