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No Drilling, No Deposit, No Value

by Lobo Tiggre
Friday, July 08, 12:00pm, UTC, 2022

It’s said that the hierarchy of falsehood goes from lies, to damn lies, to statistics.

Few in the world are better at twisting statistics to create an untrue image based on true facts than government propagandists. This applies as much in the sphere of attracting investment to mining projects as in that of trying to win votes in an election.

A recent example of this comes from Uganda’s Ministry of Energy and Mineral Development, which reported that surveys had “shown” that the country has gold deposits containing an estimated 320,158 tonnes of gold. That’s over 10 billion ounces of gold—more than all the gold that has ever been mined in the world, according to the World Gold Council.

Elements of the crypto-maximalist crowd were quick to seize on this claim as evidence that gold is not scarce, and therefore Bitcoin (or some other favorite token) is superior. I can almost understand this, since few in that community have bothered to educate themselves about metals and mining in general, and gold in particular.

What’s more surprising is how many resource investors wrote in to ask how this gigantic discovery might affect the price of gold.

The answer is: not in the least.

First off, consider the source. A poor African country suddenly declares it has found more gold than has ever been mined in all of history—why on earth would anyone take that seriously?

One does not simply find 10 billion ounces of gold under the Christmas tree.

If anyone had done the work necessary to define such a monstrous resource, the milestones along the way would have been making global headlines for years. People and money would have poured into Uganda—if warlike neighbors hadn’t swooped in and turned the place into a slaughterhouse.

Extraordinary claims require extraordinary evidence and proof. A government press release declaring a virtual impossibility doesn't qualify.

What we find instead, if we read the reports, is not just an absurdity, but something that comes close to lying with the facts.

The claim is that “over the last two years, aerial exploration was done across the country, followed by geophysical and geochemical surveys and analyses.” In other words, the surveys are all surface work.

It’s impossible to define a volume of rock and estimate its mineral content from any amount of surface measurements.

When it comes to mining, value is found beneath the surface.

The best that could be done with such work is to identify targets for exploration in three dimensions, as needed to define a volume and estimate its characteristics. In mineral exploration, this is done with powerful drills that extract samples as they go. That takes time, costs a lot of money, and never has a certain outcome.

No respectable exploration company would publish an estimate of resources in the ground, based on surface work. They’d have to make unsupported assumptions about the dimensions and consistency of the mineralization. Such a thing really shouldn’t be called an estimate, but a wild guess, pure and simple.

“Informal” miners may dig into things they see on the surface, like outcropping quartz veins or sparky river sands—but even they don’t know what they’ll get. They just go for it and hope for the best. Most go broke.

In the business of modern mining, nobody builds a mine based on surface work. That’s just a first step, followed by drilling, metallurgical testing (to see if the metals can even be recovered from the potential ore), and a host of other inquiries that go into a detailed feasibility study. In the world of serious mining, one can’t even do a preliminary economic assessment based on surface work alone.

Without an economic study, one can’t say what a potential discovery might be worth—let alone the $12.8 trillion some are crediting Uganda with.

One might ask if I'm not being too strict. Might this not be like, for instance, estimating the number of fish in a given country's territorial waters? No. We actually know a lot about the world's oceans, the contours of their bottoms, what fish like to live at various depths and temperatures of water, etc. A knowledgeable scientist might make a reasonable ball-park guess, and even estimate the value of these fish. But this would be based on many years of accumulated data, in three dimensions as regards the water, and more regarding the nature of the fish. This Uganda claim is more like a child looking at all the blue on a map and telling us how many fish there are.

Not to mince words:

  • No actual, defined discovery with any estimable value was announced.
  • All Uganda has is surface indications that there might be some gold in them thar hills.
  • This is pure propaganda that has no significance whatsoever for the price of gold.
  • Uganda’s new mining law is supposed to create a new state mining company that gets a “compulsory” 15% in every mining operation. This is not encouraging.
  • If proper exploration work does determine that Uganda has major new gold, or any other resources worth mining, it will take years, lots of money, and a stable government with decent rule of law to develop those resources.

Lest it seem that I’m making a mountain out of a molehill, remember the supposed discovery of a trillion of dollars’ worth of minerals in Afghanistan back in 2010?

That exciting discovery was credited to no less an authority than the US Geological Survey… on behalf of the Department of Defense. I can’t prove that this was propaganda to make US military adventures in that country seem more potentially productive. But I can’t imagine any other reason for such a ridiculous pronouncement. Be that as it may, not one dollar of these supposed new riches has been defined since then, let alone produced to the benefit of investors, locals, or any other stakeholders. And this was true even before the Taliban took the place back over.

There’s a lot to say about all the work it takes to discover, define, develop, and deliver value to the world from mineral resources, but it can be simplified to: no drilling, no deposit.

More generally, investors should never believe unbelievable claims—especially from minions of the state with obvious propaganda agendas.

Caveat emptor,




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