A Year-End Message to Stakeholders
2020 has been both a challenging year and an exciting year of discovery for our Company. Like yourself, wherever you are reading this, the COVID-19 pandemic has impacted our employees and their families, and our stakeholders on the territory of our concessions in Ecuador. We are getting through this and I hope you are too.
In mid-March we were ordered by government mandate to cease our operations in the field. Over the following 48 hours it became apparent that the country was headed for total lockdown, and we were only able to get our small expat staff out of Ecuador hours before the international airports were shut. Little did we imagine that they would remain closed until June 1st. The Shuar indigenous people living on our concessions were extremely panicked in the first days of the pandemic. Insensitive newspaper reporting and social media trolls suggested that COVID-19 would be as devastating to the Shuar as smallpox had been in the 16th century after it was brought in by Spanish colonials. For the first few months we thought it prudent and warranted to minimize our contact with the Shuar peoples as much as possible. In any case our small expat staff, including myself, were excluded from visiting Ecuador, and at the same time the military severely limited travel within the borders of Ecuador so that our employees living in Quito and other cities had no choice but to stay home. Quick lockdown decisions by the Government of Ecuador no doubt saved countless lives as the healthcare system was able to manage the most serious cases without the overwhelming of services. Sadly, many of you are limited this holiday season from your traditional gathering with family and friends and in some countries the hospitals are once again full. In Ecuador it would seem that the worst of the pandemic is now behind us. Shopping malls, airports, restaurants and office buildings are open again but every business requires a temperature check, a hand cleaning with sanitizer, and the compulsory wearing of a mask before you cross the threshold. It is rare to see anyone out on the sidewalk or the street without a mask and social distancing is scrupulously practiced and I believe in this way the Ecuadorians have knocked this infection down.
The pandemic has been nowhere near as impactful to the Shuar as was forecasted and fatalities have fortunately been rare and way below the national average. We believe this can be attributed to demographics, since most of the population is below the age of forty, and to lifestyle, which eliminates high risk health conditions such as obesity or type II diabetes. What immediately became apparent in March was a food emergency, since the Shuar like the rest of us were caught entirely unawares by the situation and were unable to secure supplies. Together with the Ecuadorian military and the Ministry of Social Inclusion our small locally based skeleton staff were able to put together parcels of non-perishable food for over 1500 families, and ship in and distribute 18 tonnes of food aid. I am personally very proud of this achievement. Over the next few months, in consultation with the Ministry of Health and the Ministry of Labour, Aurania was able to develop an effective COVID-19 protocol to minimize the transmission of the disease. We maintain two doctors on staff, and though we have experienced a small number of infections among our people they have all been identified before entry into the field, and the persons infected quarantined or isolated.
The Province of Morona-Santiago, in which we are located, reopened on the “traffic light system” with some Cantons remaining red, and in lockdown, while others were amber or even green. In all cases we have been limited to 50% of our usual complement of staff and this remains in force. We decided to suspend work in the Crunchy Hill and Yawi areas since paved Highway E40 passes right through the Crunchy Hill anomaly. Inevitably, COVID-19 was spread to communities along this road and Aurania would have been blamed for this had we been in the area. For the time being we consider it prudent not to restart work there until such time the pandemic has abated. This has been perceived by some investors as a shift in commodity interest from gold to copper. Nothing could be further from the truth, but we have had to juggle priorities against a COVID-19 reality just as you have had to do in your personal and professional life. The Tsenken targets, where we are currently focussed, are helicopter fly-in accessible only and we are able to 100% control access and work within a COVID-free “bubble”. I want to emphasize that these targets were not necessarily selected for work because we considered them to be the “best” on the project. It takes much lead time to prepare a drill campaign and the Tsenken targets are in a pipeline of many many targets the number of which is the envy of our peers in the exploration business.
For the first months of the lock-down we coordinated work between four continents via the internet and compiled our data between our geologists and consultants. This was a long overdue task. To date we have taken 3,390 stream sediments and 13,417 soil samples, all of which needed to be plotted and interpreted. We made a strategic decision to prioritize the Tsenken magnetic targets and complete geological mapping and soil sampling on and around them. Results showed low level but distinct copper anomalies in soils. Our interpretation was that the Tsenken bodies were buried copper porphyries, which was reinforced by the presence of copper-bearing breccia at surface at N1. To my personal surprise these targets have proven to be IOCG (iron oxide – copper – gold) type associated with magnetite and hematite flooding and alkaline volcanic rocks. We have initiated a drill programme that will carry on at least to June, 2021 and most likely beyond, and a Mobile Magneto-telluric (MMT) helicopter-borne survey to better target our drilling. I want to emphasize that what we are doing is “scout drilling” designed to give us a quick look at the subsurface before moving on. Many of these are large and complex targets with little showing above ground, and the scout drilling will allow us to better interpret the geophysics, and vice versa for future drilling.
This year we have also successfully completed two financings. No mean feat given the market volatility! My thanks go out to all participants for their support. We now have 6% of our equity held by Ecuadorians which I view as a real plus.
Over the past several months there has been much press made about Warintza and Porvenir. The Warintza copper porphyry which lies about 15 kilometres south of our southern boundary has yielded, some spectacular high grade and continuous drill intersections. It is one of a cluster of targets. Porvenir is one of two copper porphyry targets about 125 kilometres south of our southern boundary, and has yielded circa 600 metre intersections. We can expect more news from both companies which own these projects and it is bringing investor interest into focus. I might point out that the Warintza porphyry was actually discovered by teams led by our company President Dr. Richard Spencer when he worked for Gencor Mining in the mid-1990’s. Much lauded geologist David Lowell, was brought in as an investor in 1999 after the first holes were drilled at Warintza. He was handed the job of running the exploration but his handling of community affairs was not equivalent to his geological talents and the company was barred from working after November, 2006. Nearly a generation later, the present operators have twinned some existing holes from the database and taken them to depth; it is hardly a “eureka moment”. I point this out to give credit to Richard, but also because some investors have expressed impatience with our pace of exploration thinking that Warintza just miraculously materialized. Exploration is not like the film “The Treasure of the Sierra Madre” (which for sheer entertainment value can’t be beat, and I recommend it for holiday viewing!)
Geologically, our project is centred on the Cordillera de Cutucu, which is a prominent ridge system running north-south and contiguous with the Cordillera del Condor to the south across the Santiago River, which occupies a topographic canyon. The two Cordilleras are in reality one geological feature, just given different names. This series of mineralized ridges is what is called a “back-arc rift”, and when it formed back in the Jurassic during the age of the dinosaurs was a fundamental crack in the Earth’s crust along which was a string of volcanoes. Over time, all of this area became buried in sediments which filled in the crack or “rift basin”. Then, during the Tertiary period 66 Million years ago to about 3 Million years ago, the faults controlling the basin reversed direction, and what was formerly 4,000 metres down below surface was now as much as 2,600 metres up in the air forming steep cliffs and flat mesas. These were then eroded down exposing the copper porphyries and gold systems in the Cordillera del Condor. In the Cutucu the uplift was not as pronounced, and most of the mineralized systems are not at surface or are poorly exposed. North of our property, at the end of the Cutucu, the fault reversal has not happened, and the rift basin is still intact and actually contains most of Ecuador’s oil reservoirs. North again, near and across the Colombian border, the fault reversal has happened again and the Mocoa and La Bonita copper porphyries are exposed. It was always believed by us that the conspicuous gap in mineral discovery – occupied by the Cutucu and under the “U” in ECUADOR on the accompanying map – was only there because no one had explored to make the discoveries. There are now nine advanced copper projects in the Cordillera del Condor, an operating copper mine (Mirador) as well as the Fruta del Norte gold mine (FDN) and an advanced gold prospect of Lundin Gold called Barbasco. All of these, with exception of FDN, outcrop at surface. We are fond of saying that if one were to superimpose our land position anywhere in the Cordillera del Condor, we would have a number of advanced projects and maybe a few mines, but geologically this is not an idle boast. Almost four years of dedicated effort has yielded a double handful of prospects which are being gradually worked up into drill targets. It is important to understand that Aurania is telescoping fifty years of exploration in the Condor to maybe five or six years in the Cutucu.
My own personal opinion is that our project is the very best exploration project currently worldwide, in one of the world’s very last frontier areas. I also believe that the eastern Cordillera in Ecuador will, in time, be as important as the El Indio-Chuquicamata copper porphyry belt in Chile. Ecuador will be the source of metal for the coming Green Revolution and the Copper Renaissance.
Early in 2021 there will be a vote for a new President of the Republic. In my opinion it doesn’t much matter who wins; mining is here to stay in Ecuador because it is such a potential cash generator for a broke government. Politicians are savvy enough to realize that Mirador and FDN are only hints of what is possible, but only if the exploration companies can do their job.
A couple of years ago I set up the Step Forward Foundation to help fund projects in the Shuar community that were either too financially ambitious for Aurania or not appropriate, because I could see a definite need. It is a way for me to “give back” and the right thing to do. For the Company, I view it to be part of our Corporate Social Responsibility in an age when ESG is so very important.
When we were able to do it, we visited communities and supplied villagers with masks and through videos instructed them in the proper technique of handwashing to help prevent the spread of COVID. In October we opened a primary school in the village of Tuna Wempaim. Eventually, the school will house 40 pupils aged 4 to 11. These children had formerly been walking 2.5 hrs to school in the morning and then 2.5 hours back home every day, and crossing three rivers without bridges! Aurania only paid 20% of the costs and the Ministry of Education is supplying the teacher at no cost to the Company. Aurania and the Foundation together also funded five clean water projects whereby a small stream was dammed off in the hills and water fed by gravity through plastic tubing to a cistern in the middle of each village. This is a low cost and proven solution to the Number One problem identified by the Shuar. In every case where examined, their water sources were contaminated with human and animal waste, creating a major health hazard. The villagers themselves participated in a “Minga” or community project to help in the construction. Of course, the most impactful activity of Aurania has been in providing local employment while empowering the Shuar and treating these indigenous peoples with dignity and respect.
As in every election season, politicians of every stripe are eager to get press coverage and headlines, and Ecuador is no exception. “Issues” whether real or contrived for the moment are brought to the fore. A small but vocal anti-mining faction has attempted on four occasions recently to stir up trouble in our local communities ahead of the national elections. I am happy to report that in the first three cases more than 30 “Sindicos” or village Headmen, attended on their own volition and supported our Company. Moreover, they were furious that the Shuar were being “co-opted” into anti-mining movements by other indigenous organizations that did not speak for them. So little support was gained by the anti-mining factions that their last Press Conference had to be held in the town of Puyo, in the Province of Pastaza. This would be rather like protesting mining in Quebec, yet holding your meeting in Toronto.
I was not personally able to appear as Papa Noel this year for the Shuar children as I have done in the past two Christmas seasons because of the pandemic. The Foundation decided that for 2020 we would buy rubber boots for the Shuar children, since snakebite is a serious hazard in the Cutucu and kids often go barefoot in the forest. We found an Ecuadorian manufacturer who had lost a major retail client due to the COVID-19 lockdown and was sitting on a massive inventory they were willing to let go at a discounted price. In this way we were able to supply 2,400 pairs of boots – in all colours – to the children. The Company has assisted in getting the boots to the village leaders for distribution in each community. Oh, and the kids got a small bag of candy too!
All that remains is to say please stay safe, Happy Hanukkah, Merry Christmas, Happy Kwanza, or Festivus, or whatever your holiday, and God Bless.
Dr. Keith M Barron
Chairman and CEO
Aurania Resources Ltd.