(Disclosure: The following represents my opinions only. I am not receiving any compensation for writing this article, nor does Hydra Capital have any business relationship with companies mentioned in this post. I am long AU.V).
Big Boulders Make a Big Splash for Aurion
Ever since the Patterson Lake discovery was found up-ice of a boulder train, mineralized boulders have been near and dear to my heart. Boulders are direct samples of rocks at surface and are especially useful in areas where glacial till cover makes rock outcrops scarce. By looking at the size, roundness, and physical characteristics of boulders (in conjunction with knowledge of recent regional glacial history), inferences can be made about how far the boulders are likely to have travelled and what direction they are likely to have travelled from. That's why when Aurion announced the discovery of scores of large, high-grade, angular gold-bearing boulders in Northern Finland yesterday, I read the details very closely. The 1150-metre-by-700-metre-wide core, the "Aurora zone", is located within a broader zone of alteration and mineralization that measures some 2.3 kilometres by 3 kilometres. In the core Aurora zone, 133 samples were collected with an average grade of 74.3 g/t Au. This does not appear to be some kind of one-off occurrence and it remains wide open for expansion if you don't think it's big enough already.
Boulder prospecting in areas with glacial cover is nothing new. At Patterson Lake, Saskatchewan, Alpha Minerals and Fission Energy had used radioactive boulders to zero in on what would turn into the first major shallow high grade uranium discovery in the Western Athabasca Basin in an area that been overlooked for decades. The Patterson Lake boulders were believed to have been transported somewhere around 2-2.5 kilometres from their source, which made the task of pinpointing their origin a bit more difficult initially. In Aurion's case, it appears that some of the boulders may be more or less sitting in place, which is precisely why the market took the stock up nearly 100% on the news of the discovery of bonanza grade gold-bearing boulders (up to 1,563.5 g/t Au, with an average of 21 g/t Au over 525 samples within the broader 2.3 x 3 km area, inclusive of the 133 samples mentioned above) at the company's wholly-owned Risti Project. To reiterate, it's not just the fact that Aurion has found gold-bearing boulders that got the market excited, it's that these boulders don't appear to have travelled very far, if at all. The "hunt for the source" might not turn out to be much of a hunt at all, as the erosion-resistant quartz-rich vein material may have more or less just fallen over in place as the weaker surrounding rock was eroded away over time.
While Aurion's gold-rich boulder sample results are presented with the usual disclaimers regarding grab samples, they do appear to capture a representative sample of the boulders in the area. Perhaps an equally important takeaway from the company's geological description is the fact that the sampled vein material appears to be hosted by conglomerates and quartzites that lay unconformably on top of older mafic and ultramafic volcanic rocks. That sequence of rocks may be suggestive of a period of extensional tectonic stress late in orogenesis, and when rocks are in extension, cracks and fissures open up through which mineralizing fluids from depth can flow. Combine that extensional regime and those lithologies with an underlying heat source (possibly suggested by the iron-oxides, breccias and stockwork veining seen in the broader area) and you have a pretty good recipe and plumbing system for generating not just a gold deposit, but possibly a whole trend of gold deposits... a trend on which Aurion has 30 kilometres of strike to explore. To that end, the company points out that there are many similarities between the geological setting at the Aurora zone and some of the best known gold trends in the Abitibi province of Northern Ontario. And with the best indicator of gold being, well, gold, Aurion has captured the imagination of the market with what has the potential to be a major new gold discovery... or possibly even a new gold camp... and they've done it on ground that has never even been walked before, let alone drilled.
I want to stress that it is very, very early days in this play... even earlier than my first involvement with Patterson Lake. In that case, I didn't buy any stock until high-grade mineralization had actually been intersected in drill core. Drilling on this property won't likely happen for several months, which may feel like an eternity when you're hot-to-trot to see drills turning, but I do take comfort in the size (large) and description (angular, slab-like) of these boulders, both of which suggest that they may be more or less sitting on top of the deposit from which they were sourced. In that sense, actually seeing mineralization in drill core before getting involved is less important to me, but don't take that to mean that it's not a critical part of the de-risking of this discovery that's still hanging out there. As it stands now, the Aurora zone is about as sexy of an exploration target as one could hope for with data that suggests a geological setting similar to some of the most prolific gold camps in Canada, with bonanza grades to boot. Access is described as "very good" with forestry roads connecting the project to paved highways and it's worth pointing out that Finland is regarded as one of the most attractive mining jurisdictions in the world. Considering that (1) all mineral exploration was carried out by state-owned companies until the mid-1990's, and (2) the whole area is covered by a veneer of glacial till leaving only ~1% outcrop exposure, it's certainly possible that an elephant has been hiding here, waiting for boots-and-hammer geologists to sniff it out.
Some (Painful) History
When I first met with Aurion CEO Mike Basha in February of 2015, his company was trading around 5 cents, which gave it a market cap of about $2 million. Mike showed me some data on prospects he had been working on in Finland's Central Lapland Greenstone Belt and another in Nevada. His figures were a bit rough, but his analysis and interpretation were thorough. He was clearly a true prospect generator. Given the absolute lack of liquidity in the stock and the early stage of the projects we discussed, I put Aurion on a watchlist, but did not buy any stock. About 6 months later, Aurion optioned two of its projects to B2Gold (BTO.TO) whereby B2Gold can earn a 75% interest in exchange for funding $15 million of exploration (that JV is on projects adjacent to, but not including the newly announced Risti project and Aurora zone). I was intrigued, but lots of juniors sign up more senior companies for exploration JVs that don't turn into much, so I still didn't buy any stock. Fast forward to day before yesterday and I saw Aurion halted pending news. Well, if there's one thing I've learned about valuation, it's that when the information changes, your view has to as well. Once I read the news I swallowed my pride and did something that I can't recall doing before... I paid roughly 20 times the price that Aurion was when I first saw it. Aurion has roughly 55 million shares outstanding, which gives it a $55 million market cap. Given the scale of what's on the table here, I could see this going a lot higher before a drill hole is even placed in it.
With the Hollywood movie "Gold" out in theatres right now, Aurion's timing is almost too perfect. Aurora is already conjuring the spirits of fear and greed that are so prevalent in the exploration game, but one thing that I have a lot of confidence in is that the shareholders who are backing this are playing the long game and are committed to seeing this all the way through. I suspect Aurion will have no lack of interest (i.e., money) from the market or industry... the size of the potential prize is just too big to ignore.
I strongly recommend reading through the press release and background information on Aurion's website. Taking the time to understand the exact nature of a speculation like this is critical to keeping your wits about you as the story's twists and turns unfold over the coming months. Here's a shot of three happy prospectors in Finland (CEO, Mike Basha, on the right) and of course... some of the gold!