Something important came into renewed focus for me this month. I’ve been going through the 370 entries in the My Take database of resource companies clients have asked me to evaluate. Several have reported high-grade drill results over very narrow widths. Some just a few centimeters.
This adds very little value.
Imagine that a company reports 1,000 g/t silver-equivalent (AgEq) over 0.5 meters. Very exciting. The headline will attract attention.
But then we look at the details, we see that it's actually 500 g/t silver, and the rest in various percentages of lead, zinc, and copper. We also see that the intercept is deep underground, so the angle at which the drill hole passed through the vein is oblique. Given that angle, the down-hole interval is 50 centimeters, but the true width of the mineralization is only 25 centimeters.
Okay, that’s less exciting, but still high-grade, right?
Yes, but not over widths amenable to mechanized mining (using wheeled vehicles with hydraulic arms with drills attached).
In most cases, it’d take high-cost jackleg mining—individuals hefting drill rigs manually to drill and blast just the pay dirt—to mine something this narrow. Waste rock from the blasting would still get mixed in. I’ve seen mechanized mining done over widths of just 1.5 meters, but that’s pretty tight, and the rig has only one arm, so it’s slower and higher-cost. And again, some of the surrounding rock crumbles in to dilute the ore.
Two meters is a good rule of thumb for minimum mechanized underground mining width—but the wider the better.
Now, what happens when we mine two meters of rock to take mineralization 25 centimeters wide?
We dilute the ore with waste by a factor of eight: 200cm / 25cm = 8.
This turns our 500 g/t silver into 62.5 g/t silver—which is too low grade to bother mining underground.
But what about the lead, zinc, and copper?
Well, you never get very high recoveries of all the metals in polymetallic ore. You have to do trade-off studies between which metals in this particular ore give you the highest recoveries for the least processing cost vs. the value of that metal. It would be common, for instance, for most (but not all) of the silver to be recovered with the lead. So the miners would likely sacrifice zinc and copper recoveries in order to maximize lead recoveries and get the most value from the ore via the silver.
For the sake of argument, however, let’s say that this discovery is of miracle ore from which 100% of all metals contained can be easily recovered. Our AgEq grade of one kilo per tonne still gets diluted by eight, for mechanized mining. That would give us 125 g/t AgEq over 2.0 meters, which is still too low-grade for underground mining.
Remember also that in our example, this was a deep intercept. The deeper the mineralization, the more expensive it is to tunnel down to it and haul it back to surface for processing.
But there’s more…
A key problem with narrow intercepts is that it makes it hard to build up enough tonnage to make mining worthwhile.
Let’s say that the magical vein in this example is a perfectly rectangular slab 25 centimeters wide. It’s 200 meters in vertical extent, and it runs for a strike length of 250 meters, straight as a ruler. This amounts to 12,500 cubic meters of ore (200 x 250 x 0.25). We multiply this by a specific gravity of 2.75 (about normal, given the metallic content) to get 34,375 tonnes of ore. At 1,000 g/t Ag-Eq, this contains 34,375 kilos of silver, or 1,105,182 ounces of AgEq—only half of which is silver.
A million ounces of silver may sound like a lot to you or me as an individual, but it’s too small to pay for building an underground mine. Any responsible company that found something like this would look for bigger and better veins nearby, and hope to include this little sweet spot in the mine plan—if it would pay to do so.
Similar considerations—but with different variables—apply to discoveries that might be mined by open-pit methods. A drill hole that grades 1.5 g/t gold over 150 meters would be great if it was in problem-free mineralization starting at surface. It would not be so hot if it started 500 meters down. Or, if the drill hole is right against a property line, it would not be possible to mine with a pit without moving the property line. Or, if the mineralization is full of arsenic, mercury, and other “nasties” that cost money to get rid of, it might be worthless, even under ideal mining conditions.
My point is that mineral exploration is not done as an abstract exercise for the love of science. It’s done to find ore worth mining.
When evaluating a company’s exploration results, the critical question to keep in mind is: “Can this be mined profitably?”
A lot goes into answering that question well. This is why feasibility studies can cost millions of dollars and run to hundreds of pages. It’s also why people are willing to pay for My Take on mining stocks.
But anyone can begin to assess the odds earlier than that, starting with grade and true width, as well as whatever other data explorers provide on their discoveries.
Just remember; the goal of all this is to make money mining.
Pretty rocks are cool.
It’s fun playing with big trucks.
But as resource speculators evaluating opportunities, we should ever and always be thinking: “Does this look like it would pay to mine?”
P.S. Click here for my take on “What is High Grade?” and why the above considerations argue against land bank plays. To be kept abreast of more opportunities, dangers, and issues affecting investors, please sign up for our free, no-spam, weekly Speculator’s Digest.