With full ownership of a 208,000-hectare property in southeastern Ecuador, Aurania Resources hopes to find two abandoned 16th-century gold mines.
Aurania Resources Ltd. is a Canadian junior mineral exploration mining company that focuses on the identification, evaluation, acquisition, and exploration of mineral interests. Its flagship project is The Lost Cities, Cutucu Project in the Andes mountain range of southeastern Ecuador.
The “lost cities” refer to the gold-producing centers of Longrono and Sevilla, which were two Spanish Colonial mines from the 16th century. The company is using LiDAR technology to locate indications of the old mines through the thick foliage in the area.
If the company can locate these gold deposits, modern technologies will allow them to access them at levels the Spanish wouldn’t have been able to.
The project is located along-trend of Ecuador’s Cordillera del Condor region, which contains 26 million ounces of gold, and 30 billion pounds of copper. The 208,000-hectare property also contains other deposits of gold, silver, copper, zinc, and lead.
In February, the company began scout drilling at the project’s Tsenken N1 target, a copper-silver mineralized zone where previous surface sampling yielded positive ore grade results. They have also been scout drilling other target areas for sedimentary-hosted copper and epithermal gold on an ongoing basis.
On February 17th, Aurania announced that it had been granted the first six mineral exploration concessions of the 393 applied for in northern Peru. The region contains identified extensions of the copper-silver deposits within the Lost Cities project in southeastern Ecuador.
The company has a talented management team led by the experienced geologist Keith Barron, Ph.D., who brings over 35 years of experience in the mining sector. Keith co-founded the gold explorer Aurelian Resources, which was responsible for the 2006 discovery of the massive Fruta del Norte gold deposit. Kinross Gold acquired the company for USD 1.2 billion in 2008 in a friendly deal, and Keith was jointly awarded the Nothern Miner’s “Mining Man of the Year.” He currently holds director, chairman, and president roles of companies involved in the exploration of sapphire and uranium.
Geologist Richard Spencer, Ph.D., serves as the company’s president and director, bringing over 33 years of experience to the management team. Spencer has led and worked on numerous successful exploration projects, including the discovery of the San Carlos, Mirador and Panantza projects that contain an estimated 24 billion pounds of copper and 3 million ounces of gold (both deposits are located immediately south of the Lost Cities project).
Aurania is benefitting from favorable economic conditions in its relationship with the Ecuadorian government. Before the COVID-19 pandemic, Ecuador was already in growing debt and was looking to the mining sector as a much-needed revenue source. The country has been heavily impacted by the pandemic and is now encouraging investment in its mining sector more than ever before. BNamericas has estimated that mining companies operating in Ecuador will invest over USD 1 billion in exploration in 2020-2021 and that Ecuador will emerge as the “go-to” jurisdiction for mining operations and investments in Latin America.
Even with its robust and proven management team and favorable jurisdictional conditions as key strengths, Aurania is drilling in locations where no prior data is available and is thus a risky and speculative investment for investors. Since the company is still in the exploration stage—the earliest stage in a miner’s lifecycle—positive results from drill programs are the only factor that can lead to significant progress. Even with positive drilling results, there is still a long and expensive road to the construction of an operating mine. Mineral resource calculations, preliminary economic assessments, and numerous feasibility studies will be required to obtain the financing needed to commence mine construction. It should be noted that the majority of mineral deposits never even make it to this stage.
Having just raised an additional USD 5.4 million through an overnight offering, the company has enough cash to fund exploration expenditures in the near term, but will require further capital raises to remain operational.
The only available stock price forecast places $ARU’s 12-month target price at USD 3.75. The stock closed on March 22nd at USD 2.41. While this does provide a relatively significant upside, we do not believe it justifies the risk of negative drill program results. We will keep an eye on Aurania’s operations and publish follow-up commentary if the company’s drilling operations lead to significant discoveries.