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Ivan Bebek on Auryn Resources' (TSX: AUG) Pedigree, Goldcorp's Recent Investment, and an Upcoming $35 Million Discovery Campaign Across Six Projects in Canada & Peru
Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is Executive Chairman of Auryn Resources (TSX: AUG)(OTC: GGTCF), Mr. Ivan Bebek. Mr. Bebek has over 17 years in financing, foreign negotiations, and acquisitions in the mineral exploration industry. His understanding of the capital markets and ability to position, structure and finance companies that he has been associated with has been instrumental in their successes.
Mr. Bebek formerly was the President, CEO and co-founder of Cayden Resources, which, of course, was sold to Agnico Eagle Mining for $205 million in November of 2014. He's also a co-founder and a Director of Stratton Resources, and a co-founder of Keegan Resources, now Asanko Gold.
Auryn is focused on scalable high-grade gold deposits in established mining jurisdictions, which include the Committee Bay gold project located in Nunavut, the Homestake Ridge gold project in BC, and a portfolio of gold projects in Southern Peru. The company will be undertaking one of the most aggressive drill programs in 2017, and we'll talk about all of that, but first I'd like to thank my guest. Ivan, thank you for your time today.
Ivan Bebek: Thank you so much for having me. It's a pleasure to be here.
Gerardo Del Real: Well, Auryn has started the year with some major news and we'll definitely get into that, but before that, Ivan, I'd love for to you share the details of your past successes with Cayden and Keegan, and how you got involved with Auryn.
Ivan Bebek: Yeah, so thank you very much. Just a bit on our history, myself and a partner of mine, Shawn Wallace, who's the CEO of Auryn, we started off with a company called Keegan Resources back in 2005. We set out to any find a world-class gold deposit, and for the benefit of your readers, when we talk about world-class it's usually three to five million ounces, or larger. We were tremendously successful in doing that. We found a five million-ounce gold deposit, and in our business there's finding deposits and there's also a major factor which relates to all shareholders, and that's monetizing them.
The share price at Keegan went from about C$0.70 a share to over C$9.00 per share in the four years of making that initial discovery, which was tremendous. It's now a producer, which is ramping up to produce 400,000 ounces a year. I believe the company's worth about a billion dollars in terms of market cap. You know, without the success of selling that company, we converted into a producer by bringing in one of the best mine builders in Africa, and that's where the project was. His name was Peter Breese.
For us, we set out do it again. We went and started Cayden Resources because obviously we had a lot more fuel in the tank. As you have these successes, you learn what you could do better, not what you did wrong, because we had a success so everything went well. Cayden was a pure example of that, and we were really, really unfortunate that we started at the peak of the gold market going into a five-year downturn, but we managed to finance, raise money and be very anti-dilutive, and deliver a tremendous win for shareholders.
Although a $205 million takeout of Cayden doesn't sound like a big number, if you were a shareholder a year before that takeout, it would have been 70 cents Canadian and the sale would have been worth about $4 Canadian in that year, when all other juniors and the entire market was completely flat and things weren't going well at all for a lot of juniors. It felt more like we sold it for a billion dollars than $200 million, just by achievements in terms of timing and suppress market.
This led us to Auryn Resources, which is our third company, and on that note, we thought, "Okay, Keegan was a great success." We converted it into a mining company which is producing today. It's doing very well. And then Cayden was a tremendous success for our shareholders in a bear market. How could we take that success and do something even better? And that's where we were very fortunate to have the currency and the following on the back of Cayden. We went shopping. We went shopping for people and for world-class assets. As I said before, we were looking for three to five million ounces or larger in terms of a gold deposit as world-class.
Well, Auryn came together, and we quickly got to a portfolio of six different projects, two in Canada and four in Peru, and they all have varying stages of exploration and risk and advancement. But they all carry the same denominator that they could all be standalone what Keegan was: that 5 million-ounce discovery, from zero to 5 million ounces, and a company that could go up 10 times or 15 times your money from your initial share price investment. And that kind of brought us to the Auryn portfolio.
The way we did that is we found some of the best technical people in the business that were available in the downturn of the mining cycle. And that was led by a gentleman by the name of Michael Henrichsen. Him and his colleague Dave Smithson were integral in the sale of Cayden to Agnico Eagle in 2014 by giving us some big company advice. These guys had previously worked with Newmont, one of the largest gold companies in the world, and they were giving us perspective of what kind of things work for a major, and I think that was a big underpinning of how that transaction went.
Well, what we did with them was we said, "Look, guys, we want to go after more than one. We want to build a portfolio of world-class gold projects. And we want to go after things that a company the size of Newmont would want to acquire." Each project had to meet that merit, and they all have, all six of them. They're scalable, meaning they can get a lot bigger than what they look like they could be initially, and they're in very good jurisdictions in Canada and Peru, some of the best places in the world to be in.
Lastly, they acquired a lot more technical people from their colleagues that they worked with at Newmont, and these guys come on and they work as a team. It's not just nine geologists, it's nine different types of geologists that have found several million ounces of gold in their careers at Newmont and other majors together. These guys work in unison as a team, multidisciplinary abilities, and that's what really gives us a very, very, very good reason to be very confident about our potential for major discovery which we're embarking on this year.
Gerardo Del Real: Excellent. You spoke to the accomplished group that you've been able to put together, and I recently heard you speak and you were talking about the creativity that is allowed and encouraged with the exploration strategy that you kind of undertake. You don't like to do what a lot of the big companies do, which is a lot of red tape. It takes a little bit for them to get done what they want to get done. When I heard you speak to how you allow everybody throughout the multiple disciplines to be creative, I was impressed by that. What's your take on that, Ivan? How does that play out? How do you encourage that? How do you nurture that culture?
Ivan Bebek: That's a great, great comment, and I'm glad you picked up on it. I think it's something that is very integral. There's a saying in our business that majors don't usually make discoveries, they usually buy them. And I think that roots down from the general bureaucracy within a major, which has 25 geologists competing for budgets for their great ideas that they have. Then when you get into their ideas and you're competing for budgets internally, you're going through the bureaucracies and the red tape. You get fairly limited, because the company has to make a decision between 25 choices, and you have schedules and you have timelines. There's a lot of different hands that are tied and a lot of tape to get through, before these geologists can actually just be geologists.
My partner Shawn and I, we've encouraged our technical team to go out there and use the left side of their brain, the creative side. We've taken away all the red tape and we said, from what Shawn and I have seen, what's the number one thing that's led to discovery around the world? That's been really good, creative ideas, taking big risks on great ideas, and following really smart technical people, geologists, our gut instinct. So we've encouraged that full throttle here. We've reduced the red tape to nothing, you know, and we work through them with a very disciplined approach.
These guys get to go chase their discovery ideas. Even some of the projects in our portfolio are things that these guys wanted for 20 years at a major, but couldn't get them because of the bureaucracies and layers of legal and accounting to go through to make some acquisitions on earlier-stage projects. These are the kind of things that we think will lead to tremendous discoveries for us, and we'll talk a little bit about how that's going to look this year with our big program we're doing.
We're going to drill 55,000 meters, which is a tremendous number, because all of that is going into discovery holes. If you look back at Keegan's rally from 70 cents to $9 per share, that was a discovery. If you think about the first few holes in that program that made the discovery that started that whole trend, we're drilling 55,000 meters of those kind of holes across 25 different targets. These targets range from Canada down through Peru, and each one of them has a different level of risk, a different level of confidence, but it all has the same scope of reward at the end.
We're going to drive 25 shots at finding a major gold mine this year, and we're going to do it with some of the smartest technical people in the business. And I think that's a real testament to why Goldcorp was really clever and they came in when they did at a premium to our share price. I think they were really clever to be there first and be aggressive with this.
Because if you look at our track record, if you look at the valuation of all of our companies that we've built, they tend to trade at very good premiums to the value of what we're doing. Not above value, but they trade closer to where they should be in terms of value and speculation. That being said, when we make a discovery, we're looking for the five, ten, twenty times our share price, you know, and taking 25 shots at that is probably the most exciting drill plan I'll ever be part of, you know?
Gerardo Del Real: Excellent. You mentioned Goldcorp and I'd love to get the details of the deal here because that's a big deal, but let me just provide some context. It's going to be 55,000 meters in 2017. I understand it will include drilling on the entire portfolio, which is six projects in all. Can you share the details of how the drilling will be allocated?
Ivan Bebek: Yeah, so we're going to spend $35 million, which is going to include $15 million at Committee Bay, $10 million in British Columbia at Homestake Ridge and then $10 million more in Peru, but that number is not fixed.
If we do get into some tremendous discoveries in Peru or BC starts to continue, we will add drills and we will drill into ... right through the season, you know, because you can do that even in the north. It's more expensive, but if you're in a big discovery, you keep going, right? There'll be a small break between drilling up north, maybe a few months from the fall until the early spring, but in Peru we can drill year-round.
Our drilling is going to start in Peru. It's going to start in about two months from now. There'll be a lot of news about surface work we've done ahead of drilling, which is really important for investors and really important for the market because when you start to get an idea of what's on surface, it starts to give you a bit of a preamble or a speculation of what could be underneath, right?
What we're looking for is dimensions. We want to see size and we want to see grade of gold. Those are two factors, and from what I've heard so far of these projects in Peru that we're starting with, there are going to be some spectacular drill targets that we're going to get into here in the next few months.
Following that, we're going to come up to Committee Bay, which is a 300 kilometer-long greenstone belt. There have been over 60 discoveries on this belt of high-grade gold in the last 20 years. There's been about a $100 million spent ahead of us, so someone's done a lot of homework for us, to be real simple about it. We spent the last year and a half figuring out what's the best way to get to discovery. There is 1.3 million ounces of about eight grams per tonne as a deposit right in the middle of the belt, but we think this is the type of belt you could be finding gold mines for the next 20 or 50 years.
You know, there's so much prospectivity. The grade is so high and it's such a big land position, with a lot of, again, homework that's been done. We're going to drill 17 targets up there in Committee Bay this year, and that's 17 shots of finding a three to five million ounce gold mine of high-grade gold. That's the shot we're taking at Committee Bay. If we find one or two out of 17, I think you could see reactions in the share price that could be three to five times our current share price, depending on the metrics of the discovery and how meaningful it is as well as the gold market, which I think is going in our favor.
Coming over to Homestake Ridge, we'll be drilling there the same time as we're drilling Committee Bay. What we're doing here, there's a million ounces of nine grams gold equivalent. We've announced some metallurgical numbers which tell the market and people of how profitable the gold would be or how easy it is to extract out of the rocks, and the numbers are spectacular. It's a very, very valuable million ounces of nine grams per tonne, because of speculated economics by ourselves and some of our engineers and geologists, but that's not big enough for us.
It's not big enough for a major. It's good-sized for a mid-tier. We're looking for something much bigger, and Homestake Ridge is a phenomenal part of the world. It's in the Golden Triangle, where one of the world's richest gold mines has ever been found and mined called Eskay Creek, owned by Barrick. The best drill hole there in that project, in our project, was 73 meters of 21 grams per tonne gold. If we start finding more mineralization like that around, the end result of where our share price could go and what could happen next would be just absolutely spectacular. We think there's room to at least double that, possibly triple or go a lot further with that million ounces of nine grams per tonne.
You have to look worldwide. You can look at any gold company. When you start talking about nine grams per ton gold, you're getting into the highest-grade gold in the world, into the top 2% of gold mines that exist today. That's something that is an extremely rich asset. There is a deposit there already, so expanding it is not a high risk to do, but how big does it get is going to be the joy and the speculation for our shareholders.
You come down to Peru and there's one word that really describes Peru. It's "endowment." Things that are found there, whether they're copper, gold porphyries or they're gold deposits, they're ginormous. They're huge, the biggest things. You hear of a mine, Yanacocha, which was over 60 million ounces of gold. I mean, you don't see that anywhere in the world. There's maybe very few places where that's occurred, where Mother Nature has let that happen, but it happened in Peru.
You see these two to four billion-tonne porphyries. You see companies like ... Glencore I think sold Las Bambas for $5.8 billion to an Asian group. These are real big, huge types of discoveries that are made down there and mines that are being discovered. We have four different properties there. We have two that are solely gold, and then one is a scarn and one is a porphyry target, but each one of these, again, could dwarf what we did with Keegan, and that's how big the look is there. Some of them have a bit of gold on surface that's been drilled previously, so it gives us a really high level of confidence that there could be, you know, a low risk to find a lot more gold.
Other ones are earlier-stage, but conceptually they're brilliant. You know, they're very obvious, huge alteration systems that have been tied up with landowners that weren't able to do a deal. As I alluded earlier on, a major tried to do a deal on some of these and they couldn't, because of the red tape between the owners and the major. We were patient and we spent a good 12 to 14 months in some of these things to get them. They're well understood, they're well known, they're massive targets.
The last point I'll make, everything I'm talking about, from the drilling we're doing, the amount of targets we're doing: it's discovery. Discovery's where you make all your money in the share price. You know, there was a company called Aurelian Resources. It was around last market, and if you remember it, it was 25, 30 cents to $44 a share. I mean, that is discovery in itself. That's what I get up for. That's what my partner gets up for. That's what the technical team gets up for.
We are looking for major discoveries. We're doing it with a majors exploration team, which is what we inherited in the downturn by being active and able to finance where not too many people could, and we've built a major’s exploration portfolio. The portfolio is spectacular, but I kind of just ran through. Then when you come down to the final investment from Goldcorp. You've got a major’s investment into a junior, with a majors exploration team and a majors portfolio. You know, by virtue of the scalability and the size potential of discovery and all of these assets.
Lastly, we're in a rising gold market. You know, Trump's coming into the office, and the call on him is that he's going to be very pro-growth. He was saying it today, that he believes the U.S. dollar is too strong and it affects their exports a lot, and so a lowering U.S. dollar and a lot of growth and raising rates is inflation, and it's a dream path towards gold. I think you get that for the next four years.
Investors, you can look at a lot of gold companies. I'll go on record here saying that you could probably buy any single decent gold company. You know, you could buy 20 or 30 of them, majors, mid- tiers, or some of the juniors that are active that are able to raise money like ourselves, and you're going to do extremely well. Of that basket of them, doubling or tripling, that's not what we're doing it for. We're looking for the five, ten, twenty-time return, and we're doing that with a lot of confidence taking that shot, because of how many shots we have at getting there, you know, in a rising gold market. It's one thing to make money, but it's another thing to make a real spectacular return.
The risk among of the all the juniors, you know, it's quite high because most juniors only have one or two projects. If one doesn't work out and you go to the next one, maybe you're okay. Maybe the two don't work out, or if it's a single-asset company, if you don't drill and hit it, it's over. Your share price can get cut down by 80 percent. Because we have six projects, if three don't work out of six and three do work... I mean, all we need is one them to work out... we mitigate that risk.
It doesn't mean that if you buy our share price today, it's a guarantee that it'll be there and higher. It just means that the chances of it going down 80 percent are really, really, really extremely low, because the chance of us winning are so high and each project ensures the other project. You get six major projects that could be... you know, host 25 discoveries as we sit right now. We don't expect to hit 25 discoveries, but one would make shareholders a lot of money, but two or three would just be outstanding.
Gerardo Del Real: Absolutely. Well, I'm a big proponent that exploration companies should actually do some exploring, and I've got to say this is probably one of the most exciting exploration programs for all of 2017. Now, the other exciting aspect to this is that it's mostly paid for, right? You recently announced a strategic investment by Goldcorp as you referenced. Gross proceeds to be received by Auryn will be approximately $41 million Canadian. It was interesting to me that the investment in Auryn by Goldcorp occurred just days before Goldcorp announced they were disposing of two assets. Can you share the details of the strategic investment by Goldcorp, and kind of your thoughts on their approach?
Ivan Bebek: Yeah. They invested. They bought 12.5% of our company at $3.67 Canadian per share. Because of the Canadian tax benefits... we have this thing called donor charity flowthrough... half of the financing was done at $5.01 Canadian per share, so Goldcorp investment's was at $3.67 but the dilution to our company was at $4.31 Canadian per share, and it gave us ... as you heard before, we're going to drill $35 million worth of drilling this year... it gave us adequate money for our entire program, as well as working capital to go and undertake all of this, and it will leave us with some money at the end of the year. I believe right now, within the money dilutables, we sit with around C$45 million. We have C$10 million extra at the end of the program, so we don't need to raise any more money.
We're taking all these big discovery shots. Goldcorp's interest at 12.5% is a great first stepping stone as a corporate into us. We as management own over 18% and we're constantly adding to our position, so we have a very good position ourselves. There's a lot of room for various opportunities going forward, but I think that their investment, the size of it and the fact that it was at a premium, are two really big validations of what we're doing technically and what we might be onto in terms of our projects.
You commented on their divestiture of a couple of assets. I've noticed, and I've had a chance to obviously get to know Goldcorp and their plans a lot better. Probably my favorite major at the moment for growth, they're becoming very jurisdictionally-sensitive. The assets that they let go, one was in Guatemala. Another one was in a part of Mexico where I actually have experience with Cayden there, and it's not easy. It's a tough part of Mexico, but I think Goldcorp's going back to their roots of Canada and areas that really worked really well for them, because you get a huge premium when you're in really safe jurisdictions, and Peru falls into that category as well.
No, I see a lot of growth out of them. I see them making these investments into juniors because there's really not much to buy for the majors. There's several majors and mid-tiers that are going to be in a frenzy to try and accommodate growth if the gold price continues to go higher. Making investments like this early give them a leg up on a lot of the other corporates with a portfolio like ours. Their strategy is, you know, focus on the best jurisdictions, high-grade in Canada, the assets that make them the most money, and by complete coincidence we're fully aligned with that, because that's how we designed our portfolio and that's kind of how the relationship has started.
Gerardo Del Real: Excellent. Well, there's not going to be a shortage of news flow this year. Ivan, what does the share structure look like? How are we looking there?
Ivan Bebek: Yeah. We had 66 million shares before we did this investment with Goldcorp. That's another 9.5 million shares. We'll call it 76 million shares will be our new share structure. Eighteen percent is management, 12.5% is Goldcorp, then we have some very, very friendly investors. We call them strategics, but they're not a corporate like Goldcorp. They're just people who financed all three of our companies. They represent another 12% of our company as well.
I'd say a good portion of our shareholders are in very good hands from the list I gave you, but the balance of our shareholders are held by a lot of shareholders who've experienced two successes with us prior to Auryn. They know our style of business, and that's the one thing you get. The more successful business you do, the better shareholders you can attract. I'd say we have some of the best shareholders in the entire business, and we're very proud and honored to have them, but it's a big factor.
What makes a shareholder a great shareholder? It's somebody that understands our business plan and they see the potential that we see, and if we all see that in the same light, then the shares tend to do a lot better versus a company where you have a small percentage with management and a lot of people aren't aware of exactly how good or what the real opportunity is.
For us, again, you'll see a lot of insider buying at various times on announcements, great announcements, like after Goldcorp. There's some good news hopefully ahead here out of Peru before we go drilling, and we'd be buyers after that happens if it does happen. You know, that just lets you guys know as investors that we are very, very bullish. We want to own more. It's that good, and we think it's going to go and do that well.
Gerardo Del Real: Yeah. No, it's funny. I was looking through insider purchases yesterday and I was impressed by the amount of insider buy-in. Could you share ... I think you mentioned it was 18%, Ivan, but could you share the management ownership there?
Ivan Bebek: Yeah, the 18% is management. I'm the largest shareholder. I've bought about, I don't know, I think about 3 million shares out of the market in the last year. Then a new director just joined us, Michael Kosowan. He was one of the largest brokers at Sprott Wealth, which he'd been there for about 15 years. He's a mining engineer by trade, and we've invited him to join us for some time. He was backing us financially with his clients for several years, and finally he made the decision to come over.
He's got a good-sized position in management as well, and he's been a buyer as of lately too. I think the one common theme across everyone in management is we don't own enough shares of our company, and that's a good sign of a company that's come together the way you'd hope for, that has tremendous potential going forward.
Gerardo Del Real: Excellent. Ivan, I want to thank you very much for your time. Auryn is obviously one of the most exciting exploration stories of 2017, and I definitely encourage everybody to keep Auryn on the radar. Is there anything you'd like to add?
Ivan Bebek: No. You know what, I'm just excited. There's very few people doing what we're doing. We've rewritten the junior exploration story with our involvement from the technical people from the majors, and we've certainly built what we think is one of the best portfolios in the world. I'll go on record saying this. I don't think there's a junior in the world that is doing what we're doing right now in terms of technical people, in terms of the amount of discovery drilling that's going to go on this year.
55,000 meters of pure discovery is a very big number, and it's across 25 targets. It's really a spectacular thing for us. It's about as good as we could do, based on taking advantage of the downturn of the gold market and coming into it on the back of a big success. If you can find something out there that's similar to it, I'd love to hear about it, but I think we've been over-the-top aggressive in a good way, and I certainly look forward to how the program's going to go.
Gerardo Del Real: I'm looking forward to it as well. You obviously have a history of monetizing those assets and doing so in rather quick fashion, Ivan, so it'll be definitely something to keep on the radar. Hopefully we can have you back on once the news starts flowing again.
Ivan Bebek: Gerardo, thank you so much. Really appreciate being her. Thank you so much for having me on the call.
Gerardo Del Real: Thank you, Ivan.
Ivan Bebek: Okay. Appreciate it.