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Thursday, March 02, 2017 Derek Macpherson

Aurania to Acquire Lost Cities, a Historic Gold Prospect


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Aurania Resources Ltd. (TSXV:ARU) announced it has entered into a definitive agreement to acquire EcuaSolidus S.A., a private company that owns the ~2,080 km2 Lost Cities – Cutucu project in Ecuador. Consideration for the proposed transaction is C$500,000 and 1.0 million Aurania shares. Lost Cities is potentially the first project where professional historical archival research is coupled with modern exploration techniques. Findings from archives suggest the project area might host two major 16th and 17th century gold mines. The project is based at the foothills of the Andes, covering the core of a mountain range adjacent to that which hosts Lundin Mining Corp’s (TSX:LUN) 7M oz Au Fruta del Norte deposit. It was the team of Dr. Keith Barron, who currently is the President and CEO of Aurania, that discovered Fruta del Norte in 2006. Dr. Barron aims to apply the same exploration strategy this time, which might potentially lead to the expedited identification of drill targets. Dr. Barron is giving a special presentation on the Lost Cities and the process of finding them at our Pre-PDAC Conference tomorrow.


Prospect’s location based off historic literature. Historic Spanish literature suggests the Cordillera de Cutucu as the likely location of Sevilla del Oro and Logroño de los Caballeros, which were two famous gold mining areas in the 16th and 17th centuries. However, with the passage of time, the precise location of these mining centres has been lost. EcuaSolidus commissioned extensive archival research in Spain, the Vatican and Ecuador. This work returned over a hundred documents relating to gold mining at the two cities, supporting the thesis that the "Lost Cities" may be located within EcuaSolidus’s project area (Figure 1).

Exploration strategy mirrors that of Fruta del Norte’s. An exploration program has been planned for the Lost Cities. The program is to consist of airborne geophysics, a regional stream silt program combined with geological work which is currently underway. To expedite the identification of drill targets, the company intends to prioritize any anomalous stream silt or rock geochemical samples for ground follow-up work. Such strategy contributed to the discovery of Fruta del Norte.

Transaction metrics appear to be favorable for Aurania shareholders. Consideration for the proposed transaction is C$500,000 and 1.0 million common shares, implying a total value of C$1.22 million based on Aurania’s close price on February 13 of C$0.72/sh. The transaction is expected to close in Q2 2017. The closing of the transaction is conditional upon Aurania completing a C$6.0 million financing at a price of no less than C$1.0/share. Prior to the closing of the transaction, Dr. Barron is expected to provide a US$2.0 million loan to EcuaSolidius for the payment of property fees. Of this, US$1.0 million is expected to be repaid at closing and the outstanding US$1.0 million is due one year after closing with an annual interest of 2.0%. The project area is subject to a 2% NSR and a 2% net sales return royalty.


Derek Macpherson | VP Mining Analysis
Sunneva Bernhardsdottir | Associate, Mining Analysis
Victoria Ellis Hayes | Associate
 
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