Over the past month the S&P 500 is down 5.23%, the DJIA down 6.31% and gold (KITCO Charts) is up 5.23% (stock futures are down 4%).
The following interview with Shawn Wallace, President and CEO of Auryn Resources Inc. (TO:AUG) was conducted by Peter Epstein, CFA, MBA in the week ending August 21st. From the company’s website:
Auryn Resources is a junior mining exploration company focused on delivering shareholder value through project acquisition and development. The company’s management team is highly experienced with an impressive track record of success in the exploration, discovery, development and financing of mining assets.” This is true. However, upon reading this interview, readers should learn that there’s a lot going on at Auryn.
Mr. Wallace, thank you again for taking the time to answer my questions. Please describe Auryn Resources and its key project.
Auryn Resources Inc. is a well-financed and technically driven gold exploration company boasting an experienced management, Board and technical team with a proven track record of success. Auryn is currently advancing the Committee Bay Gold Project (CBGP). The mineral project, located in Nunavut Territory, Canada, includes 66,160 hectares (163,485 acres) situated along the Committee Bay Greenstone Belt (CBGB).
What attracted us most to CBGP is its high-grade gold endowment, existing exploration infrastructure, mining friendly jurisdiction, major mine developments in the region and district scale discovery opportunities. Our property extends more than 300 kms northeast to the shores of Committee Bay, and is roughly 180 kms NE of Agnico Eagle’s “Agnico” Meadowbank mine. Importantly, we are in the process of acquiring North Country Gold Corp (TO:NCG), holder of a 49% stake in the CBGP project. This acquisition would consolidate 100% of the property for Auryn.
The project benefits from existing infrastructure including bulk storage fuel facilities, 5 high efficiency drill rigs, a heated drill water system, heavy equipment on site, a 100-person camp at our main Three Bluffs deposit area and two satellite camps SW of the belt.
The CBGB comprises one of a number of attributes that are thought to be equivalent to that of other significant gold bearing deposits such as Agnico’s Meadowbank and Meliadine mines. High-grade gold occurrences are found throughout the 300 kms strike length, including the Three Bluffs deposit that contains a NI 43-101 compliant Indicated & Inferred resource of 1.2 million ounces of gold. The Three Bluffs deposit remains open for expansion both along strike and at depth, giving us tremendous exploration upside.
Much has been written about previous successes. What have you learned that might carry over to Auryn?
Junior exploration company Auryn Resources is the third company that Auryn Chairman Ivan Bebek and I have started. We also founded Keegan Resources and later Cayden Resources. Keegan became Asanko Gold Inc (TO:AKG) and merged with its neighbor, PMI Gold. While working with Asanko in Ghana, we met Auryn’s COO Michael Henrichsen, a brilliant structural geologist who was at Newmont. Long before Cayden was acquired by Agnico, our team had already began a global search for our next gold play.
We reviewed close to 200 prospects. We searched in several countries and looked at assets at varying stages of exploration and development. We screened each by three essential criteria; it had to be a district-scale opportunity, i.e. a land package where multiple deposits could be discovered and developed; it had to be in a stable jurisdiction; and it had to be high-grade. It’s only in times like these when one can acquire high-grade assets at attractive valuations.
We are a group of experts in mineral exploration, that’s what we do.
We are not in the business of building mines. We’re a lean team, comprised of highly experienced executives and geoscientists blessed with a wide range of critical capabilities. Many in our group have participated in every capital raise we’ve done and myself and Chairman Bebek recently acquired shares in the open market.
We made investors in Keegan Resources and Cayden Resources a fair amount of money, funds that our loyal shareholders are entrusting with us again. Committee Bay in Nunavut ticked off all the boxes. The Committee Bay asset represents the highest grade, most potentially scalable, with the largest number of NI 43-101 compliant resource present, compared to our previous companies. If we close the proposed acquisition of North Country Gold as expected, we are off to the races!
Auryn’s stated goal is to discover a major high-grade gold district, what gives you confidence in achieving that goal?
Our main focus at the moment is to try to find and explore an abundance of recently identified, existing and additional targets. We believe that we might be able to expand Three Bluffs but we would not be starting work on it until 2016 at the earliest. We really don’t know for sure how many ounces of gold we might discover, however we could not have rationalized the JV or the proposed takeover of NCG had we not believed the potential for much more gold.
Approximately $100 million has been spent on Committee Bay, the vast majority before Auryn entered the picture. Explain the work done and the value of it.
$100 million in expenditures have led to the following benefits: Exploration infrastructure in place with camps, runways, etc, allowing us to effectively execute and stage our exploration plans. Delineation of the 1.2 million Indicated & Inferred gold ounces at +8g/t at Three Bluffs, a number we hope will grow in size and grade. Potential identification of high-grade prospects at Inuk, Raven, West Plains, and 4 Hillsas deposit footprints that could be explored, and if warranted, expanded to move them toward a prospective resource. Abundant geophysical data in the form of airborne EM surveys over the high-grade prospects. Belt-wide prospecting and identification of high-grade gold occurrences with no follow up drilling.
Is Auryn encumbered by any debt, streaming or royalty funding?
No, another hallmark of our prudent approach is that we try to avoid using debt and debt like funding vehicles such as streaming and royalty transactions. It’s too early for Auryn to even consider these options and frankly we would not be inclined to adopt any of the avenues you mentioned except as a last resort.
Few things can kill a promising project, lack of funds to advance, failure to find enough gold and onerous debt covenants. We avoid debt and aspire to minimize the amount of equity capital raised. That’s why we have such a solid capital structure and devoted shareholders. Even after possibly consolidating Committee Bay, our capital structure would remain in great shape.
Speaking of capital structures, can you give us the latest version of yours?
Our capital structure is very straightforward. We have 30 million shares outstanding and 32 million fully diluted, no debt, no preferred shares, and as mentioned, no streaming or royalty mechanisms in place. Pro forma for the merger and $4.8 million capital raise, our capital structure would contain about 47 million fully diluted shares. If exercised, proceeds would add $2.5 million to our coffers).
With no change in our debt, streaming or royalty situation. We remain confident that our shareholders, management and Board will continue to support the company as needed. I hesitate to say this, but our stakeholders constantly tell me and Chairman Bebek that high risk capital follows the winners. We are lucky to have two successes under our belts. Clear evidence of management’s conviction in Auryn is Chairman Bebek’s $500,000 of open market share purchases this year.
Are there analog exploration, development and producing mine(s) to point to?
People readily compare our deposit with Agnico’s Meadowbank mine, 150 kms SW of CB. Agnico’s primary exploration focus, Amaruq is also 150 kms SW of CB Meadowbank was Agnico’s largest gold producer in 2014. According to Agnico’s website, that mine is expected to produce 400,000 ounces in 2015. The character and history of rock packages, and the timing and nature of mineralization occurring within the CBGB is considered to be geologically similar to that of other significant gold bearing greenstones hosting mines such as Meadowbank and Meliadine. We see no evidence or red flags suggesting that our prospective deposits couldn’t be as large as Meadowbank’s. However, the truth is that no one knows what we might, (or might not), have on our expansive property.
Where does Auryn stand regarding additional acquisitions, or is North Country Gold enough for now?
The company is continuing to actively pursue other high quality mineral opportunities with the goal of establishing a robust project pipeline. Active discussions and ongoing due diligence with a number of parties in North and South America continues with the goal of establishing exploration and development operations in those regions.
In addition to Three Bluffs, your corporate presentation details a “pipeline of drill ready, tier 2″ deposits in Inuk, Raven, West Plains, and 4 Hills. How might they fit into Auryn’s plans?
The targets are effectively potential deposit footprints that have been identified by our predecessors (North Country Gold) with very limited drilling. Our focus is to bring geologic context to these footprints and explore and possibly expand them to determine if we can move them toward a potential resource.
What are some key near and intermediate term activities to watch for?
Near-term we will complete a comprehensive framework study across the 300 kms Committee Bay Belt, incorporating the $100 million of historic exploration expenditures detailed above. We would also like to conduct ground IP and surface programs across West Plains, Raven and other newly defined targets and design our 2016 work program based off of 2015 exploration results.
In the intermediate time frame, our historical database has highlighted 115 rock samples grading above 5g/t gold that have not had any follow up or first pass drilling within a 200 meter radius. We believe that a large campaign of low-cost drilling could lead to the discovery of new deposit footprints. Our goal is to drill 1,000 + RAB holes into the Committee Bay Belt in 2016 & 2017 alone. Remember, we will be exploring a 4 km gold trend open along strike and at depth. There’s no shortage of exploring to be done on even that small fraction of our land holdings.
Thank you again Mr. Wallace, President and CEO of Auryn Resources Inc., for your time and consideration.
Disclosure: Auryn Resources is a small cap stock that’s speculative, not suitable for all investors. I, Peter Epstein, own shares of UURAF. Mr. Epstein, CFA, MBA is not a licensed financial advisor. Readers should take that fact into consideration. Readers are encouraged to consult with their own investment advisors before buying or selling any stock, especially speculative ones like Auryn. I conduct a lot of written interviews and articles that are popular among readers. At the time that this interview was posted, Auryn Resources was a sponsor of EpsteinResearch.com.