Aurania: Widening the Metals Hunt

Lost & FoundLost Cities

Years of labour poring over old documents has borne fruit in rediscovering the chain of lost gold-producing cities (in reality settlements) scattered through the dense Ecuadorian jungle. Work thus far has provided a “treasure map” to the potential areas for more intensive exploration.

In 2019 exploration began on what is a massive concession with a goal of replicating the success of Aurelian at Fruta del Norte. The gold price’s recent ebullience helps with funding and Ecuador coming back in from the cold is a plus. The markets have fallen back in love with greenfield exploration after a number of years when only cash-flowing production stories captured the attention of investors. By targeting areas of past production the management at Aurania would contend that the Lost Cities project is actually a form of brownfield exploration.

The Starting PointThe Initial Concessions

In March 2016 Aurania applied for mineral exploration concessions following an eight-year freeze on the issuance of exploration licences in Ecuador. Exclusive exploration licences were granted on 27 and 28 December 2016 for the 42 tenements that comprise the Lost Cities — Cutucu Project.

These mineral exploration licences (shown on the map that follows) extend north to south for 92 kilometres (km), and east to west for over 45 km at their widest extent. Each licence encompasses an area of between 4,869 hectares (Ha) and 4,950 Ha. In total, the properties have an area of 207,764 Ha or 2,077.64km2.

The concessions are located some 376 road kilometres (260 line kilometres) to the south-southeast of the capital, Quito (population 1.7 million), and 140 line kilometres east-northeast of Ecuador’s third-largest city Cuenca (population 332,000).

Projects on Trend

1. Fruta del Norte (gold-silver)

2. San Carlos (copper)

3. Panantza (copper)

4. Mirador (copper-gold)

5. Mirador Norte

6. Warintza (copper)

7. Nambija (gold)

Promising TrendRegional Geology

The Cordillera de Cutucú forms a geological uplift similar to the adjacent Cordillera del Cóndor that lies immediately to the south. The two uplifts are separated only by a geographical feature — the Santiago River. Mineral exploration that started south of the river in the 1990s in the Cordillera del Cóndor has since identified substantial gold, silver and copper resources comprising a known metallogenic district. This mineral endowment is exemplified by the Fruta del Norte deposit.

The largest known copper deposit in the Cordillera del Cóndor is San Carlos, reportedly containing an inferred resource of 8.5 billion pounds of copper in 657mln tonnes of mineralised porphyry at a grade of 0.59% copper.

The geological formations and structural geological framework that hosts the extensive mineral deposits in the Cordillera del Cóndor plausibly extend into the Cordillera de Cutucú, hence its prospectivity for high-quality mineral deposits such as the epithermal gold-silver, skarn gold and copper-gold as well as copper-molybdenum-gold porphyry deposits that occur in the Cordillera del Cóndor.

Since the discovery of this substantial mineral inventory in the Cordillera del Cóndor, the term Northern Andean Jurassic Metallogenic Belt has been used to describe mineral deposits hosted by this particular Jurassic-aged belt that extends from 3° north in Colombia to 5° south in Ecuador. The Cordillera de Cutucú is strategically located within this belt and, in the view of Aurania’s management, warrants a mineral exploration programme.

Aurania has since discovered an extensive trend of oxide copper and silver mineralisation in bedded sediments. This trend highly resembles the Kupferschiefer unit that runs through part of Germany and Poland. Mining of this trend ended (after 800 years) when Germany reunified but is still in production, by KGHM, in the down-dip portion within Poland. In the Cutucu, Aurania has traced the trend for 23 kilometres.

Small-scale hydraulic placer gold mining and aggregate extraction operations are actively exploiting materials along the low-elevation fringes of the Cordillera de Cutucú. Several small-scale mining licences, between 4 hectares and 300 hectares in extent, are located in the southern and western part of the Cordillera, particularly along the Santiago River.

Warintza – New Mega Mine in the Making?Warintza – Closeology at Work

Anyone looking at the price chart of Aurania in 2020 would note the dramatic spike in price (and volume) in September. Nothing particularly exceptional had happened at Aurania but what did occur was the realisation in investors’ minds that the company was playing in the new hottest section of mining real estate in South America. This realisation came about due to the dramatic results of the exploration campaign of Solaris Resources just to the south of Aurania’s main concessions.

The Warintza discovery is not new though as it was first encountered by David Lowell in 2000 but then sat largely dormant since 2001 due to a breakdown in social acceptance from local communities.

The September event that set the price of both Solaris (and Aurania) on fire were stunning intercepts, as detailed below:

• SLS-02 returned a consistent, high-grade interval from surface of 660 metres (m) of 0.97% CuEq

• SLS-03 returned a much longer and open interval of high-grade mineralisation from surface to the depth capacity of the drill rig: 1,010m of 0.71% CuEq , including 716m of 0.75% CuEq

This was further reinforced more recently, in February 20212 when SLS-10 returned 600m of 1.00% CuEq, including 546m of 1.06% CuEq from surface.

While this is “only” a neighbouring property these discoveries totally changed the dynamics of the district, turning the focus towards copper, which has now come to the party by being the strongest major metal of late, breaking through the key US$4 per lb level and thus firing up investor demand for copper explorers.

Including Warintza there are nine advanced projects to the south of Aurania’s concessions, some held by majors such as Lundin and Newcrest. We would expect this area (fired up by Solaris’s discoveries) to become something of an elephants’ stamping ground with majors increasingly moving in on the likes of Solaris (and maybe Aurania).

The Tiria Shimpia TargetTiria Shimpia

In early February 2020, the company reported that soil sampling had defined compelling epithermal-style targets in the Tiria area. As a result, Tiria was moved up the list of epithermal gold-silver targets ranked for drilling, ahead of the Apai target and Aurania applied for the required water permit. A maximum grade of 710 grams per tonne (g/t) silver and 48% zinc was obtained from a rock-chip sample 0.5 m long in the core area.

Then in mid-April, the company announced some exceptional rock-chip sampling from this site. This would indicate that this is the first time that sediment-hosted lead-zinc-silver has been found in Ecuador.

Seven mineralised layers have been identified, one of which is 50m thick. So far, the layers have been traced laterally, through intermittent exposures in thick jungle, for between 500m and 1,100m.

Pathfinder elements for epithermal gold-silver mineralisation at Tiria are concentrated in four areas that partially enclose a core of silver-zinc-lead mineralisation evident over a 15 km trend.

Highlights included:

• Unit P: mineralisation has been observed over a true thickness of about 50m and extends at least 1km along trend. Intensely mineralised layers within the dolomite were channel-sampled, returning grades of 2m at 12 g/t silver and 3.9% zinc and 0.8m of 26 g/t silver and 6.4% zinc.
• Unit H: has been sampled in two-channel samples spaced 500m apart along its length of 1km, that returned grades of 4m at 21 g/t silver and 9.3% zinc, and 1m at 8 g/t silver and 4.8% zinc.
• Unit J: has been traced 900m along trend with the one channel sample taken, returning a grade of 48 g/t silver and 39.6% zinc.
• Unit N: has been traced 1.1km along trend and a grab sample from outcrop had a grade of 199 g/t silver with 22% zinc and 13% lead

A leading consultant in epithermal and porphyry systems, Dr Jeffrey Hedenquist, was impressed by the systematic arrangement of the epithermal pathfinder elements around the elongated central, carbonate-hosted area that contains silver-zinc-lead. He drew comparisons with the deposits in the Cerro de Pasco–Colquijirca district in adjacent Peru. He recommended that the targets be advanced as a priority, which Aurania’s management have duly done.

In addition, field evidence suggests that the level of erosion at Tiria is deeper (as can be seen in the cross-section below), and therefore closer to the gold-bearing zone of a typical epithermal system, than at Crunchy Hill and Yawi, which both have features that indicate the preservation of the paleosurface.

Another formation of interest here is the mantos with limestone replacement bedded in sedimentary rock. These are prospective for Lead/Zinc and Silver.

The new Pb-Ag-Zn zone

The Yawi TargetYawi

The targets at Yawi lie within an area measuring roughly 4 km by 4km in the southern part of the project. A paved road provides access to within 1 km of the first target area to be scout-drilled, while the furthest target requires moving the man-portable rig up to 4 km from the road. Soil sampling has identified four targets that contain elevated levels of silver and other “pathfinders” — elements that typically occur in epithermal gold-silver systems. Metal and pathfinder elements are concentrated in elongate zones 1 km — 2 km long and 100 – 200 m wide) that contain banded chalcedonic quartz veinlets that represent the upper fringes of vein systems.

Target A shows evidence of gold enrichment within its silver and pathfinder element footprint. Successful targeting depends on a clear understanding of which part of the epithermal system is exposed by today’s erosion level. Once the extent of erosion has been established, the gold-mineralised zone, which is usually confined to a specific elevation range beneath the position of the original land surface as it existed at the time of mineralisation, can be targeted. At Yawi, blocks of sinter — where the original epithermal system reached surface as geysers and silica terraces like those in Yellowstone National Park — show where the top of the system was at the time of mineralisation.

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Evidence at Yawi of gold enrichment within elevated, naturally-occurring arsenic and molybdenum in soil

Work so FarWork at Yawi

The drilling has been designed to hopefully intersect the vein system represented by the metal-enriched corridors at an elevation several hundred metres beneath the altitude of the sinters at Yawi. In early October 2019 diamond drilling equipment was mobilised to the site for the scout drilling on the epithermal targets at Yawi. Yawi has well-preserved sinter textures. Sinter is a mineral deposit with a porous or vesicular texture (having small cavities) that has developed around hot springs. These show the position of the land surface at the time the epithermal system developed, and the gold-bearing zone is usually located a couple of hundred metres below that.

In fact, Aurania’s team learned from scout drilling at Crunchy Hill that the gold zone may be somewhat deeper than initially expected in this area of the project, and its drilling plan takes that possibility into account.

In the first phase of scout drilling at Yawi, seven holes were drilled for a total of 3,010 metres, with the deepest reaching a maximum depth of around 450m below surface.

In late 2020 into early 2021, the company was engaged in an ongoing MobileMT geophysical survey which has clearly defined a target that has the characteristics of a porphyry at the Yawi target. The MobileMT data from Yawi showed five electrically conductive areas. The conductive area lies adjacent to an area in which copper-mineralized porphyry fragments were found in a diatreme breccia.

The company is planning a 1,000m hole to test the depth of the structure. All in cost should be US$250 per metre.

Going for DepthKuri at Yawi

In early April the company gave a progress report on the drill hole advancing at this site. This is proposed to be around 1,000 metres, inclined at 60° to cross the structure. Thus far it is still a significant distance away from the MobileMT target; however, epithermal-type veining has been encountered in brecciated lava in the upper part of the hole.

The target at depth is a strong conductor, which may be a zone of sulphide, capped by a strong resistor, which itself may be a zone of silica-flooding. The target is about 1.1 km from a siliceous sinter outcrop and 200 metres from geochemical anomalies of pathfinder elements (arsenic, antimony, selenium, thallium, mercury and silver) at surface. Epithermal veins are reportedly outcropping in a riverbank below the current drill hole, and an underlying area of geophysical interest has been identified in MobileMT data.

The epithermal-type veining encountered in brecciated basalt contains significant amounts of black “pyrobitumen”, which is a pseudo-mineral composed of carbon and derived from hydrocarbon (crude petroleum or related substances). The pyrobitumen lies as colloform layers within the veins with pyrite/marcasite, quartz, sphalerite and carbonate also in bands.

Drills Turning on Tsenken TargetThe Tsenken Target

In February of 2021, drilling commenced at the Tsenken N1 target here. The target is a copper-silver mineralised zone exposed at surface, with an underlying area of interest having been identified in MobileMT data (shown below). The mineralised zone is expected to be intersected at 75m to 100m below surface, while the MobileMT target is at about 700m depth. Previous surface sampling has also yielded results of up to 7.1% of copper and 55 g/t of silver.

Peru – On TrendThe Move into Peru

In mid-February 2021, the company reported that the first six mineral exploration concessions have been granted from the 393 covering about 384,000 hectares applied for in northern Peru. Application for this extensive concession package was made to cover potential extensions of the sedimentary-hosted copper-silver identified over the border in the Aurania’s Cutucu Project in southeastern Ecuador.

The first concessions granted form part of a larger block that adjoins the joint venture between Hannan Metals Limited (TSX-v:HAN) and Japan Oil, Gas and Metals National Corporation (JOGMEC). High-grade copper and silver have been reported by Hannan from the adjacent concession area. The concession blocks that Aurania has applied for in Peru cover the contact between red-beds (oxidised sandstone) and carbon-bearing rocks that, due to their chemically reductive nature, form prime trap-sites for copper.

Publicly available seismic data acquired by various oil companies that previously explored the area of Aurania’s concessions has been secured by Aurania, at no cost, from the Peruvian government. The location of the seismic lines is shown in blue on the map below and Aurania’s team is currently interpreting the data.

If all Aurania’s applied for concessions are eventually granted, it will represent the fourth largest landholding by any explorer in Peru. Aurania applied for these concessions in Peru in mid-2019 and Hannan announced the signing of its joint venture with JOGMEC on November 30, 2020.

Strong Capital Markets SupportFinancing in 2020

Aurania was very nifty in managing to get sizeable financing under its belt in early 2020, veritably on the eve of the global lockdown for the pandemic (and the plunge in the gold price and markets in March of last year).

The first tranche closed on 28 February with 473,990 units having been placed for the gross proceeds of C$1.47mln. The second tranche closed on 6 March for gross proceeds of C$4.16mln. Then on 13 March, it was announced that it had closed the third, and final, tranche for total gross proceeds of C$6,470,131.

Then in late October 2020, the company closed an offering of 2,679,500 units, which were sold for C$4.30 per unit for gross proceeds of around C$11.5 million. Each unit comprised one common share and one-half warrant. Each warrant entitles the holder to purchase one common share at C$5.50 at any time until October 29, 2022.

Warchest for ExplorationThe Latest Financing

In early April 2021, the company closed a public offering of units (including exercise in full of the over-allotment option) with 2,507,000 units were sold at C$3.10 per unit for gross proceeds of around C$7.77mln. Each unit comprises one common share in the capital of the company and one common share purchase warrant. Each warrant will entitle the holder to purchase one common share at C$4.25 at any time until April 1, 2024. The warrants will be listed and trade under the ticker ARU.WT.A.

Anticipated use of the proceeds will primarily be applied to the scout drilling programme and the geological and geophysical programmes on the concessions in Ecuador.

The company, shortly afterwards, completed its previously announced private placement of units (which will have substantially the same terms and conditions as the units issued in the offering) for gross proceeds of up to C$1.5mln.

Back on the Virtuous PathEcuador Redeemed

The problems that investors faced in Ecuador earlier in the decade have been rapidly dissipating. These had not made sense but reflected the common fallacy that “oil will provide” and thus mining can be eschewed but the reality is that mining and its supply chain makes lots of jobs, while oil & gas make few jobs and those tend to be skewed towards foreign technical FiFo (first in, first out) type personnel.

Since 2016 Ecuador has regained ground as a mining investment destination due to a revised regulatory framework and a major investor engagement campaign that attracted around 420 applications for concessions in less than a year.

In July 2018, one of the reforms, enacted by the country’s Ministry of Energy and Non-Renewable Natural Resources, let companies perform non-systematic drilling during the early exploration phase of their mining concessions. Drilling activities were previously only permitted during the advanced exploration phase and required an environmental licence.

In mid-2018, the nation’s emerging mining sector employed 3,700 people, but the government estimated that the figure would rise to about 16,000 by 2020 as projects such as Fruta del Norte gained ground.

Ecuador rescinded its windfall profits tax on mining in 2019.

The country was particularly badly hit by the first wave of the pandemic surprising an unprepared government (not that they were alone in that) and it did result in travel restrictions (since lifted) that hampered exploration efforts for a number of months in mid-2020.

Seeing Sense PoliticallyPro-business Victor

The first round of the presidential elections was held in Ecuador on 7 February 2021. The incumbent president, Lenin Moreno, who has held office since his victory over Guillermo Lasso in 2017, did not seek re-election.

The second round took place on the 11th of April, with Lasso defeating Arauz in the run-off. He is scheduled to be inaugurated on 24 May.

Conclusion

Originally Aurania’s focus was on the gold potential in this part of the Ecuadorian cordillera. The team was cognizant of the copper potential here, but all the market wanted to hear about was the yellow metal. Massive discoveries to the south with extensive copper intercepts have resulted in an investor feeding frenzy in the zone and Aurania should now be viewed as a play on the potential in both metals.

It is only logical that the team that brought the markets the stellar Fruta del Norte discovery should return to their Ecuadorian “roots” and seek out further deposits in this terrain; however, with dense jungle cover comes challenges and opportunities.

The evolution of the story over the last year (while hampered by the lingering effects of the pandemic) is an endorsement of the commitment shown by Aurania’s management to the prospectivity of Ecuador is certainly out of the ordinary. Even when many had fled due to onerous and hostile government actions the founders of Aurania hunkered down and went into “study mode” waiting for the almost inevitable volte-face in policy. Now the turn has occurred in government policy the pawing over old manuscripts has borne fruit in the Lost Cities project.

On the back of the work done by historical researchers, the Aurania team have honed down the target areas for the exploration effort.

Recent discoveries in the district have driven a surge of investor interest which means that financing is not an issue. While gold may have soared to nearly US$2,000 before pulling back, it is still at levels way above the average of the last ten years. As gold has stabilised, copper has picked up the pace and moved from being a laggard to the best performing major metal of late, breaking out of its lassitude of the last decade swiftly breaking through the US$3 then the US$4 resistance levels and reaching as high as US$4.30 per lb.

With major new copper discoveries nearby, Aurania is now being seen as a play on both gold and copper outcomes, with potential in silver and other base metals (like lead & zinc).

Story by ProactiveInvestors