Optioning a property/project of this magnitude is a serious commitment, one that is not for the faint of heart
Briefly, let me explain. Most understand the principle of how an option works. For those who are still posting ridiculous questions on the boards as to the details not coming forth, let me enlighten you a bit.
So, below is the definition of an option agreement.
An options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a later date at an agreed upon price.
So, with an options contract, the seller receives valuable consideration from the buyer of the contract.
We are not clear on what value Medinah receives with this option. But we have been told in a company news release that the cost of exploration of the ADL claims will amount to multiples of the $100M Auryn will be paying Medinah Chile when Auryn and or its subsidiary exercises its option to purchase 85% of ADL claims from Medinah.
So, if this information is to be relied upon as real, we are looking at a long term commitment, up to three years, to explore these claims, with hard dollars being spent along the way, as the news release states, many times more than the $100M being paid for 85% ownership of the claims.
If we assign a rough dollar number of even $150M to be spent on future exploration, and if the exploration proves up the reserves, adding the cost of exploration, plus the purchase price, plus any option money,(if any is paid throughout the option contract period)Auryn will have spent a minimum of $250M on the combined exploration and purchase of 85% of ADL.
Here is a question: When they state that the exploration will cost many multiples of the $100M Auryn is paying for 85% of ADL, is that cost of exploration being referred to for the life of the mining operation or is it in reference to only the three years of the option period? Not sure. If the reference for multiples of the $100M being spent for the cost of exploration is only for the duration of the option period of three years, then this commitment from Auryn is really a game only played by the big boys. Again, it is not for the faint of heart.
So by the time the option is exercised, my guess is that at least $250M, perhaps much more, will have been spent on this acquisition. That portends for a very valuable and lucrative mining operation for the foreseeable future on the ADL plateau.
I don't see smart investors throwing around this kind of money just to double or triple their investment, or worse yet, just walking into this venture with their eyes closed. This investment on Auryn's part could be a huge windfall, to the tune of multiples of billions of dollars, perhaps tens of billions of dollars of revenue over an extended period of time. Only time will tell. And the clock is now ticking.
Of course, it could also be a flop and Auryn could as well run out of ADL with its tail between its legs and never look back. But I highly doubt that will be the case. Based on previous reports, this group has had its experts, boots on the ground, on the ADL performing its due diligence for some time now. So based on what its experts have come up with so far, that Auryn has enough confidence to move forward with its plans to spend good money on the ADL plains, and then pay $100M for 85% ownership, I feel this is a huge positive step forward.
Would that this partnership had started a few years ago, instead of teaming up with the Sweedish meat ball. The only thing the Sweedish meat ball gave us was heartburn and lots of indigestion. Maalox anyone?
