Auryn's Management Finds Success In The Prudent, Measured Approach

After Agnico Eagle Mines gobbled up Cayden Resources in a mostly share-based deal worth CA$205 million, Shawn Wallace and Ivan Bebek are back with another gold exploration story: Auryn Resources. The successful tandem—with Wallace as CEO and Bebek as chairman—have a following among junior gold investors and hope to grow the Committee Bay gold project in Nunavut into a district-scale project worthy of a suitor's interest. If that's not enough, the company has plans to acquire a low-cost, high-quality gold asset to add to its project portfolio. In this interview with The Gold Report, Wallace shares his perspective on the junior market and his lofty goals for Auryn.

Drill bit

Management Q&A: View From the Top

The Gold ReportPlease give us an overview of Auryn Resources and its genesis.

Shawn Wallace: Auryn Resources Inc. (AUG:TSX.V) is the third company that Auryn chairman Ivan Bebek and I have started. Previously we founded Keegan Resources and later Cayden Resources. Keegan became Asanko Gold Inc. (AKG:NYSE.MKT; AKG:TSX; ) and it merged with its neighbor, PMI Gold. While working with Asanko in Ghana, we met Auryn COO Michael Henrichsen, a brilliant structural geologist with Newmont Mining Corp. (NEM:NYSE).

After Cayden was bought by Agnico Eagle Mines Ltd. (AEM:TSX; AEM:NYSE), our team began a global search for an asset with three key attributes: it had to be a district-scale opportunity, which means a land package where multiple deposits could be developed in the same geological setting; it had to be situated in a stable jurisdiction where people get mining permits in a reasonable timeframe; and it had to be high grade because it's only in times like these when you can economically acquire high-grade assets. We searched in a bunch of countries but Committee Bay ticked off all the boxes.

Auryn has people from Cayden and Keegan on the board, which has made the integration of a new company into the group almost seamless. We had about $9 million ($9M) in cash at the start of this year but it is about $7M now because we have started spending money on Committee Bay. And a lot of that money came from us. We invest in our company.

TGR: Why has your group had so much success, even in difficult markets?

SW: The key to our success is that we're a disciplined group with skilled people. We know what we're good at and what we want to achieve. Ivan and I get a lot of the pats on the back, but frankly, it's our technical people—the geologists and geoscientists who go into the field and create value for our shareholders. I was with the Hunter Dickinson Group for 15 years before Ivan and I formed this group about 10 years ago. That is where I learned how to do things.

Our ability to adapt and be flexible to changing times and not getting too hung up on the things that we can't control and trying to mitigate the risk of the things we can control has helped us in these difficult markets. We're not going to issue shares just to keep the lights on. Many companies have fallen into that trap. We're not going to let that happen.

TGR: What are some examples of how you have mitigated risk?

SW: It's about picking where and how we spend our capital. For example, with Keegan in 2008 when the markets crashed and our share price went from about $4 to $0.50, we had about $7M in the treasury when Ivan and I sat down and said, "We have to stop drilling in order to preserve our capital," whereas a lot of companies continued to drill. Why would you drill holes and put results into a market that could not care less? But because we ceased drilling we didn't have to raise money until the markets had recovered. That sort of prudence kept dilution to a minimum. If a company has too much cheap stock, it usually can't recover.

TGR: What are some ways that you are creating value with less money?

SW: Right now we are preserving value, rather than creating it, by being prudent. But we are also in acquisition mode. We're creating value by purchasing or getting involved with high-quality assets that would not be available in a better market. The Committee Bay Joint Venture is one example. We will spend $6M over 18 months to earn a 51% stake in Committee Bay. We have a top technical team that will make its decisions using a precise, science-based approach to exploration. We're not drilling for the market.

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Disclosure: Brian Sylvester conducted this interview for Streetwise Reports LLC, publisher of more

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