Auryn Resources (TSX: AUG; NYSE-AM: AUG) has found a zone of oxide copper mineralization at the Milpoc prospect, 12 km south of the Sombrero Main target on its Sombrero North copper property in Peru. Rock samples it collected at the 1.2 km by 500 metre Milpoc graded as high as 8.75% copper and 101 grams silver per tonne.
Auryn optioned the 1,200 sq. km Sombrero copper-gold project in July 2016 from geologist Miguel Cardozo. It consists of the Sombrero North and Sombrero South properties. To acquire 80% of Sombrero, the company must spend US$2.1 million on exploration over five years and pay Alturas $200,000.
At the time, Cardozo was running a company called Alturas Minerals that ran out of money during the market downturn post 2011. Cardozo never had a chance to sample the project in detail, but would go on to join Auryn as its Peruvian exploration manager.
In an interview with The Northern Miner, Auryn executive chairman Ivan Bebek calls the project a “highly overlooked” opportunity. Several companies considered it before Auryn, but all eventually shied away — in part, Bebek says, because of an iron mine on inlying concessions that private company Aceros Arequipas was running.
“Normally you see iron and gold, but if you went there, and we did early on, we found tons of copper,” Bebek says. “We started to find multi-percent copper in the tailings and in the area around where they were mining iron.”
In late 2018, the company optioned Aceros’ inlying concessions. If Auryn completes its earn-in, it will form an 80-20 joint venture with Aceros on the 5.2 sq. km Aceros concessions, as well as 46 sq. km of Auryn’s surrounding land position. Under the agreement, Auryn will have to pay Aceros US$800,000 and spend US$5.15 million exploring the optioned concessions over the next four years.
The company now has five targets at Sombrero: Sombrero Main, Nioc, Good Lucky, Totora and Milpoc.
“It’s going to take us 18 months to find out if one of these is another Peruvian giant, or if potentially more than one of them are,” Bebek says.
Shortly after picking up Sombrero, Auryn found the Good Lucky target. Good Lucky is in the side of a cliff, where a skarn body and plenty of sulphide is exposed. The company intends to eventually drill into the side of the cliff, where adits indicate historic copper mining.
“The reason why it wasn’t discovered in other places is there’s a widespread layer of volcanic cover,” Bebek explains. He says the volcanic cover is likely the second reason other companies passed over the project.
It took Auryn more than a year to finish its first major community agreement (CA) at Sombrero. The CA helped it explore the southern part of the project. It has since started a second major CA, which it aims to finish by mid-February 2019. It will then continue trenching its project. That agreement covers the northern part of the project.
“These were the hold ups for Sombrero,” Bebek says. “We’re an aggressive group, and we would have loved to have been here much sooner, but we didn’t want to rush our community access. We took the time to create long-term, pristine relationships under Miguel’s guidance.”
So far, Auryn has had about a year of on-the-ground work at Sombrero consisting of trenching, geochemical analyses, magnetic surveys and geophysical surveys. It’s in the process of permitting 40 drill pads. It submitted its drill pad application last August, and hopes to start drilling in May or June of 2019. Ivan says the company would like to start with a 12,000- to 15,000-metre drill campaign. The extra drill pads give the company optionality as it progresses the project.
“The reason we want to be aggressive here is because of the scale,” Bebek says.
Due to the limits of its first CA, Auryn has so far focused on Sombrero Main. It has not done any work on Nioc, the strongest chargeability signature on the project, which sits 2 km north of Sombrero Main on one of the recently acquired Aceros claims.
“We’ve sampled 5 grams gold, 9% copper on surface,” Bebek says. “It has got a lot of mineralization outcropping and we’re just getting access to that now.”
Further northwest of Good Lucky, at the Totora target, the company can see porphyry outcropping for 50 metres.
“We feel that there’s tremendous potential at each of these targets,” Bebek says. “Taking all those five targets into consideration, now you’re looking at a district.
“The one thing that makes the hair stand on the backs of our necks is that you’re in the territory of some of the largest porphyry skarn deposits in Peru.”
He’s referring to MMG’s Las Bambas copper mine. Auryn interprets Sombrero as being on the northwestern margin of the belt that hosts Las Bambas. Las Bambas produced more than 453,000 tonnes copper concentrate in 2017. In the first three quarters of 2018, Las Bambas produced more than 273,000 tonnes copper concentrate.
Auryn is composed of former Keegan Resources and Cayden Resources members, including Bebek, who co-founded both companies. Keegan would go onto become Asanko Gold (TSX: AKG; NYSE-AM: AKG) after developing the Asanko gold mine in Ghana; Cayden sold itself to Agnico Eagle Mines (TSX: AEM; NYSE: AEM) for $205 million after finding and developing the El Barqueno gold project in Mexico.
In 2015, Auryn acquired the Committee Bay gold project in Nunavut, and shortly after six other projects, including Sombrero. Sombrero and Committee Bay are its two flagship projects.
The company has spent four years and $45 million exploring Committee Bay. The company hopes to drill the project mid-year as well, with help from an artificial intelligence platform it has developed to identify drill targets. As of a 2017 resource estimate, Committee Bay has 2.07 million indicated tonnes grading 7.85 grams gold for 524,000 oz. gold, as well as 2.9 million inferred tonnes at 7.64 grams gold for 720,000 oz. gold.
The company is funded to the end of April 2019, but would either need to raise money or sell an asset to turn drills by mid-year. It’s not looking to raise money, but is “very mature” in negotiations for selling one of its assets.
Shares of Auryn are trading at $1.24 in a 52-week range of $1.14 to $2.17. The company has a $112-million market capitalization.