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Monday, April 25, 2016

Making the grade

Exploration companies love to 'expand' the widths of mineralization in their drill-holes.



Here is an example from Royal Nickel’s Beta Hunt “Hand of Faith" (link) where they have released the following results:

 

Wow, 3.4m at 3.5 ounces/tonne, it looks like it is a very wide, very high grade vein, but if we look closer, we can see that they intersected:

  • 3.4m grading 107.5 g/t Au,
  • Including a narrower zone of 0.8m that returned 455.9 g/t Au


So what the rest of the 2.6m wide zone grade? We can calculate that quite easily. Personally, I prefer to use the Drill Interval calculator (link)
  • width of high grade interval / width of structure
    • 0.8 / 3.4 = 0.235 or the grade multiplication factor
  • average grade of structure - (grade of high grade zone x grade multiplication factor)
    • 107.5 - (455.9 x 0.235) = 0.22 g/t


So we can see that virtually all (99.8%!) of the gold is found within the 80cm wide structure. They have even included a nice photo of the structure.


Here we have a photo of the Hand of Faith zone that was drilled and returned bonanza gold grades. You can clearly see that only a small portion of the structure is mineralized, and the rest of the rock is essentially barren, but that hasn't stopped the company from presenting and advertising the Hand of Faith zone as being a 3.4m wide bonanza vein, whereas in reality it is a very narrow zone, with gold (in areas a lot of gold) found only in a very small part of it.


Unfortunately, this type of reporting is typical among exploration companies, I wish it would stop.


4 comments:

  1. Great blog initiative, thanks. While this reporting issue is not unheard of, would you mind explaining why exactly this is misleading, in this case and broadly speaking? Would have thought that as long as the vein is reasonably shaped over the extent of the deposit with no excessive mining dilution (which you won't know with just one hole!), that's ok. Or is it because the barren stuff can't be processed with the ore?

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    1. I have no issues with companies taking narrow, high grade intercepts and using them to calculate an average grade over the width of the structure or over the width that they will mine the structure. I would like them to put a comment to that effect, stating that they calculate the grade over a specific width due to the type of mining technique they will be using.
      In this case, I would also prefer that the mining width grade is calculated using a top cut (e.g. 50 g/t or 100 g/t Au depending on the deposit), so that the nugget effect is minimized.
      I also think you've partially answered your question, a 30 cm vein, no matter how much gold it contains is unlikely to be continuous over considerable distances, whereas a 3.4m wide gold zone gives the impression or a strong, wide structure that could contain significant resources.
      Another area that caused me concern is that the pictures form drill-hole BE-20-44 show that they gold is mainly contained in a narrow quartz vein, but in the photo from the development drift, the white quartz vein is relatively poorly mineralised (1.98 g/t Au) but to its left there is a ~1m wide zone of relatively unimpressive dark grey rocks that run >300 g/t Au. This could suggest that the controls on the gold mineralisation isn’t well understood.

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  2. I agree with Picsou in that I don't understand why is it so wrong. I understand that a 0.8m wide vein is not mineable, so I think it is fair for them to expand it to something logical. I have heard 1m on either side or minimum 3m in total width is what a cut and fill mining method can do.

    If they were to spread it over 10m, then for sure it is misleading because you more into a different mining method (bulk mining).

    Is the issue that the true effective grade (i.e. grade net of recovery) for the low grade material is actually zero, so Royal Nickel should have weighted the 0.8m of 455.9 g/t with 1m on either side of material effectively grading 0 g/t to arrive at 455.9/(0.8 + 1 + 1)*0.8 = 130 g/t. 130 g/t seems pretty good worth 130/31.1 x 1200 = $5016 per tonne gross metal value.

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    Replies
    1. It is common for companies to calculate diluted grades over mining widths, but I would prefer them to use a top cut on the gold assays (Pretium do this in some of their PRs), which will reduce the effect that a few very high grade samples will have on the average grade of the structure.

      Why is this important, well for the HoF vein, in the drill-hole the quartz vein graded 1000 g/t Au over 30cm, but the corresponding sample from the quartz vein in the development drift only returned 1.98 g/t Au. This is a classic example of the nugget effect, with gold (and sometimes a lot of it) being concentrated into small areas of the vein, so over a 2m horizontal distance there is an exponential decrease in the gold values.
      In addition, the fact that there is a zone grading 390 g/t Au immediately adjacent to the HOF vein may suggest that the controls on mineralisation may not be fully understood.

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