Aurania Resources Ltd. (ARU) Earnings Call Transcript & Summary

Hello, everyone. Good afternoon. We've just concluded the business side of the AGM. So right now, I'm going to give kind of a brief overview of what's been going on with the company, and I'll address some questions later on. I'm sure that everyone is wondering and maybe even concerned about what's happened over the last week with Aurania, especially down in Ecuador. I've just come back from Ecuador last night. I'm here in the Toronto office. So kind of give you a bit of a recap on what happened. So I think it was last Thursday, I became aware through an article that was filed on Business News Americas about a potential for -- well, you can call it many different things. It really comes down to a tax on the industry operating in Ecuador, both the exploration people and the producers. And this was a sum to be -- that was calculated by a group within the government called ARCOM. And the idea was that the industry within Ecuador would be well, pretty much on the hook to pay -- provide funds in the fight against illegal mining within Ecuador. Illegal mining is something that carries on in many, many countries around the world, especially common in Asia, in Africa and in South America, Central America as well. And I'll give a very brief overview of what all that represents in a second or 2 here. But the government wanted the companies to pony up for this. Now of course, as you would expect, there was immediately an outcry amongst all the participants in the industry in Ecuador because we do pay very, very high land rental fees were called patentes. We're in the top quartile of costs for South America. And we believe that it was unfair and certainly unsustainable, no way that the companies, especially the companies that do not have revenues, which is about 70% of the projects within Ecuador, these companies could never take on the burden of this kind of thing, and provide cash from -- essentially from their shareholders to fund the military or the police forces or whomever is going to carry out this vigilance against illegal mining in the country. So I was asked to go down to Ecuador and participate in the meeting, which I did last week. And essentially, I got on a plane almost immediately. And I met with a room full of lawyers. There was one representative from another mining company there, who's the CEO. And of course, the opposition to this was very strong. But I really didn't have all the facts to, at that time, come up with a strategy or anything like that. There were all kinds of different scenarios presented and different approaches to some of them quite aggressive, some of them not. Anyway, I was there really to get information. In the following days, I spoke to many different people, including the Canadian Ambassador and the Trade Commissioner in Quito. And everyone is taking this very seriously. The story appeared in a number of different media outlets, including the Mining Journal of London. And we all saw it as particularly damaging, potentially damaging or even something that would end exploration in Ecuador. So the upshot of all of it, I've had a number of discussions with some well-placed people in the political framework. And I think it's a situation where maybe some people misspoke. They got the wrong end of the stick or they were poorly informed by the civil service, and this came out. And I don't think the government realized the full repercussions of this. Now this is not the first time that this has happened in Ecuador, and it's happened in other countries as well. I'm sure that you can well remember not too long ago, Justin Trudeau in this country, saying that people who had paid off their houses would have to pay a fairness tax to allow younger people to get onto the housing ladder. And people who had spent maybe 50 years of their lives paying their mortgage off, they were the ones who are going to be stuck with the bill. And of course, there was a huge public outcry against this, and it didn't fly. You go back in history away, Australia is supposed to be a very advanced economy and government-wise and such. But Prime Minister Rudd back in 2010 wanted to introduce a 40% special levy on mining, 40% royalty. And he was actually removed as a result of that. So it's not just South America or the second world or third world countries that sometimes get it wrong and put this kind of stuff out. So I know that right now, a dialogue is taking place between the government and the mining chamber of Ecuador in Quito and a number of industry players, we're involved in it, too. We have some representatives. And a solution is going to be found for this. And the sooner, the better, and then I think it will be put to bed, and we will move on. But I have been assured that as it stands right now, it will not -- it's not going to -- whatever is going to come out of this is not going to be in its present form. And it's -- the government's intention is not to annihilate the exploration industry in Ecuador. Years and years ago, and I brought this up at several meetings, my former company, Aurelian went through something called the mining mandate back in 2007 and well-meeting governments, but misdirected really, closed down all activity in the mining sector in Ecuador, supposed to be for 3 months. It ended up being 18 months. And on the day that was announced, all the Canadian companies participating in Ecuador lost 35% of their value. So take note, right? The things that you do can have consequences that are not perceived. So I think there's a valuable lesson, a long time ago, a lot of the people who are present in governments were -- they were school children back then. But that was a potential event that could have ended exploration within Ecuador. They wanted to limit as well all companies to holding no more than 3 concessions. And if that had happened, Lundin Gold, who are now making a lot of new discoveries on the extension of Fruta del Norte probably wouldn't own that today. So this is all very critical stuff. We are very dedicated to Ecuador. I still believe that it is one of the best, if not the best place on the planet to go and find ore bodies, commercial ore bodies. I think that we have one of the best properties in the whole world. We certainly have the last piece of the Cordillera of South America that hasn't been adequately looked at. Now people ask us, why haven't we found an ore deposit yet? What's slowing us down? Well, it's not like it's slowing us down. It's just that when we started our exploration on the 208,000 hectares, which we have, it was a blank slate. There was nothing known there. There was no geological database that we could rely on. There are many, many companies that are active today in Canada, in other parts of the world that are working on properties that have been explored, some of them for 50 years, 70 years, even 100 years, maybe had 2 dozen different drill programs on them previously. And so they're working with a lot of data. So we started essentially from ground zero, and it took a lot of time to collect the data and put it together, and we showed up essentially what we have now, which is 4 different possibilities of finding a potential commercial and economic ore body. The first one, gold and silver epithermal type alteration we find on the surface with pathfinder elements, things like arsenic antimony mercury, very similar in many, many ways to Fruta del Norte. We have siliceous sinter on the surface, same sorts of things that you find in North Island, New Zealand, in Yellowstone Park. These are geyser deposits, boiling mud, all that kind of stuff. It's all significant because it shows you that there's going to be a plumbing system at depth. And the chances are very, very good because it happens at Fruta del Norte that, that plumbing system will have gold in it. That's the first one. The second one is copper, silver and sediments. And these are essentially flatlined. They're in shales and sandstones. And across the property, this goes for 22 kilometers. This is really a world-class opportunity. Nobody has seen this in Ecuador before. This is really, really unique type of mineralization in Ecuador, and it's pretty high grade, lots and lots of analyses all the way up to 38% copper, but lots of them in the 3%, 5% range and always with silver. I love silver, almost as much as I love gold. The third bucket, if you can call it, that we have are the -- it's the extension of that type of deposit in the limestones where we have lead, zinc, silver. And again, we have very, very high levels of silver in this stuff. And this goes for 14 kilometers across the project. And then the fourth one are conventional porphyry coppers of which I'm sure that you know about Owasha up in the northeastern part of our property, which we believe is a cluster of porphyries. We know that there's copper there. We know that there's molybdenum there. It has not been drilled. So over the past, I guess, several months now, we have been talking to one of the major companies. They did come down and visit us for 5 days on the property. They're back in the data room right now. And we shall see what comes, if anything. But certainly, I think the chess pieces have been moved around the board because of the gold price and the silver price. Silver is now at a 10-year high at $36 an ounce. And gold today is over $3,400 an ounce as well, and that's getting very, very close to the all-time record. So we've got lots and lots of stuff, a lot of potential. We eat money. Without money, you can't drill, you can't move the projects ahead, but we're working on a number of different fronts and potentially get a partner here. So watch the space. I hope to have some news about that soon. And I just want to close with one other matter to do with illegal mining. Now you may not even know what illegal mining is in a place like Ecuador. So this engages a bunch of people who don't have any title, don't have any mineral rights and they simply find a place out in the middle of nowhere usually on somebody else's mining concession, or exploration property and they start digging and they recover gold. Now usually, these are groups of men, could be 5, could be 10, could be 20. And they get together in a group and they work these different places as a group, and they will be making holes into the ground. Sometimes they end up in a hard rock situation where they're actually mining rock and crushing it. Usually, though, they're mining alluvial class of gold and but the notable thing here, 2 things. First of all, they generally pay no taxes. They don't have any rights to be there. So they take the gold, and they run off with it. And the state gets nothing from it. Secondly, they leave the project, leave the property in a very, very sad state in terms of the environment. So they essentially rape it, walk away, they leave a bunch of open holes that fill up with water. They produce dengue and malaria ridden mosquitoes, and it's an incredibly bad thing. Now there are some NGOs around the world who look at this and they say, well, these are poor people just trying to feed their families. And I commiserate with that. But the reality is that once these groups get together, then organized crime moves in. And this is the case of what's happened in Ecuador, 2 different levels actually. First, organized crime funding the operations and taking the gold. And I know one case where the price of gold right now is about USD 110 a gram, and they're paying $38 to the local people. And maybe they'll produce 1 gram of gold a day, and they'll have to feed maybe 5 families from this. So this is a situation where these people are kept in poverty. And the people who are making a lot of money are the people who are financing it and they're involved with the [Macías] organized crime. The other thing that happens is money laundering. So drug money from adjacent countries comes into Ecuador. It funds mining operations. Some of them are actually dummy operations. They go through the motions, and they mine stuff, but they're actually not mining anything. They buy gold from the local miners or from a local gold shop and they declare it as production. They fund the thing with the proceeds of crime, drug running, prostitution rackets, all kinds of different things. Once they have the gold, though, they can sell the gold and launder the money. So it's sold as production, and they can do whatever they want with it. I have a lot of experience, 5 different countries I've worked in where I've been involved with stopping illegal mining. And what I'm going to do and what I invite my compatriots down in Ecuador to do is to assist the government in any way possible to provide as much information as we can from our own experience in different places around the world on how to stop this scourge. And I've got a lot of ideas. I think some of them are pretty good. Certainly, they've worked in the past for me to put an end to this. And so at the end of the day, it would mean that ARCOM doesn't have to go to the companies to fund this stuff. In fact, I think I've got a scheme where ARCOM can actually fund itself, and not have to go to the companies. And wouldn't that be a tremendous thing. If all this gold was going into the coffers of the federal government of Ecuador, it could be a game changer for the Republic. It really could, and it really needs to happen. Not just that, though, certainly, not if, but when we come up with our discoveries, that's going to be a game changer for Ecuador as well. And so I thank you all for your attention. I thank you for your support. And oh, I should -- yes, I should provide -- I've just been handed a piece of paper. Why haven't you talked about France. So in France, we've been looking at a number of different things in Brittany, strategic minerals and gold. Now in Brittany, there has been a long tradition, though none of it's happening today of producing tin. The tin price has gone bonkers, if you haven't been watching it. In fact, there was just a deal done today to purchase a tin producer out of the DRC. And we're right in the area, the applications that we've made to find commercial deposits of gold and tin and gold with antimony. Antimony, of course, is a critical metal that has mostly been produced in China, but the Chinese are holding it back. So the West is getting a very, very low supply of this stuff. It's very, very important in industry. It's going through the public comment phase right now. That will end next week, I believe, next weekend. So that will be done after it will be a whole month of public comments. So that will come to a close. Now Corsica as well. Well, it's now a high season, it's tourist season in Corsica. And of course, we've been dealing with 2 beaches in Northern Corsica. And we've suspended the work for the time being. It was always in the cards. It's not something new. It was an agreement that we came to with our MOU with the communities over a year ago. So we continue to do laboratory work and stuff like that, but we're not on the property today. So -- and finally, on this piece of paper, I've been handed, we have no illegal mining on our property in Ecuador. I want to make that very, very clear. We've been asked to give money towards ARCOM, but it's really not our problem. But potentially, I myself, I will offer my assistance in my time gratis to the Ecuadorian government to help eradicate the scourge. And I think if the government has the will, they can actually put this largely to an end. So unless there's something else, did I cover everything?

Okay. Anybody got any questions for me? Yes, sir.

The public review process in Brittany. Is there any community or NGO opposition to mining in general in that area?

Of course. There is everywhere, right? There's a lot of nimbies in the world, and it's interesting. This is the second public consultation that we've been through. And I was informed by the government that in the first one, there was -- now a lot of this is online, right? So people press a button, and I don't know. I really don't know how the whole thing absolutely works. But there was somebody who pressed the button more than 700 times, and they know that because they trace the IP address, expressing opposition to the project and giving the impression that it was actually 700 different individuals, which is very, very underhanded. And -- but anyway, so in any kind of scenario -- up in Northern Ontario, you'll get this sort of opposition to projects. It doesn't matter what they are, where they are. There are just some people who are, for whatever reason, opposed to every aspect of what we do. They believe that we can get all of our minerals from recycling. You can't do that with a population around the world that's increasing in size. You work the numbers, it just doesn't happen. It's not possible. It's not feasible. So mining, especially in a scenario where you have to supply things like cobalt and nickel, very, very essential for electric cars, batteries of electric cars, charging stations need copper. So essentially, the whole American grid is going to have to be redone. It was built really between 1880 and 1920, and it's all going to have to be redone to allow, say, even 50% of the population to have electric vehicles. This is an incredible burden on the industry. The industry is way, way behind the eight ball on this. The industry should have been finding these deposits over the last 10, 15 years and bringing them in production now. And really, the light has only just gone on in the last couple of years, the light bulb that gosh, we need to get this stuff, and we need to get it out of the ground because the renaissance getting away from fossil fuels is not going to happen without metals.

Is permitting more or less difficult in France?

Permitting is a little bit of a black box. It's not straightforward as it is in Canada, where you just go out and you stake a piece of ground, you file it with the mining record and then the next day, you can go and work on it. In France, it takes a long time. It can take up to 2 years. We'll be coming up to the 2-year mark in all of our projects in August and straddling August and September. So that's why we think it's about to get granted. But there are a lot more stages. So in Canada, as in other places in the world, most exploration, you only leave footprints on the ground if that, right? You go around, you collect your samples, you're doing geophysics or remote sensing even from the air, you're not even touching the ground. In France, you have to provide all kinds of detail, all kinds of environmental impact before you even set foot on the property. It's a big burden. It's a burden in terms of time and energy and lots and lots of legal filings and things like that. But we see these areas of France that we're looking at as for whatever reason, they've been neglected from exploration, and they may have stuff that's extremely valuable on them.

So can mines be built within our lifetimes?

Well, I believe so. There is a private company right now working around the Bordeaux area, and they have their drill permits, and they're drilling for gold. I'm not sure if they have other minerals as well as gold, but they're well-funded, and it's got the green light. So they're working away.

For the benefit of people listening to the reporting, do you want to make any final comments on what your exploration plans will be for Ecuador if you were to go ahead with things on that now?

Okay. Well, Ecuador plans. So yes, well, in an ideal world where we've got enough cash to do everything we want to do, I really believe that if we were properly funded, we could find potentially 3 deposits with commercial possibilities in 3 years. It's a very, very tall order, but we've done a lot of the heavy lifting already. So I think this is entirely possible. And another thing, we've had more or less a total rethink of all the exploration that we've done in the past, and we've compiled it a new compilation, we had Gregor Borg, one of the world's authorities on copper, silver and sediment deposits, just to the property, as you may have seen in the recent videos, and he had a lot of things to discuss with us. He's a [indiscernible] information, is incredible. And so we did a reworking of a number of things. And the Eureka moment comes, and the light goes on, you think, gosh, why didn't we attack that once before? Why didn't we do this? Why didn't we do that? Well, we still have the property. We've kept it intact. We've worked very, very hard to make sure that, that has happened. And we still have all those possibilities. I'm not just talking to one potential partner in this, but other companies as well. And I think with the gold price the way it is, silver price the way it is, and everyone being very, very bullish on copper that we have a real potential to get something done. We've gone through the wilderness for about 1.5 years, 2 years. We had COVID before that. We lost about 1.5 years of momentum because of COVID. But we're in a situation now where we're, I think, able to pick up the slack here and get some stuff done that's going to be very, very transformative, not just for the company, but for the whole of Ecuador. So I probably said this last year but watch the space. We have a much better understanding of what's going on geologically, and we've got a whole slew of targets to go ahead and drill. I guess that's about it for me.

The [indiscernible], the other part of the land. I know it's not on the radar. Any chance of that happening?

Well, it is on the radar, and it's always been on the radar for me. And we have a strategy there. I'm not able to discuss that, but I just want you to be aware that we haven't forgotten about it. And we think that offers not just on our present property, but offers real incredible potential. So we're working away at that. And I'm hoping that I'll be able to say something concrete about that soon.

Perfect. And just with the joint venture, you're hoping to enhance share price or share value?

Well, I think that if we had a strong partner immediately, you would see an appreciation in the share price. And also, if we kind of had an underpinning here, we could go to the market and raise money as well at a much higher price than today. So it's a win-win on several levels. We have to make it happen. And it's not like we've been sitting on our hands. We had 3 companies we were talking to last year. Two of the companies decided to go to other countries. And this was because of the impending presidential election, where the pundit said that [indiscernible] -- President [indiscernible] would not win. They thought the socialist would take over again, and now it scared them off. So one of the companies went to Colombia and the other one went to Argentina. The third company that was very, very interested in us and wanted to take 11 geologists to our project blew up. I'm not going to say who it was, but maybe you can formulate who you think it might have been, but they were not in a position to proceed in any way with us later. So that was just unfortunate. It's a lot of time and energy on our part to take these people to site and show them around and everything, but we've got a real showcase here of different things to look at. And when I was down with Gregor Borg, I took some photographs. I'll have to share them on the Internet at some point of essentially what is a core farm. We've got this very, very large area of drill core that's all piled up. And gosh, it just shows how much time and energy we've spent on this project. It's really, really quite something that what we've done, what we've accomplished. Anybody else? They're all dumbfounded. Okay. Well, thank you so much for your attention. I think I've covered everything now. But as always, I'm open to anybody who wants to e-mail me, [email protected]. I will endeavor to answer their e-mail as fast as I can and provide you with some information. Thank you very much.