Goldcorp drops $35M into Auryn

Goldcorp (TSX: G; NYSE: GG) is taking a 12.5% stake in Auryn Resources (TSX: AUG; US-OTC: GGTCF) for $35 million — a sum that will be used to fund a 55,000-metre exploration drill program this year across the junior’s projects in Nunavut, British Columbia and Peru.

“We’ve spoken with a number of major mining companies over the last little while, and we realized that there was a lot of synergy with Goldcorp,” president and CEO Shawn Wallace says in an interview.

“We’ve got a common mind on how we see this suite of assets being developed, and the manner in which we want to explore them, our approach lined up with what they wanted to see — so it makes for a good partnership.”

One of the things that attracted Goldcorp, Wallace says, is that Auryn took advantage of the dismal environment for juniors over the last few years and acquired a basket of quality assets, including the Committee Bay gold project in Nunavut, the Homestake Ridge gold project in B.C., and a portfolio of gold projects in southern Peru.

“We acquired high-quality assets, and we also acquired a high-class, experienced exploration team led by Michael Henrichsen,” Wallace says, describing the team as “technical superstars.”

Henrichsen, Auryn’s chief operating officer, was a former global structural geologist at Newmont Mining (NYSE: NEM), where his contributions increased the company’s reserves and resources in Ghana. Henrichsen also worked extensively at other major gold camps in South America, the Carlin trend, Guinea and Canada.

In addition to Henrichsen, six others on Auryn’s 10-member technical team have previously held senior posts at Newmont, in addition to other companies including Gold Fields (NYSE: GFI) and BHP Billiton (NYSE: BHP; LON: BLT).

Another, Dan McCoy, led the technical teams at Cayden Resources and Keegan Resources, two companies cofounded by Wallace and Ivan Bebek, Auryn’s executive chairman.

McCoy was in charge of the team at Cayden that discovered the El Barqueno gold asset in Mexico’s Jalisco state, and helmed the team at Keegan, which discovered the Esaase gold deposit in Ghana.

Cayden was sold to Agnico Eagle Mines (TSX: AEM; NYSE: AEM) in 2014 for $205 million, while Keegan, which was renamed Asanko Gold (TSX: AKG; NYSE-MKT: AKG) in March 2013, declared commercial production at Esaase in April 2016.

“We were fortunate as a group that we were coming off a few successes and we had a little bit of wind at our back, and some currency in our equity,” Wallace says. “We are an ambitious, capital-efficient group, and that was one of the things that drew Goldcorp and others to us.”

This year, Auryn plans to drill 25,000 metres of its planned 55,000-metre exploration drill program across 17 multi-kilometre-long targets at its flagship Committee Bay project, and another 30,000 metres split between its Homestake project in northwestern B.C. and its Sombrero, Huilacollo and Banos del Indio projects in southern Peru.

“It is ambitious, but the good news is that we’re going to hit them hard and fast,” Wallace says, noting that the company has “spent the last two years getting these assets ready.

“We’ve done a lot of work,” he says. “This will be a big year for us because a lot of the preparation work is going to come to fruition.”

Auryn says its Committee Bay project offers district-scale discovery opportunities. The project covers 3,800 sq. km in the Arctic’s Committee Bay greenstone belt — one of a number of Archean-aged greenstone belts occurring within the larger Western Churchill province of northeastern Canada.

The belt occurs 180 km northeast of Agnico Eagle’ Meadowbank mine, and extends more than 300 km northeast to the shores of Committee Bay.

“It’s one of the most exciting projects out there,” Wallace says. “It’s like one company controlling the whole Abitibi belt. The opportunity for an exploration company … is unprecedented.”

Over the last two years the company has completed surface work over 85% of the greenstone belt. In November, Auryn reported that 6,450 till samples from sampling programs in 2015 and 2016 had identified 17 multi-kilometre-long targets within five structural corridors across the belt. (Fifteen percent of the belt still remains to be surveyed during the mid-2017 program.) In conjunction with the till survey, Auryn also rock-sampled areas to find mineralization within the till anomalies.

“It’s one 300 km belt [and] we had to distill it down to the best targets,” Wallace says. “We’re now ready to go drill with a deep understanding of the structural controls and the mineralization, and so forth.”

Committee Bay already had a resource on Three Bluffs when Auryn picked up the project in its mid-2015 acquisition of North Country Gold in an all-share deal valued at $20 million.

Three Bluffs has an indicated resource of 4.3 million tonnes grading 4.91 grams gold per tonne for 683,000 contained oz. gold, and an inferred resource of 5.5 million tonnes of 5.43 grams gold for 965,000 oz. gold.

The resource includes what Auryn describes as a “high-grade subset,” made up of 1.9 million indicated tonnes averaging 8.42 grams gold for 501,729 contained oz. gold, and 3.4 million inferred tonnes averaging 7.16 grams gold for 772,179 contained oz. gold. Three Bluffs remains open for expansion both along strike and at depth.

During its eight-week mid-year field season last year, the company completed 10,000 metres of rotary air blast (RAB) drilling, 3,750 metres of diamond drilling at the Three Bluffs deposit, 5,500 regional till samples, 3,100 XRF till samples, 1,000 line kilometres of mapped boulders and 3,500 sq. km of drone imagery. Highlights included 13.7 metres of 1.91 grams gold at the Anuri prospect, and 23 metres of 2.5 grams gold and 30 metres of 2.12 grams gold from the Three Bluffs deposit.

Boulder sampling focused on certain areas within the Anuri and Three Bluffs corridors, targeting only eight discrete boulder trains that represent only a fraction of those identified across the belt. Of the boulder trains sampled, two were identified as containing high-grade gold values, one at Anuri and the other, called Ridge, near Three Bluffs.

The mining camp at Auryn Resources’ flagship Committee Bay project. Credit: Auryn Resources.

The high-grade boulder train at the Anuri prospect has a source area along a major north–south fault zone that wasn’t drill tested in 2016. The boulder train is 2.6 km long and its 112 samples average 2.43 grams gold. The total strike length of the north- to south-oriented structure is 8 km, and will be drill tested this year.

While the Committee Bay project is “massive,” Wallace says, he is also excited about the company’s Homestake Ridge project in B.C. and the company’s properties in Peru.

Homestake Ridge covers 75 sq. km within B.C.’s Iskut-Stewart-Kitsault belt. So far 268 drill holes totalling 77,845 metres have been completed on the property, which Auryn acquired last year in an all-share deal valued at $9 million.

At a US$120 net smelter return per tonne cut-off, the project has a resource of 482,000 indicated tonnes grading 7.4 grams gold and 57 grams silver for 115,000 contained oz. gold, and 883,000 contained  oz. silver. Inferred resources stand at 4.5 million tonnes averaging 5.4 grams gold and 117.5 grams silver for 779,000 contained oz. gold and 16.89 contained oz. silver.

“We got almost 1 million oz., with tonnes of exploration upside, and that was a huge milestone for us,” Wallace says of the Homestake transaction, which was completed in September 2016.

In addition to Homestake, Auryn picked up the rights to the Huilacollo, Sombrero and Banos del Indio properties in southern Peru last year. The company completed extensive surface sampling at Sombrero and Huilacollo in last year’s fourth quarter to advance the projects toward a drill-ready stage. At Banos del Indio, exploration plans are to undertake a property wide induced-polarization survey in the first quarter of 2017.

As part of its agreement with Goldcorp, the gold major can participate in future Auryn equity issues up to a 12.5% interest.

Auryn’s management and insiders hold 18% to 20% of the stock.

At press time, Auryn’s shares were trading at $3.44 apiece within a 52-week trading range of $1.01 to $4.17. The company has 67 million shares outstanding.