Homestake Ridge

Preliminary Economic Assessment

A Preliminary Economic Assessment (PEA) for Homestake Ridge (see April 15th, 2020 news release) demonstrates the project’s potential to become a high-grade, small footprint, underground gold mine with positive economics and upside potential from both a rising gold price and prospective expansion.

Homestake Ridge PEA presentation

PEA Highlights:

  • US$108 million Net Present Value (NPV 5%) and an Internal Rate of Return (IRR) after tax of 23.6% at US$1,350/oz Gold
  • US$670/oz gold All in Sustaining Costs (AISC)¹
  • US$173 million NPV 5% with 32% IRR at US$1,620/oz gold
  • Pre-production capital expenditures of US$88 million

PEA Summary

Base Case: $1,350/oz gold, $12/oz silver, $3.00/pound copper, $1.00/pound lead and an exchange rate of 0.70 (US$/C$)
Net present value (NPV 5%) after tax and mining dutiesUS$108 million
Internal rate of return (IRR) after tax23.6%
Pre-production capital costsUS$88 million
After tax payback period36 months
All in sustaining costs (AISC) per ounce goldUS$670
PEA life of mine (LOM)13 years
LOM metal production gold equivalent ounces590,040 AuEq ounces
LOM average diluted head grade6.42g/t AuEq
Peak year annual production (year three)88,660 AuEq ounces
Average LOM payable production45,400 AuEq ounces
LOM mineralized material mined3.4 Million tonnes
Mining scenario tonnes per day900 tonnes

The Company cautions that the PEA is preliminary in nature in that it includes Inferred Mineral Resources which are considered too speculative geologically to have the economic considerations applied to them that would enable them to be characterized as mineral reserves, and there is no certainty that the PEA will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

The PEA was prepared in accordance with National Instrument 43-101 (“NI 43-101”) by MineFill Services Inc. of Seattle, WA with other contributors including Roscoe Postle Associates Inc. (RPA), now part of SLR Consulting Ltd. (SLR), (QP for updated mineral resource estimate) and One-Eighty Consulting Group (environmental, permitting and social). The Company plans to file the PEA on SEDAR at www.sedar.com within 45 days in accordance with NI 43-101.

¹All-in sustaining cost (“AISC”) is a Non-GAAP measure. The Company has calculated AISC using operating costs as a basis, and then adjusting it in accordance with the World Gold Council guidance.

Overview and Highlights

The wholly owned Homestake Ridge project covers approximately 7,500 hectares within the Iskut-Stewart-Kitsault belt in NW British Columbia. To-date more than 275 holes, totalling more than 90,000 meters, have been completed on the property and multiple exploration targets remain to be tested.

Homestake Ridge Project Highlights

  • High-grade gold endowment located within the Golden Triangle
  • Established significant mineral resource
  • Situated close to regional infrastructure: Northwest Transmission Corridor, deep water access and existing road within 6 km of the deposit
  • Mining friendly jurisdiction

For Homestake Ridge related news: Homestake Ridge News Releases

Project Location Map
Project Location Map
Project Location Map

Location & Infrastructure

The Homestake Ridge project covers over 7,500 ha and is located 32 km southeast of Stewart, BC, and 32 km north of the historic mining towns of Kitsault and Alice Arm.

There is no permanent infrastructure on the project and labour and supplies can be trucked in to Kitsault via Highway 113 from the town of Terrace, which is serviced by three air carriers with daily scheduled flights. Access to the project from the town of Kitsault is by boat/barge to the community of Alice Arm followed by service roads to the edge of Homestake project area (6 km from deposit).

Infrastructure
Infrastructure
Infrastructure

Project Geology

The property is located within the prolific Iskut-Stewart-Kitsault Belt which hosts several precious and base metal mineral deposits. Diverse mineralization styles include stratabound sulphide zones, stratabound silica-rich zones, sulphide veins and disseminated or stockwork sulphides. Mineralization is related to Early Jurassic feldspar-hornblende-phyric sub-volcanic intrusions and felsic volcanism and commonly occurs with zones of pyrite-sericite alteration. Numerous genetic models can be proposed for the area and local deposits present a broad range of characteristics.

Drilling has outlined mineralization with three-dimensional continuity, and size and grades that can potentially be extracted economically. Project geologists have a good understanding of the regional, local and deposit geology and controls on mineralization.

Homestake Ridge Project Geology
Homestake Ridge Project Geology
Homestake Ridge Project Geology
Mineral Resource Model Long Section
Mineral Resource Model Long Section
Mineral Resource Model Long Section

Reserves & Resources

The mineral resource estimate on the project as at December 31, 2019 is summarized below:

Mineral Resource by Zone

Average GradeMetal Content
ClassificationZoneTonnage
Mt
Gold g/tSilver
g/t
Copper %Lead
%
Gold
oz
Silver MozCopper MlbLead
Mlb
IndicatedHM0.7367.0274.80.180.077165,9931.82.871.25
Total Indicated0.7367.0274.80.180.077165,9931.82.871.25
InferredHM1.7476.3335.90.350.107355,5532.013.324.14
HS3.3543.13146.00.030.178337,01315.72.1913.20
SR0.4458.684.90.040.001124,1530.10.360.00
Total Inferred5.5454.58100.00.130.142816,71917.815.8717.34
Notes:
1. Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Definition Standards for Mineral Resources and Mineral Reserves dated May 10, 2014 (CIM (2014) definitions), as incorporated by reference in NI 43-101, were followed for Mineral Resource estimation.
2. Mineral Resources are estimated at a cut-off grade of 2.0 g/t AuEq.
3. AuEq values were calculated using a long-term gold price of US$1,300 per ounce, silver price at US$20 per ounce and copper price at US$2.5 per pound and an exchange rate of US$/C$1.20. The AuEq calculation included provisions for metallurgical recoveries, treatment charges, refining costs and transportation.
4. Bulk density ranges from 2.69 t/mto 3.03 t/m3, depending on the domain.
5. Differences may occur in totals due to rounding.
6. The Qualified Person responsible for this mineral resource estimate is Philip A. Geusebroek, P. Geo., RPA.

Mineral Resources Sensitivity by Cut-off Grade

Average GradeMetal Content
Cut-off g/t
AuEq
Tonnage
Mt
Gold
g/t
Silver
g/t
Copper
%
Lead
%
Gold
oz
Silver
Moz
Copper
Mlb
Lead
Mlb
Total Indicated
5.00.37210.99131.30.200.120131,4631.61.70.99
4.00.4659.57111.20.200.105142,9111.72.01.07
3.00.5928.1890.50.190.090155,7301.72.51.18
2.00.7367.0274.80.180.077165,9931.82.91.25
1.00.8626.1965.20.170.069171,4411.83.11.32
Total Inferred
5.02.1588.25145.70.210.216572,44410.19.810.26
4.02.9726.78133.40.180.189648,21212.811.912.36
3.04.1365.52118.60.150.163734,27515.814.014.84
2.05.5454.58100.00.130.142816,71917.815.917.34
1.06.4484.0990.90.120.127847,99618.917.018.07
Notes:
1. Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Definition Standards for Mineral Resources and Mineral Reserves dated May 10, 2014 (CIM (2014) definitions), as incorporated by reference in NI 43-101, were followed for Mineral Resource estimation.
2. Mineral Resources are estimated at a cut-off grade of 2.0 g/t AuEq.
3. AuEq values were calculated using a long-term gold price of US$1,300 per ounce, silver price at US$20 per ounce and copper price at US$2.5 per pound and an exchange rate of US$/C$1.20. The AuEq calculation included provisions for metallurgical recoveries, treatment charges, refining costs and transportation.
4. Bulk density ranges from 2.69 t/mto 3.03 t/m3, depending on the domain.
5. Differences may occur in totals due to rounding.
6. The Qualified Person responsible for this mineral resource estimate is Philip A. Geusebroek, P. Geo., RPA.

Exploration

The 2018 exploration program focused on developing new gold and silver targets away from the defined resource in addition to a 2482 meter drill program at the South Reef target. Through this program, which included a full review of historical datasets, geologic mapping, stream sediment and rock chip sampling, two new, significant gold and silver targets were identified. These targets are approximately 10km northeast and 3.5km south of the previously identified high-grade resource. The northern target, Bria, is definied by high-grade gold and silver rock samples from mapped quartz viens that are believed to be related to an Eocene aged intrustrive rock. Maximum values from these samples are 11 g/t gold and 448 g/t silver, demonstrating the potential to find high-grade mineralization within the target area. The mineralized veins that were sampled are considered to be leakage structures from potential mineralized bodies associated with mapped intrusive rocks. Rock sample results are presented below in Table 1.

Table 1:

Bria Target Rock Samples*

Sample IDAu (g/t)Ag (g/t)Cu ppmPb ppmZn ppm
W72580511.052125481445203
W7259005.7717.0558.81770506
W7258984.2810983.9502041
W7258041.74199138.55430616
W7258020.8236.7845.728873
W7258990.75744836.585001480
W7258030.5579.1312624664
W7258970.2992011415240878
*Approximately 1-2kg of material was collected for analysis and sent to ALS Lab in Thunder Bay, ON for preparation and then to Vancouver BC for analysis. All samples are assayed using 30g nominal weight fire assay with ICP finish (Au-ICP21) and multi-element four acid digest ICP-AES/ICP-MS method (ME-MS61). Where ICP21 results were > 5 g/t Au the assay were repeated with 30g nominal weight fire assay with gravimetric finish (Au-GRA21). Where MS61 results were greater or near 100 ppm Ag the assay were repeated with ore grade four acid digest method (Ag-OG62). QA/QC programs for 2017 rock grab samples using internal standard samples, lab duplicates, standards and blanks indicate good accuracy and precision in a large majority of standards assayed. Grab samples are selective in nature and cannot be consider as representative of the underlying mineralization.

The southern target area, Kombi, has been defined by historical stream sediment samples taken in 2019, which Auryn’s technical team believes are robust due to the sample collection methodology and assaying methods. One of the high-priority areas at Kombi is defined by a two kilometer trend of gold-in-stream sediments within multiple adjoining drainage basins, demonstrating peak values of 0.91 g/t gold. This continuous trend of gold over multiple catchment areas coincides geologically with the Betty Creek Formation that also hosts the defined Homestake Ridge deposits.

The second high-priority area within Kombi has been identified through stream sediment samples from adjoining dranage basins that define a one-kilometer-long trend at the southern limit of the property. The anomalies are defined by strong gold, silver, copper, antimony and arsenic responses that coincide with the Stuhini group formation, which hosts the former producing high-grade Snip mine that produced approximately one million ounces of gold at an average grade of 27.5 g/t (1).

1. Source: https://www.skeenaresources.com/projects/snip

The 2018 2482 meter drill program at the South Reef target consisted of six drill holes, that did not produce any significan tresults, although sporadic gold mineralization was encountered in each drill hole as presented below in Table 2.

Table 2:

Intercepts Highlight 2018 – South Reef

Hole IDFrom (m)To (m)Interval (m)Au (g/t)Ag (g/t)
18HR-30634734923.111.6
18HR-30722222421.060.6
30230421.431.4
18HR-310747621.960.4
True widths of mineralization are unknown based on current geometric understanding of the mineralized intervals.

The 2017 summer drill program was designed to test 2 of 7 major target areas across the project with a focus on expanding the South Reef mineralized zone as well as the potential northwestern extension to the Homestake Main deposit. Drilling was discovery oriented which targeted new potential zones of mineralization or significant extensions. None of the drilling occurred within 500 meters of the Homestake Main and Homestake Silver deposits, leaving them open for expansion.

The drilling from South Reef demonstrated that the high-grade mineralization has a 15 - 20 degree shallow plunge to the northwest with the width of the structure and associated breccia’s increasing in the same direction. The shallow plunge observed at the South Reef main zone is similar to that observed at the Homestake Main and Silver deposits and represents an excellent opportunity to significantly expand mineralization on the project. Auryn also discovered a 600 meter long gold-in-soil anomaly that coincides with the northwest direction of plunging high-grade mineralization that remains undrilled demonstrating the highly prospective nature of this structural corridor.

Auryn’s 37 hole (14,850 meter) program at Homestake Ridge, which was completed under budget, represented its first field season on the project. Total drilling costs were approximately $400 per meter showing that this area of the Golden Triangle can be explored in an efficient manner.

Significant results from the South Reef diamond drilling are provided in the table below. No significant results were obtained from the Homestake Main extension drilling or other holes.

Significant Intercepts 2017 – South Reef

Hole
ID
From
(m)
To
(m)
Interval
(m)
Au
(g/t)
Ag
(g/t)
17HR-283137155181.292.3
including14114544.183.8
17HR-286138162240.621.5
17818682.671.9
including17818025.593.4
17HR-2935280280.512.2
276290141.231.6
including28629043.313.6
17HR-296622160.662.3
17HR-3015969104.121.8
including6163218.206.4
17HR-302134146121.453.3
including13814243.192.5
17HR-303258288302.003.5
including26426846.032.7
including278280211.806.0
17HR-3047080101.031.8
* Composite interval includes no less than 4m < 0.2ppm Au True widths are estimated at between 50 – 75% of reported intervals
Target Areas
Target Areas
Target Areas
South Reef Long Section
South Reef Long Section
South Reef Long Section

Communities and the Environment

The pursuit of environmentally sound and socially responsible mineral development guides all of Auryn’s activities as the Company understands the broad societal benefits that responsible mining can bring, as well as the risks that must be managed through the implementation of sustainable development practices. Auryn strives to maintain the highest standards of environmental protection and community engagement at all of its projects.

Auryn considers sustainability to include the pursuit of three mutually reinforcing pillars: environmental and cultural heritage protection; social and community development; and, economic growth and opportunity. The Company assesses the environmental, social and financial benefits and risks of all our business decisions and believes this commitment to sustainability generates value and benefits for local communities and shareholders alike.

Auryn places a priority on creating mutually beneficial, long-term partnerships with the communities and countries in which it operates, and with its shareholders, respecting their interests as its own. At the community level, the Company works to establish constructive partnerships to address and contribute to local priorities and interests and ensure that local people benefit both socially and economically from its activities.

Auryn has undertaken early and ongoing engagement with respect to the Homestake Ridge gold project since January 2017. Engagement goals include providing Indigenous groups, residents of nearby communities and other regional interests with corporate and project-related information, details of work programs and other activities being undertaken in the field, project updates and opportunities for feedback and local involvement in the Homestake Ridge project.

Auryn’s approach to Indigenous and stakeholder engagement provides opportunities and benefits through:

  • the provision of jobs and training programs
  • contracting opportunities
  • capacity funding for Indigenous engagement
  • sponsorship of community events

Members of local Indigenous groups comprise approximately 40% of Auryn’s Homestake Ridge project team. Two of our primary contractors are local Indigenous-owned companies. Auryn and the Nisga’a Lisims Government entered into a Confidentiality Agreement in January 2020. The parties look forward to a collaborative relationship based on mutual respect and a desire for economic prosperity generated by responsible natural resource development in British Columbia.

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