Aurania sees shares jump, identifies target in Ecuador

Shares of Aurania Resources (TSXV: ARU) skyrocketed in the first week of January  after a senior analyst at The Casey Report recommended to his subscribers that they buy the junior for up to $15 per share. The stock, which opened on Jan. 4 at $3.20 per share, soared to a 52-week high of $7.57, before closing at $5 — a 61.2% increase.

“He put a target price on the stock and said it was something worth watching and literally within minutes the stock took off,” Richard Spencer, Aurania’s president, tells The Northern Miner. “It was quite scary for a while and we sent the report to IROC as soon as we got it.”

The Casey analyst and editor, E.B. Tucker, said he met Aurania’s CEO, Keith Barron, about a month ago in London, when the company’s shares were trading at $2.45.

“With less than 23 million shares outstanding, if Aurania hits the mother lode in Ecuador, its shares will explode,” Tucker said, adding that Barron has “found a billion-dollar mine before in the same region.”

“He thinks he can do it again,” Tucker mused. “For that reason, he’s not letting go of shares unnecessarily.”

Barron — who cofounded Aurelian Resources in 2001, and along with Stephen Leary and Patrick Anderson discovered the multi-million ounce Fruta del Norte gold deposit in Ecuador in 2006 — sold the project two years later to Kinross Gold (TSX: K; NYSE: KGC) for $1.2 billion.

This map titled “The Gold Regions of Peru” was produced by Flemish cartographer Abraham Ortelius in 1574 and references storied gold-mining centres Logrono and Sevilla del Oro in modern-day Ecuador. Credit: Auriana Resources.

The exploration geologist has now staked 2,000 sq. km, or 1.5% of Ecuador’s total landmass, in the Cordillera de Cutucu, 90 km north of Fruta del Norte, now owned by Lundin Gold (TSX: LUG; US-OTC: FTMNF), which sits in the adjacent Cordillera del Condor.

Barron is hunting for two famous gold-mining areas, or “Lost Cities” that Spanish documents and maps from the 16th and 17th centuries refer to as Sevilla del Oro and Logrono de los Caballeros. Logrono was considered the richest gold mine in the Spanish Empire and Barron’s 12 years of research has taken him to libraries in Quito, Lima, Madrid, New York, London and the Vatican in Rome.

“The Aurania story is a little bit different from many other exploration stories in that it has a historical basis,” Spencer told analysts and investors attending a Red Cloud investment forum in Toronto in late October 2017.

“Keith was based in Ecuador in 2003 and started to hear about the so-called seven lost cities from the Spanish colonial days, and he started doing some research into this because they had found some month-end reports produced by the Spanish in the late 1560s that talked about the amount of gold that had been produced from two areas — Logrono and Sevilla. Not only were there actual month-end reports about the amount of gold that had been produced over a 40-year period or so, but there were historic descriptions of how to get to these places … and some of the documentation, apart from these descriptions, were old historic maps.”

Spencer pointed out that a map from 1584 shows two landmarks that still exist today — Quito (now Ecuador’s capital) and Camora (now spelled Zamora) — which Aurania can use as two fixed points to put everything else into context. The ancient map also shows a river called El Pongo, one of the only rivers in southeastern Ecuador that flows north to south.

“The location for Sevilla and Logrono are on the east side of the river and the other crucial thing about this map is that the last chain of mountains is the Cutuco ridge, which is in the middle of our project area, and it’s the last mountain chain before you get into the Amazonian flatlands that go on for a couple of thousands of kilometres,” Spencer said. “So although this map is certainly not accurate, in some contexts it’s absolutely accurate, and critically important.”

Spencer commented that while Aurania’s concession area was defined on the basis of the historic data from the mid-1500s, the company says that it is also the geological extension of the Cordillera del Condor to the south, where Barron and his team found Fruta del Norte.

A stream sediment sampling crew planning its next move when confronted with a waterfall at Aurania Resources’ Lost Cities-Cutucu gold property area. Credit: Aurania Resources.

Cordillera del Condor is a mineral belt that isn’t that well known, although it contains resources of 27 million oz. gold and 30 billion lb. copper, Spencer said. “It is a phenomenal mineral belt and we have the geological extension to that in an area that hasn’t undergone recent exploration.”

Spencer also pointed out that Fruta del Norte was a blind discovery, where the gold mineralization started at a depth of 125 to 150 metres. This discovery, along with a chain of copper porphyry deposits encompassing San Carlos, Mirador and Panantza, were made through fieldwork and stream-sediment sampling, without using geophysical data.

“With hindsight we can see that the Fruta del Norte deposit formed in a pull-apart basin, which is basically a basin where the crust has cracked open adjacent to a couple of faults, and, in the case of Fruta del Norte, hot fluids came up that plumbing system that was provided by the faults, and it was gold-bearing, and the gold just precipitated to form the epithermal deposit. So building on our knowledge of FDN, it’s absolutely fundamentally important for us to be able to find these pull-apart basins.”

So far Aurania has identified five of the basins on its property. “The basins are showing the same scale as the Fruta del Norte one, we’ve seen the same geological patterns, we’ve seen the same sort of cracking, and if there are gold-bearing fluids in this area we stand a reasonable chance of finding epithermal deposits, hopefully similar to FDN within those structural domains,” Spencer said.

Aurania completed an airborne geophysical survey of its 2,080 sq. km project area in November and is analyzing the results. The first target defined from the geophysics program — Awacha — was announced last month on Dec. 6.

This month, the company reported that stream-sediment results and rock textures found in initial field exploration, several tens of kilometres away from the Awacha target, have led them to the project’s first epithermal target.

Keith Barron looking at Fruta del Norte core in Ecuador in 2007. Credit: Keith Barron.

In a press release on Jan. 11, Barron noted that he is calling the target Latorre, in memory of professor Octavio Latorre, a friend and mentor, who “played a critical role in the historical research, which ultimately led to the staking of the exploration concessions that constitute the project area.”

Stream sediment geochemistry in the Latorre target has found two areas — both 3 sq. km. in size and located 3 km apart — of high concentrations of pathfinder elements. The company stated that the concentrations of arsenic, antimony and silver in stream-sediment data from the Latorre West area are similar to those that defined the Fruta del Norte target before exploration drilling intersected the gold-silver deposit.

The company has seven crews on the ground to prepare targets for initial exploration drilling in the second half of 2018.

Spencer, who has worked in Ecuador since the mid-1990s, calls the country a “hotspot of exploration activity,” and says the government is doing its part to rectify past mistakes.

“Ecuador implemented a supertax the way Australia tried to do that killed the mining industry, [but] they’ve basically defanged that supertax over the last couple of years, and we’re hearing that the supertax is going to be revoked completely in the relatively short-term,” he noted.

The government also recognizes that given the country’s dwindling oil and gas reserves, those commodities can’t continue to be the major driver of its economy, he said.

Fruta del Norte alone, Spencer estimates, will produce a couple percent of the country’s gross domestic product, and the government has spent US$140 million on infrastructure development in the province where the project is located.

“There are a couple of hydro-electric systems that have gone in, the roads have been paved — they’re absolutely world-class — there are schools, and colleges and hospitals have been upgraded,” he said. “The government is very much on the front foot in saying to us, ‘Look, we’ve put our faith in you. We’ve spent the money before we’ve even gotten one cent out of you guys in terms of royalties.”

Meanwhile at Aurania’s Lost Cities project, the infrastructure is also coming along. There’s a 1.5-gigawatt hydroelectric dam being built on the southern boundary of the property, Spencer said, “so there’s going to be clean power galore there for future development.”

Aurania has 31 million shares, fully diluted, and Barron owns over half of them. Altogether, insiders own 62% of the company, but that will likely be diluted as funds are raised for exploration.

At press time the company’s common shares were trading at $4.49 for a $123-million market capitalization.

The company has $700,000 in cash.