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Aurion Resources (AU) - The Next Abitibi Gold District is in Finland

September 29 2020, 16:17 GMT+01:00

Aurion Resources (AU)

  • TSX-V: AU
  • Shares Outstanding: 83M
  • Share price C$1.62 (19.08.2020)
  • Market Cap: C$135M

Aurion Resources is a Canadian mineral exploration company listed on the CVE and the OTCQX Best Market. The central strategy is to acquire early-stage precious metals projects and advance them via 'direct exploration,' driven by its experienced management team and business/JV partnerships.

The focus for this gold explorer right now is on exploring its flagship Finland-based Risti and Launi Projects. The gold player also aims to advance JVs with Kinross Gold, B2 Gold, and Strategic Resources in Finland. It is an interesting, multifaceted gold mining story that is hoping to leverage the soaring gold price.

We Discuss:

  1. 2:24 - Company Overview
  2. 2:48 - Abitibi #2: Why Finland?
  3. 6:20 - Team Experience and Work in Finland
  4. 9:11 - Business Model
  5. 10:28 - Monetizing Relationships: JV Upside
  6. 11:44 - Money: Cash Position, Burn Rate, Raises
  7. 13:36 - Share Price Dropped and Hasn't Recovered: Why?
  8. 16:11 - Significance of Matti Talikka: Vision VS Targets
  9. 18:39 - Road to Economic Success: Allocating $10M
  10. 20:51 - Share Structure: Large Institutional Holding
  11. 23:03 - Utilizing the Bull Markets?
  12. 24:37 - Post-COVID Normality: Getting Back on the Ground

Matthew Gordon: why don't we kick off with that one-minute overview of what it is that you are.

Mark Santarossa: We're a high-grade Gold exploration in Finland, in what's known as the Central Lapland Greenstone Belt that is very prospective for Gold.

Matthew Gordon: There's some pretty big names ploughing in. Why?

Mark Santarossa: Above other things, number 1, it's a great place to work. The Fraser Institute has always ranked in the top 10 for mining investment. In 2019 it was number two. But aside from that, the geological opportunity is incredible. It's a major Greenstone belt in the same scale as the Abitibi that most of us know of, hosting major Gold camps like Timmins and Kirkland Lake as well as Val D’or. And then, as well as Western Australia with the Coolgardie, Waroona or Southern Africa and Zimbabwe, Creighton.

The one major difference that you have in the Central Lapland Greenstone Belt is a lack of discoveries to date. If you think about the Abitibi or Western Africa, you've got hundreds of millions of ounces that have been discovered in those major Greenstone belts where you don't have that yet in the Central Lapland Greenstone Belt. And why is that? You just don't have 100 years of exploration history. Mining and exploration started in the Abitibi in Western Australia over 100 years ago. Exploration was in state hands up until about 1995 so you've only got a couple of decades. That's why you haven't had major discoveries.

To date, you've only got one big discovery and that's Agnico’s Kittilä Mine and that's really it. When you think about the opportunity, the chances of finding a big deposit are here where no one has actually looked for it yet. The geology is right. The structures are right. It's exactly where you want to be when it comes to finding a major Gold deposit.

Matthew Gordon: Why do you get to make those sorts of comparisons? What is known about this district in Finland?

Mark Santarossa: What was been missed are a few things. Why you haven't had major exploration? The state-run mining company did explore, they're exploring for base metals. They actually made Gold discoveries but took all that information and filed it and archived it and it was left kind of untouched. That's the first. Second, it's the right age of rocks. We are talking rocks that are several, almost 2 billion years old, similar to the Abitibi, similar to Western Australia. We're talking about the same age of rock, same types of rocks that you've got in both of them. Then you've got structural features as well, in particular, what we've locked up, we've locked up an 80km section of a 125km-long crustal-scale fault. That's actually the equivalent of the entire Porcupine-destor fault or the entire Cadillac Lerner Lake deformation zone in Canada. So that's why we feel that we're onto something that looks very similar to what most of us Canadians know, is the Abitibi structure and geology are very similar. We know there is Gold there because the GTK, the state-run geological survey has actually already discovered Gold on that with numerous currencies that they had discovered on there, but never followed upon.

Matthew Gordon: Tell me a bit about the team. I noticed Matti Talikka has come on recently. I guess he didn't drive you there so who was it?

Mark Santarossa: Interestingly enough, it was Mike Basher, who's our founder and president and he's continuing on. And it was his vision. It was his knowledge, he's actually an incredible geologist and made several discoveries already around the world including co-discovered the Hammer down deposit. He saw these rocks in a similar setting to what has been seen in Timmins and in Kirkham Lake. He went to Finland and staked ground, bought some pieces of land, making small deals very quietly while no one was there. You had some small companies, but part of the issue why we don't think that a lot of big Canadian exploration companies came in early on was mainly because 1, 1995 was your first chance to get in. Soon after you had reacted a collapsing kind of junior exploration and there was very little mining investment globally going on anywhere. And then you have the Canadian experience of North of the Arctic circle; you think of Nunavut and the Northwest Territories, and the challenge that is to get there. It's very expensive, it's usually fly-in, fly-out camps. It's very expensive just to even set up a camp there never mind the exploration itself. What that probably did is put off Canadian explorers from going to Finland above the Arctic circle. Now that's not the case because the Arctic circle in Finland is actually 20 degrees Celsius warmer on the average in January and that's a function of the Gulf stream. We don't have permafrost, we have paved roads right to the site, we have excellent access, so it allowed us to stake a lot of great lands. And that's why you didn't have any major discoveries for a long time up until now.

Some of our neighbours have had some great success, Rupert Resources, who have drilled a couple of great holes and discoveries right on our property boundary with our JV, B2Gold. We've made a discovery ourselves and a number of surface discoveries as well. And, of course, there's, Agnico, who's been very successful in our neck of the woods.

Matthew Gordon: Could you just talk about that business model for us? What is it you're trying to be? And at what point do you take projects to, and what's your game plan for the company?

Mark Santarossa: We have got JVs that we've got with some excellent partners: Kinross and B2Gold, and they're moving those along, but we've also got 100% land that we're doing all the work ourselves. We're currently drilling we've been drilling on them since about 2017, late 2017. We've made one major discovery in our view on our property, but we think there's a lot more to do. We're still in the exploration phase, early exploration phase. As far as I'm concerned, we've made one discovery and we think our properties have a number of more discoveries on it, all within a small area. That is our task and our goal is to uncover as much as possible within a small enough area to show how big the opportunity is to one of the majors. Hopefully, at some point, we either sell to a major and create value to shareholders that way or if we have to, we will take it to the next level.

Matthew Gordon: Let's talk about Kinross and B2: what's happening on those particular assets? What's the upside for you? And at what point do you start to monetise that relationship?

Mark Santarossa: On our B2Gold joint venture, they're currently earning into about 70% of the property. We are free to carry on everything, B2Gold is spending money over that. They've already executed on the first 51%, and that will happen in August 2019. They spent USD$5M and issued a number of B2Gold shares, which we currently own. They're now spending USD$10M over 2-years. So through 2020 and 2021, to earn up to 70% on their properties. They're currently drilling, and they are they should have some assays out on some of those properties in the next weeks, or within a month.

The Kinross property, they're also running to 70%, also free carry. There is no step there and indirectly in the 70% on that. And they're currently drilling as well.

Matthew Gordon: How much money have you got today?

Mark Santarossa: We've got about USD$10M in the bank so we're fairly well-funded still. Our burn rate, because of COVID, has actually slowed down a bit. We are starting to try to ramp that up a little bit. But we are drilling, we just had a rig just come back on-site and it's targeting a new geophysical discovery or anomaly on our property, 6km of drilling that we're going to be doing on our longest 6km-long trend connecting our Aamurusko discovery to another one of our surface discoveries. We're going to joining along with that, and then we've got a second rig, hopefully coming in an early September to drill test one of our other targets on our 100%-owned property.

Matthew Gordon: Is there any more cashflow coming in or have you got to make this USD$10M last as long as you can? Do you need to go and raise some money anytime soon?

Mark Santarossa: The way we look at capital raising, we try to manage our money very well. So that's why we don't have 5 or 6 rigs turning at the same time. It can get very expensive and you haven't made an easy, efficient discovery to drill or something that we can just drill easily and efficiently. We were just wasting money. There's no money coming in from Kinross or B2Gold for the JVs. At this point, it's just their exploration spend. The USD$10M will last us into 2021, but of course, we're tactical; if there's an opportunity to, if the exploration wants expansion, we may go look to the market and see if there's capital available, but that's all results-based.

Matthew Gordon: What happened at the beginning of this year? Where do you think your money has gone?

Mark Santarossa: We agree - we've lagged a bit. What happened earlier in the year was we drilled our second flagship. We have two flagship assets. The second flagship, we only got the exploration license early in 2019 and did all of our work there. It was the first 6 holes that we drilled on it while they were, as the geologists will call them a technical success, we hit a little bit of Gold, but it wasn’t what we had expected. I think it wasn't what the market was expecting. I think that that's the bigger thing. The market was expecting something more, given what we had on the surface and what we were recovering on the surface from samples there. So that was the major sell-off and I think the market really penalised us for that miss, but I think they also forgot when they took us down to that level that was actually a discount us to before our Gold discovery in 2017. It wiped out almost three years of our efforts.

Looking forward from that moment on, yes, we had COVID and things kind of slowed down. We do have a team on-site still there. They are Finnish consultants. They're still working. They've been working throughout the entire COVID crisis. And so, we have been advancing, I think what the market has penalised us for was just being slow and slow with information and news. We have been in the past. Part of that was our primary target, Aamurusko, which is on our Risti property. We made our discoveries, acquired a helicopter, and it was just slow drilling, inefficient drilling so it just took time. We're trying to change that by targeting prospects that are in flat areas that do not require a helicopter, which we have a number of. Our major discovery was made on the only hill on our property, but we are focused on getting news out faster, which should bring the shareholders back. Of all the complaints or any sort of a negative that we had, was we just weren't newsy enough. We watched all of our peers, they just talked about increasing their drill program by 50% and their stock went up by 30%, that kind of thing. I think has been the lag on our part.

Matthew Gordon: What's the significance of Matti Talikka coming in?

Mark Santarossa: Matti has been with us and he's been on the board since 2015. He's been kind of part of the team the entire time. The significance is Matti is, he is a Finnish national, while he lives in Canada, but he is a Finnish national and can travel back and forth freely. He is well known in the exploration world in Finland. He's worked in Finland for a number of years, worked for Uber Tech, worked for Dragon mining, who we actually purchased our first property, back in 2015. He's been around for a while. He's well known there. He's also very technical as well, but what it does is, it allows Mike to be the visionary that he is. Mike is the founder and the visionary, and this is his vision that he sees on what this property can be. This frees Mike up to do a lot of the exploration and targeting and really thinking about where he wants to point the drills and where we should be going. Matti will take a take on a lot of the administrative role, the more community relations role, the logistical role in-country. And of course, it also bodes very well in-country to have a Finnish leader of a company when you're working in-country. It just works really well for the community.

Matthew Gordon: Do you want a visionary, or do you want someone that can hit targets?

Mark Santarossa: He has been hitting targets, but it was his vision that allowed us to move to Finland in the first place and to see that how big the opportunities are.

Matthew Gordon: How do you address that?

Mark Santarossa: We've got the team, and he took the shots that we thought were the best shots, the highest probability shots. But as you can expect, it was only 6 holes in a very small area that were drilling in, so it was not indicative of what the opportunity was. Even on that secondary property with some very interesting results in our last press release so we're pretty excited about what that opportunity is as well. While we haven't hit the home run on that property yet, we have hit Gold on almost all the holes that we drilled.

Matthew Gordon: How do you spend USD$10M in the best possible way to ensure that you create real value and excitement in the market?

Mark Santarossa: The USD$10M, again, the whole USD$10M isn’t going to this, but part of that USD$10M is going back to our flagship property, Risti, which is about 10km away. It's drilling on the extension from our already known discovery, which is the Aamurusko prospect on Risti. It is drilling eastward from there along a structural target where we've done extensive work and that we know that there's Gold on the structure. And then the second target that we're drilling on is something that has historical drilling, about 130 holes that have all got ore grade, ore width, the deepest holes are 140m deep. Most of the holes are less than 100m and are structurally sound, geologically sound. We know there is Gold there because the Gold has been hit in the past. There are 130 holes already into it. So, we are targeting targets that we believe are very economic.

Matthew Gordon: In the sense that they are high grade things that you're chasing.

Mark Santarossa: Very high-grade, very near surface, all starting at surface, as anyone would know, anything in the Abitibi goes kilometres deep so we're literally just scratching the surface on our properties.

Matthew Gordon: Why wouldn't you have started there rather than what you've obviously spent a little bit of money on towards the end of last year?

Mark Santarossa: Absolutely. And we believe that these are high-probability targets that we're going after.

Matthew Gordon: Talk to me about the share structure, the corporate structure, it seems to be very institutional heavy for a company of your size. Why is that?

Mark Santarossa: Early on, we got involved with some of the big purchase manager institutions in Canada: RBC Global Asset Management and McKenzie, they’ve been strong holders and they have been very good followers of the name. I think what they see, like others, is that this is a major opportunity to get into a major Gold camp, an emerging major Gold camp, similar to something like the Abitibi, but they were 100-years ago now, we're not going to take 100-years to prove up what we've got, but everyone would want to have their name associated with that kind of discovery and that kind of opportunity. And I think that's why they came in as early as they have. Eric Sprott was really excited by some of our results last year, which is why he came in and he's at above where the prices right now.

Matthew Gordon: What are you learning from them?

Mark Santarossa: From Kinross, Newmont, Goldcorp, who was also a shareholder, B2 wasn't a shareholder, but they are a JV partner. They came in and saw what we saw. They have walked the ground. Early on, they walked around the solid borders in these incredible boulder fields with very high-grade ports vein sitting on the surface. They say that this is something they've never seen before in their history as being geologists. In all the projects they looked at they've never seen anything like this, on this scale and in this grade, sitting at surface, which is why they got involved and why they continue to be involved. Kinross has participated in every financing that we've done ever since they came in in 2017.

Matthew Gordon: Are you not tempted to go and get a bunch more money and scale this thing up, get things moving quicker?

Mark Santarossa: Everything is an innovative process for us. We don't want to go and just raise capital for the sake of raising capital and diluting shareholders. I think what we want to do is, as mentioned, get onto a target that we know that we can continue to drill and accelerate. We'll start with one rig and then if we have success with that one rig, then we'll grow, and we'll accelerate that drilling and we'll look to raise capital to accelerate that drilling at that time. But it's with success and not just raising capital for the sake of raising capital.

Matthew Gordon: Are you nervous at the moment that the market isn't seeing what you were seeing?

Mark Santarossa: It is fixable. I'm not that nervous. I think this is partly on our shoulders and the slowness of news that we put out. I realised that, and that's part of the reason why I'm picking up and they brought me in, was to be out there a bit more, tell the story a little bit more. The most important part is we need to be drilling. And of course, we're doing that now. With drill results comes news and with the news comes more me talking more.

Matthew Gordon: Thanks for the catch-up. It’s a nice run-through of where you're at. And we did speak a couple of months ago. We need to kind of see more, as you say, you need to get out there. Is the crew still back in Canada, or have you got people back in the field now?

Mark Santarossa: We've always had someone in the field, as far as we've had our Finnish contractors there. We've got a couple of excellent geologists that are leading the charge from there. We have regular calls just as updates. And so, our Canadian team is still working remotely. We are working to get them back there now.  That will also de-bottleneck a few things; with a smaller team of consultants that are contractors we have in-country, it slowed things down a little bit as well during this period, but we'd like to get our team back in there. We're still not there yet, but we are operating. We do have a team working in-country.

Matthew Gordon: Thanks for the update.

Mark Santarossa: Absolutely. Thank you very much, Matt.

Company Website: https://www.aurionresources.com/

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Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

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