In this interview, Executive Chairman Ivan Bebek provides an update on Auryn Resources’ drill plans for the Committee Bay project in the Arctic. He also discusses the historical core drill results from the company’s Sombrero project in Peru and its significance. Furthermore, Ivan shares regarding the new gold and silver targets at Auryn’s Homestake Ridge project in the Golden Triangle in British Columbia, Canada.
0:40 Upcoming Committee Bay drill program
6:50 Cost of Committee Bay drilling and when to expect results
8:45 What Committee Bay drill results would be considered success?
10:20 Sombrero project update
17:30 Commentary on Sombrero historical drill core results
20:01 Homestake Ridge update
22:28 Auryn’s relationship with Newmont Goldcorp (11.8% ownership)
Bill: Well Ivan, welcome back to Mining Stock Education and based on your recent press release, it looks like you’re going to be drilling up there in the Arctic at your Committee Bay project.
Ivan: Yeah, thank you very much. We just announced this morning that we’re going to go drill Committee Bay this summer. Something that we weren’t sure if we were going to be organized enough with our targeting to do in time, but pushing the guys, seeing the market improve and they said they’re ready to go, so we’re extremely excited to go up there. For the benefit of everybody listening, we’ve spent about 54 million dollars up here. We took about 275 drill holes or more, over 400,000 till samples, and we’ve been trying to figure out this 300 kilometer gold belt with a eight gram deposit in the middle of it, where these big deposits could occur, because the endowment is really world class, that the whole belt has gold on one end to the other.
We brought in machine learning, as you’re aware. This is the first time we’ll ever test the AI or machine learning application in the exploration mining side for us. We think it’s going to be a critical, useful application because of its capacity to process all this data that we’ve collected to help us hone in on the targets. The algorithms were trained off of the Three Bluffs deposit and the amount of data we’ve been able to feed it is not only a lot of data, but it’s the high quality of data that was collected by our former Newmont global experts that work for us.
One of the most exciting drill programs that I’ll experience in my career, and a lot of people say, “Ivan, you say that about every one.” That’s because every one has a massive target at the end of the drill bit. We like really big discoveries. What I’ll say here is the fact that we may be able to make history with the AI platform, and that’s truly what’s taken it to the next level for us.
We published a video on Committee Bay to explain exactly how the AI works. We’re not going to show you the algorithms, but you’re going to notice the most important denominator in that video is the collection of data and the way that we came to using AI. Please watch the video. It’s on our homepage. You’ll have your own perspective of how workable or how efficient this AI program can be for us up in Committee Bay.
Bill: When you determined your targets, what was the interaction of your human intelligence…You have a top tier geological, technical team. What was the interaction between the human intelligence and the artificial intelligence in finalizing the targets that you’re now going to be testing?
Ivan: That’s a great question. If you think about our human intelligence part of it, the data’s collected by them. We have six or seven world experts that all have different geological backgrounds. You have a specialist in geophysicist, you have a specialist in geochemistry, a specialist as a mapper, specialist in structural geology. Now that’s a lot better than most companies have. It would be comparable to any major outlet that goes and explores. Each specialist determines one part of geology. That’s getting plugged into the computer.
What the human brain can’t do, and what our technical team, and no technical team can do is, they can’t go and say, “Oh, there’s a bit of arsenic here. Let’s weight arsenic at 6% and let’s weight actual gold at 17% in till responses. And structural, let’s take the diorite structure here and weight it at 16.7%. The computer can twist that algorithm, manipulate it as many times as it wants to process that data at a capacity we could never, ever dream of, probably about 1,000 times or more the capacity of the human brain. The human brains were betting on are people that’ve done this for 20 to 40 years as their specialties in each part of geology.
We’ve heard a lot of the AI companies and we first heard of this one we thought, “Oh no, it could be fanfare.” Exciting, a computer might help find it and solve it. It will never be independent of the inputs which come from the world class geologists or any geologist that way. The control of quality on the data we’ve collected is what makes our AI shot, I think, copious amounts better than a lot of other guys trying it.
You can argue an algorithm, I’m not going to do it. You can argue geoscientific interpretations. I’m not going to argue that either, except we have top world experts. What I will say is the quality of data, the discipline, militant way we’ve collected data, and anyone that’s worked from us on Committee Bay that’s gone through the rigorous training before they could take them for a sample out there with us would certainly attest to it, but these guys that we work with, they’re world class. They’re extremely thorough, they’re extremely disciplined, and those two words, thorough and discipline, going into a computer are the things that it needs really high quality data.
We’re not testing all of our area targets. This is a small program. It’s 3,000 meters. One good hole makes a start of a massive gold discovery, especially in this part of the world. We’re gonna drill a lot more than one hole. We’re going to test a few of the targets. We see the program as a win-win. Either we come out of this program and say, “We got to start the world’s next major gold discovery since Amaruq was found in 2013 by Agnico Eagle which happens to be nearby Committee Bay,” or secondly we’re coming out saying, “Ha! We got closer. We’ve refined AI, and next year we’re going to go spend real money and drill 20 thousand meters because now we’ve got the system figured out.”
I don’t think we could kill any targets with the AI because the targets are vast, or very large, but I think that if you followed our progress last year, independent of the AI, we were on the edge of a major discovery. Had we known the results during the program on our Aiviq target, we would have drilled another 500 meters or a kilometer south of where we’ll be drilling, because the further south hole and the structure was the best hole drilled.
This is the cool part, is that the AI, before we got our results last year, it actually chose the area that we saw after a result that we should’ve been going, and it would’ve never have chosen any of the holes that we drilled leading up to that last year. Tremendous opportunity, it works in our opinion. It’s an extremely useful tool. The guys who input it are world class and so I think we have a really good shot and the other part about it is it’s not just finding a gold deposit. You’re in the land of elephants. You might find something that we’ll talk about for years in the exploration business if we get it right.
Bill: What will this program cost and when can we expect results?
Ivan: The program is going to cost 1.9 million dollars. Our treasury was three and a half million dollars about a month ago. Obviously capital is going to be something we should address and it’s the elephant in the room. To raise money at our current shelf price today, the cost would be 650 thousand shares, roughly, because we can raise money at a 40% premium. We’re not going to go to market to go raise money. We’re not going to go do a broker deal. We’re just going to do it with one of our loyal shareholders. Some time here in the next few weeks we’ll probably raise the money for the Committee Bay gold project, which is such a small amount. It’s one day’s volume to pay for Committee Bay. That’s such a free pass.
As the company’s largest shareholder speaking as myself, would you want 650 thousand shares, maybe .7 dilution of your company, to get the answer if your AI works and Committee Bay actually has it after 54 million dollars has been spent? For me it’s a no brainer. I think for our management team, the targeting is pristine. We were on the edge of it last year. The AI is going to change it. The cost of capital is extremely low, and the opportunity for capital is extremely high.
You saw our last financing we did was six million dollars Canadian roughly, at $1.60 Canadian. We didn’t go to market for that. I think right now we’re extremely defensive on dilution and we have a lot of really good things going on, not just at Committee Bay. Sombrero, which we’ll talk about here in a minute, but our capital requirements for the next 12 months are actually really small. I think there’s a misnomer in the market place thinking we need a lot of capital.
We treat the company as shareholders. We most certainly are going to do the smaller finances because we have the goods on more than one project and we have a rising commodity market both with copper and gold. I think we can worry about raising bigger dollars later on when we actually need it.
Bill: Yeah, I appreciate how you always keep your ear to the street and feel out the markets as you plan out these financings and then calculate how to do it with the least amount of dilution. When we’re talking about the results from the Committee Bay project, what type of gold grades and intercept lengths would you consider success for this program?
Ivan: The advice that I would give everybody, if you look at the holes of Sabina, Amaruq, which is Agnico Eagle, if you look at the holes of Meliadine and so on, anything that’s, I would say, 70 to 100 grams per ton grade times width of the intercept or higher is going to be onto a system. If you drill 10 meters of seven grams, you’re in the start of something. If you drill 20 meters of five grams, you’re definitely in the start of something. If you drill five meters of 20 grams, you’re on the start of something, so look for … our magic number is 100 grams per ton. Ten times ten is 100, 20 times 5 is 100, and so on. That’s our goal. If we can find that in the start of a system, then we’re going to be excited.
Last year, we found in one area, 20 meters of .4, and a lot of people were like, “that’ll never work in the Arctic.” We would most certainly agree, but if you go to the Three Bluffs deposit, which is 1.3 million ounces of approximately eight grams per ton, spectacular high grade deposit, guess what’s surrounding that deposit on all sides? Twenty meters of .4. It gets us excited if you hit the smoke and get closer to it, but look for a 100 gram per ton hole. That’ll be the home run start, and that’s what we’re looking for.
Bill: Your other flagship project is the Sombrero project, copper-gold project, in Peru and that has driven a lot of the share price speculation in the stock this year. You recently released the assay results from one of your targets there. These were historical iron skarn drill core and we saw 116 meters of .58% copper equivalent. What’s the significance of this data?
Ivan: Sombrero is a land position we were clever to acquire by opportunity. A lot of people didn’t go here because there’s a lot of volcanic cover. People thought that the rocks were younger. We went in here on a small claim about 4,500 hectares and built the 120 thousand hectare land position, and we mirrored a very famous belt in Peru in the Andes called The Los Bambas district, which has, definitely Peru’s largest copper deposits in the Andes.
What we saw, instead of those deposits having copper-moly, we saw a lot of copper-gold. The last 12 months we’ve been peeling layers off the surface. We trenched 109m at .7%, 105m at .3%, then the other day we trenched 232 meters of .55% copper-gold equivalent. That started to get the world class attention that this place deserves. The feedback has been nobody did the detailed work. Nobody thought this would actually be here, nobody looked through this cover. As we did more work, it’s been a sequence of every time we go there, we find out something better about the geology and how it’s comparable to the belt next door.
Los Bambas itself is a cluster of three deposits worth about 60 billion dollars gross value. That’s part of our exploration upside. We have an entire 120 thousand hectares that would be in the northern portion, but not the entire property land position. You’ve got to think about, that could be major if you found another Los Bambas or something in that neighborhood.
Tintaya is a mine that was mined by BHP, one of their most profitable mines they’ve ever had in that company. It was about half a billion tons of 1.5%. The opportunities at Sombrero are to repeat those major discoveries you see next door. We’ve only worked on the first of six major targets. That’s the only one we’ve had access to. That’s going to change shortly. What did we announce the other day? We found some historical drill holes from a steel company that was drilling for iron skarn, and they came up with, or we came up by assaying the results with 116 meters of .58% copper equivalent.
If you read our press release, it’s so clear we tabulate a table showing all the mines next door and what those average grades are, to give everybody a direct comparison that we’re not only in the right geology, we have the right grades. Now we’re waiting for drill permits ourself. I’m a little bit … actually I’m extremely shocked that the market sold off the way it did when we put out the news and there lies the opportunity.
We basically, with this press release, have confirmed that we have the start of a potential Los Bambas district in our land position. The third dimension is real. To rewind a little bit and say one comment about the geology, there’s two types of rock that we’re talking about in this part of the system. One is called the Ferrobamba limestone. Los Bambas is hosted by it, and all these major mines are hosted by it. The other thing that we’ve seen in this hole is the upper Mara unit.
The Ferrobamba limestone is above the upper Mara unit. With your Fierrazo target, we have results. It has about 20 or 30 meters of the Ferrobamba limestone, and then the rest of it is the upper Mara unit, which is below the limestone. The rock that’s going to host the major deposit, which we’ve mapped all through our first target specifically on our Chumpi Norte target is the Ferrobamba limestone. That carries the grade.
Outside of these drill results, you say, “Ivan, what’s the fingerprint? What is this doing to the system? What does this tell you guys?” We see a target that’s over three kilometers long, same signature, but Ferrobamba limestone and upper Mara unit, 300 to 400 meters thick over the 300 meters or three kilometer long strike length. It comes into the edge of Fierrazo, and on the other end of this target is 109 meters of .7% that we’ve trenched, which include 39 meters of 1.93% copper.
My point to you is that we are in the first of six major potential discoveries in the just the northern half of our claims. We’ve gathered the attention of the largest mining companies in the world. We’ve signed multiple confidentiality agreements, and we just took away the risk. The biggest risk you have is the third dimension. Is this just copper and gold on the surface or could it be beneath? It’s an astounding press release.
Now, I think the market was hesitant to react because we don’t have our drill permits yet. They are well-filed a while ago. They’re in line. They’re being reviewed, and we do anticipate them, probably Q4 of this year is our target date, but it may roll into Q1. I know we’re being ambitious, or maybe we’re being conservative. We cannot control how fast the permit’s going to come from the government. We have to be patient, but in the meantime, we’re turning a drill on July 7th or so at Committee Bay, and there’s a lot more news to come out of Peru that we have not been speaking about that’s going to give a lot more credence to us potentially having this Los Bambas district.
How do you do that? A lot of additional surface work. That’s going to come out of the next area we get access to. If you go look at our presentation, go look at the area called Nioc. There’s 9% copper, five gram gold taken by our predecessors as a couple samples off surface in a few areas, and that area will be the next area that we bring to a drill-ready stage.
It’s the most exciting opportunity for shareholders that we could’ve possibly created. A swing for the fences on one of the world’s biggest gold belts using AI technology after a lot of money’s been spent collecting a lot of really high quality data. And down in Peru, I don’t have a question in my mind, is this going to be a hole in the ground? The question I have, or we have is, how many holes in the ground, and how big will this be at the end of the day?
If it’s anything like the belt next door, we’re talking world class, something that’s going to be notable on the world scale. Lastly, when you talk about Sombrero and you talk about grade and you about widths, the grade and widths is spectacular, but no one’s talking about the hydro electric power lines that are on the property. Nobody’s talking about the roads and the easy access. The infrastructure could not be better if we planned for a mine to exist here. There’s power, water, roads, and personnel right on the edge of this property, or power lines right on the property.
It’s truly, that equates to profitability. It’s a rare opportunity as a company to get an entire district in your portfolio and possibly have the entire Los Bambas district in our land position. That’s what we’re basically swinging for. Two major swings, a lot of really big surprises to the upside that are going to come. There should be a really steady news flow, both of out Committee Bay because we’re going to be drilling here in a few weeks, and also from Peru, there’s a lot going on that I won’t get into on this interview, but it’s going to be a very, very busy six months for us as we wait for the drill permits to come in.
Bill: I appreciated that you referenced and addressed that it’s been about an 8% selloff in the stock since the Sombrero historical core results. One thing that I think investors might forget is that this was not your target. You didn’t choose to drill in this location. You were just taking somebody else’s chosen drill target.
Ivan: That’s a very valid point. I was saying this until I’m blue in the face. The person who drilled these holes was not looking for copper. That was actually something they were trying to avoid, and was not looking for gold. They didn’t even assay for gold before us. They were looking for iron skarn. If you look at the holes, one of them in particular, it’s drilled vertical right next to the porphyry dyke. The porphyry dyke, you would drill across it, and that’s going to be where you get all your grade and that’s what you want to drill across as just a basic way to drill these systems.
You drill across structures, not beside them. It still ran 129 meters at .3% copper equivalent. When you drill vertical holes in a system beside targets versus across them and you’re getting grades that would make it considering the infrastructure we believe would be economic, that’s spectacular, but the holes, every hole that’s crossed the structure is averaging .5 to .58%. It’s all averaging the grades that are being in those big mines next door.
Tremendously lucky that the holes were close enough to the mineralization. A few of them have crossed it. I can assure you and people listening that when we get to turn the drills on our targeting, it’s going to be a much more anticipated success rate, because we’re actually going to point the drill towards the copper and gold, versus towards another metal like iron.
A huge, huge heads up for everybody, a hint that the third dimension is real. That has been achieved. I think that de-risks us by about 85% on the normal risk that you would go in and say, “Hey, is this going to be here or not?” But most importantly, the grades were spectacular in the unit below the good unit that we expect to have the majority of the mineralization to host and so, very early days, the market is a fickle place. I’m not worried about the commodity market. I’m not worried about the gold market. I’ve said this few times, I’m worried about metal in the ground.
As of now at Sombrero, I’m not worried about the metal in the ground. This thing, in my opinion, is going to go absolutely all the way. We’re going to find a few big major deposits here, and the risk of that happening now has gone away for us. The only question will be is grade and tonnage, and it’s a nice question to have when you’re in the neighborhood of some of Peru’s largest mines…Some of the big porphyries that exist in that part of the world.
Bill: About two weeks ago you issued a press release, and it looks like you found greater potential to find more gold and silver up at your Homestake Ridge project in British Columbia in the Golden Triangle. Can you recap that for us and tell us the significance?
Ivan: Homestake Ridge, Golden Triangle, you think of Eskay creek, and what’s happened up in this part of the world, Seabridge. This is a place on the earth where some of the world’s largest gold deposits have occurred and are occurring. We originally acquired the project. We thought, hey, let’s go in and extend 1.2 million ounces, seven and a half grams per ton gold/silver equivalent. We figured out the metallurgy. We created a very profitable mining scenario, but we drilled it and we didn’t see the doubling or tripling of mineralization there.
What we did last year was we said, “Hey, look. Let’s not be blinded by this high grade gold and silver. Let’s step away from it and let’s find the upside in this land position and see what we can create.” We came up with two areas you’re getting up to half a kilo of silver. We don’t know what that fully means yet, but seeing that kind of grades of silver gets us very excited. Then we have a drainage in the southwest portion of the property where we’re seeing incredible gold values.
The terrain is what it is and you’re in a part where if it were sticking out of the ground it’d be drilled by somebody else. Here’s a statistic about Homestake Ridge that we don’t talk about much, but the Homestake Ridge deposit, which has enjoyed holes of, I think, 75 meters of 21 grams per ton, 90 meters of 6 grams per ton and so on. Some spectacular world class intercepts, and it’s sitting there if you go in and see it.
It took 17 years to make this discovery. Seventeen years from the people before us to make the discovery. I’m not saying we have a 17 years wait to go make our discovery. I’m saying that in hindsight, this thing was easy to find, but The Golden Triangle does not always show off with big, robust deposits out of the ground. Again, we wouldn’t be exploring it, we’d be reading about it.
The fact that we’ve opened up two areas in The Golden Triangle, it changes the perception on the project. This summer we’re budgeted for, it’s within our budget, we’re spending 700 thousand dollars bringing these two areas to a drill ready state and by the end of the summer and going into the fall, we’re going to be able to tell everybody how probable these opportunities are, or how high risk they are. The one thing we do know is that The Golden Triangle produces the reward that we dream about as shareholders. We’re really excited about it.
Bill: Ivan, one of your large shareholders is Newmont Goldcorp. I’m curious, what kind of feedback or interaction do you have with that corporation regarding your planned drill programs or results? What does that look like?
Ivan: Sure, great question. Great shareholder within Goldcorp. They took an early bet on us, a big one, when we were about to go up and tackle Committee Bay and cross the portfolio. I’d say when that investment was made, to today, a lot of money’s been spent. Their investment was about 36 million. We spent 100 million in four years. The quality of what we’ve taken out of the ground in terms of getting closer and collecting data to point us towards discovery is something everybody should be happy about as a shareholder. I don’t think they would disagree. I can’t speak for them, I’m making a speculation, but at the same time, our technical team comes from Newmont. We have their former chief geologist, Antonio Arribas on our board with the former global structural geologist, the global mapper, the global geochemist, the global geophysicist.
When you talk about them being shareholders and you point towards our technical work, and you point towards the scope of what we’re going to go find, I think it’s something that, assuming that they’d be quite pleased that their shares are in really good hands technically with a group that’s able to finance and execute on its business model of chasing these major deposits.
They’re obviously a gold-focused company. They became a lot bigger soon with the merger between Newmont and Goldcorp. We’re giving them updates. We’re about to give them updates continuously as we move forward into these things, but everybody’s watching. They have a great head start towards the rest of the market and I think we’ve maintained structure and we’ve maintained currency, so I would assume that they’re in pretty good spirits about it and are going to keenly watch us and our programs this year, both in Canada, as well as in Peru.
If it’s a predominantly copper asset in Sombrero, I don’t think that’s their cup of tea, but if there’s a big gold component, a lot of people criticized us, said, “Hey, where was all the gold? You said there could be more gold.” There was up to 193 grams per ton gold in the system. There’s a lot of epithermal occurrences. There’s several multi gram gold samples everywhere. We don’t know what’s going to come out of Sombrero in terms of gold numbers yet. If it’s got a significant gold number, I don’t see how any gold company wouldn’t be super keen on an asset like that.
Copper is going to make you a ton of money on the backside of it, but the gold would be its own precious value for a precious metals company. Great relationship, love it that our geologists all come from there. I like to think we speak the same language technically, and I think they’re very creative to have in our registry.