Projects

    Mexico, La Dura

    Introduction

    On 27 April 2017, the Company announced that it had entered into a binding term sheet with Bonito Minerals Pty Ltd (“Bonito”), the holder of an option to purchase five (5) mining concessions that comprise the La Dura project in Mexico.

    The La Dura project is located approximately 275kms NW of the city of Durango, Durango State and locally about 2.3km E of the village of El Durazno. Average altitude of the project area is 2,200m above sea level. The project sits within the famous Sierra Madre Occidental – a belt that has historically produced approximately 40million ounces of gold and 2billion ounces of silver over the last 400 years. The significant resources and production activities from the Sierra Madre Occidental help Mexico to become the largest producer of silver in the world, with 189.5Moz of silver produced in 2015 (20% of world production).

    After conducting a due diligence review (including a recent site visit to La Dura by AKN representatives), the Board of AKN has decided to proceed with the proposed Bonito acquisition.

    La Dura – A Summary

    (a)Geology
    The La Dura project is located in an area consisting of Cretaceous to Quaternary plutonic and volcanic rocks which hosts many epithermal Au-Ag vein deposits. Guanacevi for example (100km north-east of La Dura), is a low sulphidation epithermal vein deposit hosted within a fault structure. The vein structure at Guanacevi has been traced for 5km along the trend and averages about 3m in width. Mineralisation in the system (vein structure) is not continuous but occurs in steeply-dipping ore shoots up to 200m in strike length.

    (b)Previous Mining Activities
    Mining activities have been carried out at the La Dura site intermittently since the 1920’s. In 1979 a beneficiation plant was installed at site with the processing capacity of 60 tonnes per day and this plant operated reasonably consistently until 1999. The operation resumed in 2009 but again ceased due to low prevailing metal prices.

    The current owner has reported approximately 400,000 tonnes of ore has been mined from La Dura during this period – producing 120,000oz Au and 1.2Moz Ag. A concentrate has been sold to the nearby smelter operated by Industrias Peñoles at Torreón, some 250 kms away. The current owner has advised the concentrate was considered to be very clean, with the smelter normally paying up to 95% of the Au/Ag value.

    These previous mining activities have identified a series of highly mineralised parallel systems that point to a potentially larger target that is open at depth and width. Further, the vein system can be seen (from surface outcropping) to continue along a SE-NW trend for 4km. Bonito is unaware of any other drilling or exploration activities having been conducted at La Dura.

    (c)Bonito Option
    Bonito has entered into an Option to Purchase agreement with the holder of the La Dura mining concessions. The option is for a four (4) year period during which Bonito can purchase the concessions for USD4M. In addition, the current holders will be entitled to a 2% net smelter royalty, which can also be bought out by Bonito during the option period for USD3M.

    During the course of the La Dura option period, Bonito is obliged to make 6 monthly payments of USD50k in order maintain the option in good standing.

    (d)Local Infrastructure
    The La Dura project is located in a region that has been familiar with (and to a large extent) relied upon, mining operations for many, many years. In addition, features of the project include:

    • located about 8 hours by bitumen road from Chihuahua City
    • airstrip nearby, with charter flights to El Durazno operating from 3 times daily
    • 5km by dirt road from a population centre of approx. 2000 people
    • electricity and water to the site (secured for previous mining operations)

    Bonito Acquisition Agreement

    Now that AKN has elected to proceed with the proposed acquisition, formal agreements will be finalised and signed, based on the terms originally agreed in the 27 April 2017 binding term sheet between AKN and Bonito. In summary, the key acquisition terms are as follows:

    • AKN will make an initial payment of A$350k and the issue of A$125k in AKN shares (on signing the formal agreements mentioned above) to acquire an initial 14.2% shareholding in Bonito;
    • AKN will then have the ability to acquire a further 15.8% shareholding in Bonito upon payment of A$400k and the issue of A$125k in AKN shares on or before 31 October 2017;
    • AKN has an option to purchase a further 20% of the Bonito shares upon payment of A$1.5M in 2 stages – A$500k by 31 January 2018 and the balance A$1M on or before 31 October 2018;
    • AKN will have the immediate right to appoint a director to the Bonito Board and, if its future shareholding in Bonito exceeds 50% then additional Board members can be appointed by AKN;
    • The number of AKN shares to be issued as part of the initial 30% acquisition will be calculated by reference to a 15% discount to the 20 day VWAP prior to issue;
    • AKN has a pre-emptive right to participate in future issues of securities by Bonito (should there be any);
    • AKN and Bonito also have an agreed process (by way of independent valuation) in the event that Bonito wishes to sell the La Dura project at some future time.

    AKN Site Visit – May 2017

    Representatives of AKN (including two senior Chinese-based geologists) attended the La Dura project area for three days. During the course of the site visit, the AKN team inspected the main La Dura underground workings and above ground facilities (including the tailings storage area), the “Plante 3” underground workings, the nearby “Pulverine” prospect, and a number of other prospective areas across the mining concessions. Set out below is a general layout of the main mining areas, together with the projected NW-SE mineralisation trend at La Dura:

    More than 30 rock samples were taken by the AKN team and sent to the ALS laboratory at Chihuahua for assay. These samples were collected from a number of different locations in and around the main La Dura mine workings and facilities. A table of the assay results from these samples (showing gold (Au) and silver(Ag) grades is set out in the attached JORC table, but highlighted by the following:

    Sample #

    Location

    Au ppm

    Ag ppm

    424403

    Plante 3, high grade vein

    26.4

    988

    424404

    Plante 3 alteration halo (3m wide)

    0.44

    15

    424405

    Plante 3, veins (1m wide)

    1.47

    12

    424406

    Plante 3 veins (1m wide)

    1.41

    79

    424408

    Plante 3 veins (3m wide)

    0.99

    48

    424412

    Plante 3 cross cutting tunnel 

    0.23

    7

    424415

    Meas el Borrego working 2

    0.41

    48

    424416

    Meas el Borrego working 2

    18.7

    514

    424418

    Gambusino working next to San Ignacio Creek

    0.38

    12

    424421

    La Dura Mine Level 1 remnant workings

    0.27

    25

    424422

    La Dura Mine Level 1 remnant workings

    0.28

    25

    424423

    La Dura Mine Level 1 vein remnant workings

    0.43

    25

    424424

    La Dura Mine Level 1 vein remnant workings

    0.53

    252

    424427

    Pulverine high grade zone

    36.4

    1170

    Some initial conclusions from the site visit and these assay results are:

    • the La Dura Project is situated in a region well known for its large scale gold and silver mining operations, over several hundreds of years;
    • where there exists mineralisation in veins within the existing workings at La Dura, that material is very high grade (as has been the experience of the previous owners);
    • the historic underground operations were very efficient, in terms of extracting the higher grade material. However, the remnant areas in the main La Dura workings still contain mineralisation, albeit in lower grade quantities;
    • the width of the mineralised veins is variable along strike – as is evidenced by the size of the open stopes in the underground workings;
    • although there has never been any systematic exploration at La Dura, the previous workings provide an excellent starting point from which to design future exploration drilling programs;
    • the local stakeholders are very familiar with mining operations and the opportunities they bring to a remote local community such as El Durazno. It is likely a new mine development would be well received; and
    • although generally in a remote area of the Sierra Madres, there is access to all the usual infrastructure and facilities – accommodation, food, water, mains electricity, internet and phone coverage.

    Future La Dura Activities

    Under the terms of the Bonito acquisition, Bonito management will continue oversee the conduct of exploration activities at La Dura, in consultation with AKN. The primary focus of activities will be to seek the necessary regulatory approvals and carry out on-site activities in preparation for an estimated 1600m RC exploration drilling program at La Dura. Initial planning is for this program to commence in early August 2017.

    Mary Kathleen JV- Jubilee, Blue Caesar, and Elaine

    AuKing Mining entered into an agreement on 14 December 2016 with Hammer Metals Ltd to disposed of its holdings on Mount Isa.