When it comes to mineral exploration, almost nothing is more important than drilling. Whether it’s diamond (core), reverse circulation (RC), rotary, percussion, or some other form, only drilling can extract samples from the ground to hopefully define a valuable deposit.
Until a company delivers good, consistent drill results, it has nothing.
No amount of surface sampling, geophysics, “district-scale” land packages, or exciting stories of past production confer any value whatsoever.
A deposit that’s been well drilled and studied, however, can be the basis of a rational valuation of a company. Even banks will lend money on this basis.
That’s why a drill rig is often called a Truth Machine in the business.
So, what are good drill results?
Obviously, there are a lot of variables, from the minerals in question, to the type of deposit, to the stage of exploration.
A proper answer would take a very thick book to do it justice. That’s another item on my long-term to-do list. For now, I hope this cheat sheet will help.
First off, let’s start with some basic definitions:
- Diamond (“core drilling”). This isn’t usually drilling for diamonds (though it can be), but drilling with a diamond-encrusted, tubular drill bit. The diamond bit is attached to tubular drill rods—more and more of them as the drilling penetrates deeper into the earth. This extracts cylindrical samples of stone—“drill core”—in which we can see veins, faults, and other geological information. It also provides material for chemical assay (grade determination). Core drilling provides a greater wealth of information than other types of drilling, but it’s more expensive.
Note that there are different sizes of diamond drills: NQ core is 47.6mm, HQ is 63.5mm, and PQ is 85mm. The wider the core, the more data we get, but the slower and more expensive it is. HQ is the most common diameter.
An extra step that’s possible with core drilling is to “orient” the core, so you always know which side is up. This tells us the orientation in the earth of the veins, faults, and other features we find in the drill core. That’s a great help in figuring out Mother Nature’s geological puzzles.
- Reverse Circulation (RC). An RC drill is basically a giant vacuum cleaner with a drill bit on the end. This crushes rock into chips and sucks them up to be collected on surface as it goes. Rock chips provide material for the assay labs, but obviously, much detailed information about the features encountered by the drill is lost as the rock is torn up in the process. RC’s great redeeming feature is that it’s usually faster and cheaper than diamond drilling. Because of this, sometimes explorers drill long holes to near target depth with RC, and then finish the hole with diamond drilling to get more information.
- Shallow. There are various kinds of drill that can’t drill very deep, but they’re relatively cheap and fast. Because of their depth limitations, they can’t define much volume of mineralized rocks, but they can quickly test larger areas for later follow-up with RC or diamond drilling. This disturbs a lot less ground than digging lots of trenches (and in some conditions, like sandy ground, trenching to bedrock can be difficult). I see these as prospecting tools, not resource definition tools.
- Man-Portable. There’s a type of modular diamond drill, the pieces of which can theoretically be carried by people on foot. This gives access to difficult terrain or environmentally sensitive terrain with minimum disturbance. In practice, the motors are big enough that it would take a team of very burly porters to carry them. The point remains that whether it’s people, donkeys, ATVs, or helicopters, the pieces can be assembled to make powerful diamond drill rigs on steep mountainsides or places with no roads. There are hand augurs and even a “backpack” diamond drill rig, but these are really just shallow sampling tools.
With these drill basics in hand, the next thing is to understand what the purpose of the drilling is.
In a first stab at a new target, for instance, any significant hits are a big win. But in upgrading a known deposit to a higher level of confidence category, the results have to be as good as what came before—or better—or they damage the deposit.
One could say that in general, the earlier the stage of exploration, the lower the bar. The more advanced the project, the higher the bar for materially improving a project.
Here are some specific purposes for drilling, and what to look for in the results:
- Twinning. This is when a hole (of whatever kind) is drilled right beside and in the same orientation as an existing drill hole. Why duplicate effort? There can be legitimate reasons for this, such as when there’s a database of historic drill results. Successfully twinning a few of these old holes can validate the whole database, saving the new company a lot of time and money. Another valid reason is when some sort of bias or other problem crops up in one form of drilling. RC drilling, for instance, can sometimes “smear” the target mineralization over a wider interval than it really occurs in. Twinning with a diamond hole can tell us if this is happening and help correct for it. The thing to watch out for is when a company twins high-grade holes without any real need, just because they know they’ll likely be able to report another high-grade hit to the market. What’s plain old dishonesty is when they twin a hole and don’t mention that it’s a twin. Almost as bad is when the fact that a hole is a twin is buried in the fine print at the end of a press release.
- Confirmation. Twinning can be a form of confirmation drilling, but one can confirm known information without twinning an old hole. Just plunk a new one somewhere in the middle of what’s supposed to be a mineralized area and see if the new result matches the old info. Sometimes this is necessary, but too much “confirmation” drilling looks to me like drilling for the market, rather than to define a deposit worth mining.
- Step-out. A step-out hole is any hole drilled beyond the limits of known mineralization. The idea, of course, is to expand a hopeful deposit. If there’s no known mineralization, drilling can’t be called step-out. Sometimes drilling within the known footprint of a mineralized area but below or above what’s been drilled before is called step-out drilling, but more often it’s called “down-dip” or “up-dip” extensional drilling. Whatever it’s called, if it’s successful it expands the known mineral endowment, and that’s a good thing. If it fails, it doesn’t make what’s there any smaller, but it does limit the potential to expand mineralization in that direction. One thing to watch out for is drilling a long distance off that’s sometimes called step-out drilling. Even if successful, it could be a separate zone if “the dots don’t connect.” For narrow vein-type deposits, holes (dots) more than 25 or even 10 meters away may or may not connect. That makes it a stretch to call a hole 100 or more meters away a step-out hole. For bulk-tonnage targets, it’s a stretch to call holes kilometers away step-outs.
- Infill. This is drilling within a known mineralized area—but it’s between previous holes (not twinning). This reduces the space between holes (increases “drill density”), providing more detailed information for more accurate modeling of a deposit. Infill drilling doesn’t usually make a deposit any bigger. It increases our confidence that the deposit is actually there and that its continuity, average grade, and mineral composition are well understood. So, positive infill drill results may not make a deposit larger, but they can define it in the first place, then upgrade it from Inferred to Indicated, to Measured, to Proven and Probable mine reserves. That adds value. The thing to watch out for here is results that aren’t as good as previous results. This can lower the grade, reduce the tonnage, or even turn what had seemed like ore into waste.
- Geotechnical. This isn’t exploration at all, but holes drilled to verify rock characteristics (which impact pit all slopes, tunnel support needs, and more), water flow, and other variables needed for engineering studies. These holes are not necessarily expected to hit good mineralization, so it’s “no harm, no foul” if they have none. But sometimes they surprise us with good results where none were expected—they can even result in new surprise discoveries. Sweet, but don’t ignore the geotechnical results. “Incompetent” rock can lower the angle of pit walls or require more (expensive) rock-bolting and other support in tunnels. These results are highly material to the business of actually making money on a mineral discovery.
- Condemnation. This is drilling done specifically not to find valuable mineralization. It’s when you already have a deposit and need to figure out where to put the plant, waste dumps, leach pads (if any), and other infrastructure. You don’t want to put any of these things on top of a deposit you haven’t found yet, so you drill holes to “condemn” ground (show that there’s nothing valuable there) before you build. This is a real issue: I’ve been to a mine where they poured concrete foundations for a mill right over a massive sulfide vein that graded over 20 ounces of silver per tonne. There’s no downside here. If condemnation drilling finds nothing, it’s as expected and you know you can put infrastructure there without destroying any value. But if condemnation drilling does make a new discovery, it’s an unexpected plus—usually worth it if you have to move your infrastructure around a bit.
- Bulk sample. There are different types of bulk samples, taken in different ways. One way is to drill large-diameter holes into known mineralization to extract tonnes of potential ore to process. If metal recoveries conform to model, it’s a success. If not… well, we learned something which may alter or even kill the project. However the bulk sample turns out, the drilling itself into known mineralization matters. As with infill drilling, it can confirm, improve on, or detract from modeled resources in the ground, so watch out for that.
- Production Drilling. Sometimes a drill hole is a production well. That's not just in the case of oil and gas, but also for in situ (solution mining) production of uranium, copper, and other soluble minerals. Though such wells are drilled for production purposes, they can provide exploration-type results as well, such as flow rates for oil and gas, grades and thicknesses for metals, and a sort for combination for brines like lithium and potassium salts. What we generally want here is a lack of surprises. Better than expected results are fine, but rare; surprises are usually negative. Like infill drilling, production drilling that disappoints reduces the value of a project.
Understanding these types of drilling, we have context for evaluating drill results.
To do that, however, we need one more thing; we need to understand what’s low, average, or high grade?
To do this, the #1 thing to be clear on is that open-pit mining is much cheaper than underground mining. That makes what’s considered high grade for near-surface (open pit) deposits very different from high grade for deposits that would have to be mined underground.
The other thing to keep in mind is that it’s much more expensive to extract metals from some minerals than others. Minerals like enargite are notoriously hard to process. I check with a geochemist when I’m not familiar with the minerals in a deposit I’m looking at.
One major category that’s easy to watch out for is “refractory” ore.
I’ll skip the technical details, but suffice it to say that such ores often require expensive treatment—like roasting in an autoclave—before the metals can be extracted. Refractory ores are common and how to handle them is well understood, so don’t take this as any sort of kiss of death for a project. It just means that the grades need to be higher to pay for the extra processing.
Another major category to watch out for is polymetallic ore.
When ores contain several metals, it can complicate extraction. Miners usually have to pick one metal to concentrate on to maximize the value extracted, at the expense of others that would be more difficult or expensive to recover—if they can be recovered at all.
- Gold and silver often occur together, sometimes in an alloy called electrum. But other times, maximizing gold recoveries means giving up a lot of silver recovery.
- If there’s copper and gold together, you can run into the problem of the copper using up cyanide before it gets to liberating the gold.
- If you have a bunch of metals together, like a VMS-type deposit with lead, zinc, copper, gold, and silver, there’s no way you can optimize for all of them. When explorers convert all of these metals to gold (or silver) equivalent, assuming 100% recovery of each, it results in a much higher-grade number than could ever be recovered in practice.
This may all sound complicated, and honestly, it is. That’s why I want to see a detailed feasibility study before I back a project developer planning to build a mine.
That said, I have my own rules of thumb for what’s high grade—and what isn’t—that I’m happy to share with you.
- 0–0.5 g/t gold is low grade.
- 0.5–1.5 g/t gold is average grade.
- Over 1.5 g/t gold is high grade.
- 0–5.0 g/t gold is low grade.
- 5.0–8.0 g/t gold is average grade.
- Over 8.0 g/t gold is high grade.
- Gold measured in ounces per tonne is “bonanza” grade.
- 0–30 g/t silver is low grade.
- 30–150 g/t silver is average grade.
- Over 150 g/t silver is high grade.
- 0–150 g/t silver is low grade.
- 150–350 g/t silver is average grade.
- Over 350 g/t silver is high grade.
- Silver measured in kilos per tonne is “bonanza” grade.
- 0–0.5% copper is low grade.
- 0.5–1.0% copper is average grade.
- Over 1.0% copper is high grade.
- 0–1.0% copper is low grade.
- 1.0– 3.0% copper is average grade.
- Over 3.0% copper is high grade.
- 0–1% U3O8 is low grade.
- 1-5% U3O8 is average grade.
- Over 5% U3O8 is high grade.
Rest of the world, in situ (solution mining):
- 0–100 PPM U3O8 is low grade.
- 100–300 PPM U3O8 is average grade.
- Over 400 PPM U3O8 is high grade.
Rest of the world, conventional (hard rock mining):
- Under 0.1% U3O8 is low grade.
- 0.2%–1% U3O8 is average grade.
- Over 1% U3O8 is high grade.
I should stress that it’s important to understand that these are not international standards set by some geological authority. These are my numbers, based on what I’ve seen in the field.
Also, as you can see, uranium is an odd duck. In my view, while it might be nice to have something considered “high grade for outside the Athabasca Basin,” it remains a fact that the Athabasca Basin exists. There are several known, large, very high-grade deposits awaiting development in the Athabasca—and more are on the way. I’ve never understood why so many investors apply different standards to non-Athabasca deposits. The object here is to make money, not to give everyone gold stars for making a good effort. I hold deposits everywhere to high economic thresholds. If non-Athabasca deposits can compete (somehow) on margin, that’s fine. If not, why bother?
As for gold, it's worth keeping in mind that oxidized gold mineralization tends to be much cheaper to process than "fresh" sulfide mineralization. Oxide gold that can be mined via open pit and heap leached with little crushing or grinding can be profitable at what I've given as "low grade" above. It can gush cash at what I've given as "average grade." The same dynamic applies to silver, but most silver mines are underground sulfide operations. Just remember not to jump to conclusions when you see "oxide" in press releases. Not all oxide mineralization leaches well. Some require a lot of crushing, agglomeration, and other steps that add costs. A good feasibility study should make clear the value of such mineralization.
Back to the big picture: these rules of thumb for grade are just a starting point:
- If the would-be ore is refractory, I want to see higher grades.
- If it’s polymetallic, I want to see higher grades of the most valuable metal in the mix (by price and quantity).
- For underground mining of veins and such structures, I want to see high grades over minimum mechanized mining widths. That's at least 1.5 meters, but 2.0 is solid—and the thicker the better. Anything measured in centimeters is suspect. Anything less than half a meter makes it very tough to build enough tonnage to matter—even with bonanza grades.
- For bulk tonnage open-pit mining, I want to see above-average grades over hundreds of meters. High grades over several tens of meters can work, but there also needs to be high consistency. Narrow low-grade projects need not apply.
- And so forth…
To get more detailed, I have to look at a specific project. For those interested, I do provide such analysis when I evaluate and update companies covered in My Take. That service now covers about 500 resource and mining stocks, and it grows larger every month as readers request coverage of more companies.
But in general, this is how I look at drill results.
I hope you find it useful.
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