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Monday, July 8, 2019

Pause

Sorry for the lack of posts, I've been working on a large project that has been consuming all of my time.

It is now complete-ish, so I have some time to waste on this blog!

Buritica - Narrow veins and potential issues

Continental Gold have been releasing some juicy assay data from Buritic√°, here is an example from last month (link).


I hate companies that report strike length samples, to me they are trying to deceive you into misreading the table and believing that they have wide zones of gold mineralization:
  • e.g. 31m @ 24.09 g/t Au and 76.22 g/t Ag at 2.26m width
translates to:
  • A series of samples taken from a vein where a 31m long portion averaged 24.09 g/t Au and 7.66 g/t Ag over an average width of 2.26m 

However, what interested me most about this PR were the maps and this statement:


In Summary:
  • No capping
  • Weighted averages
  • No dilution
The issue with no using capping and using a weighted average is that a few high-grade samples can increase the overall average of the mineralized zone lead to companies calculating resource blocks with higher grades than actually occur. This is especially problematic this methodology continues through to mine development (this often happens when companies do resource calculations internally), when they get into a situation where reserve/resource grades >> mined grades (e.g. several mines operated by First Majestic).

I’m using the maps from the March 9th PR (link) as they give a breakdown for each channel sample compared to just a series of colored rectangles used in later PRs.


We’ll focus on the areas YR_1444_CX05 - Stope Areas 1 and 2 – I’ve added a grade legend as the one on the original maps is quite hard to read.


We know that Continental plan to mine all of this vein in this area as they have them shown as potential stopes, but if you look closely at this map you see 2 things:

1. Grade

The average weighted, uncapped grade for this area = 16.95 g/t Au, or red according to the grade legend, so:
  • How many samples are red (or better) from this section?
    • 7 out of 26 or 27% assayed >10 g/t Au or
    • 73% of the channel samples assayed less than 10 g/t Au
In high-grade gold mine you get a lot of variability, but it would be reasonable to expect that the modal value would be close to the reported average grade of this area? Let us look closer at the map.

At the far west end of the “2” stope area, we see an ultra-high-grade sample (cyan rectangle) that is grading 2.26m @ 119.6 g/t Au, what would happen to the average grade for the entire block if we remove this sample?
    • Grade drops from 16.95 g/t Au to 9.11 g/t Au, or by 46%
Typically mining companies cap ultra-high-grade samples to avoid this issue, where a couple of high-grade samples can significantly increase the overall grade of a zone, we'll do the same here:
  • Uncapped – 2.23m @ 16.95 g/t Au over a 78m strike length
  • 50 g/t Au Cap – 2.23m @ 11.08 g/t Au – a 35% reduction
  • 30 g/t Au Cap – 2.23m @ 9.72 g/t Au – a 43% reduction
A ‘traditional’ way that resources were calculated in underground mines (some mines still use this method (link)), is that they extended the mineralization above and below the level by a distance equal to half-strike length, so for this area we can guesstimate the contained gold for the 2 stopes and see the impact of applying a cap:

Assumptions
  • Strike length = 78m
  • Vertical extent = 78m (39m above and 39m below the level)
  • Average width = 2.23m
  • Tonnage factor/specific gravity = 3.13 t/m3 (from 2019 technical report – table 11.1)

Guesstimate contained gold:
  • Uncapped = 21,150 oz
  • 50 g/t Au cap = contained ounces drop to 15,128 oz
  • 30 g/t Au Cap = Au decreases to 12,273 oz Au
Just applying a small cap, we've reduced the average grade and therefore the contained gold by a lot.

You can clearly see the impact that a few high-grade samples can have! This is why companies apply a cap, it makes the results less sexy, but is important, as if you don't, you can start to include a lot of waste with the ore and it works it way into the mine plan, which looks like it is happening here as we can see that the limits of the stopes (the black lines) include everything, including marginal (yellow) and waste (green, grey and white) portions of the vein.

Essentially, based on the channel samples gold grade distribution in the stope is more like this:
















We have some narrow high-grade zones (red), a large waste zone in the middle (green) and the majority of the block is low grade (orange) or marginal (yellow), which is <<16.95 g/t Au as originally advertised in the PR.

Why is this an issue? We can see that using a weighted average can skew the grade significantly (in this case by up to 40%), and in several mines that I know, they continue to use this 'traditional method' to define resources and zones to be mined.

A couple of high-grade samples/drill-holes can quickly add a chunk of mathematical resources that are have significantly higher grades than reality leading to large ares of sub-economic or marginal blocks being included in the resources and eventually mined.

This results in lower than expected head grades, lower gold production, lower revenues, higher per ounce production costs and reduced profits.

These are all things that shareholders love.

How many mines do you know where grades haven't met expectations or feasibility studies?

2. Vein widths

One thing that I found amusing was that all the samples thicknesses range from 2.06 to 2.27m. Remarkably consistent!

However, when you look at the level plans, you see:


That the vein is represented by a very thin red line, that is significantly narrower than the channel sample rectangles. That is the vein...

Here is a photo from the Fire Creek Mine in Nevada. 


See how they are not just sampling the vein, but the surrounding country rock (this is standard practice, you want to know the grade of everything you will be mining). In this photo the vein is ~90cm wide, and we can see that they are sampling ~1.5m either side of the vein, or a total channel sample width of ~3m. We can also see that a separate sample was taken from the small vein on the left. This is standard sampling practice.

So, if Continental are doing something similar, we would expect that they are sampling the vein, and 1m either side, which indicates that the vein is actually 5-27cm wide, which is similar to the drilled vein thicknesses (link).




High-grade but narrow, with a bit of gold in the country rock around the vein

Why is this an issue? Well in narrow vein mines, controlling dilution is critical, if you have excessive dilution, you will have:
  • difficulty in maintaining a consistent head-grade
  • difficulty in using modern mining equipment
  • low production rates
You can use highly selective mining methods (e.g. Resue (link)), but they have low production rates. You can increase production by either using mechanized methods (increase dilution), or extracting ore from many heading (increased labor costs)

If you have a large mill, you need to mine a lot of material and therefore you can't be very selective be very selective. At Buritica, the mining width (based on the width of the mine level) appears to be ~2.5m, whereas the the vein widths (in this section of the mine)  around 0.25m, so you already have massive dilution.

Minor changes in thickness of the vein or the inability to minimize mining widths and therefore minimize dilution can cascade through an operation, significantly impacting mine production and profitability.

How many mines have you read about that have had issues with grade control, or throughput?

We've see with Pretium at Brucejack where initial resource and reserve calculations appear to have struggled with accurately re-conciliating head-grades to estimated reserve/resource grades, that led to them implement a new comprehensive grade control program (with associated costs) to try and better understand the gold distribution.

I'm not saying that the same is happening at Buritic√°, but history rhymes, we have a situation where a company wants to mine a series of narrow, high-grade veins and some of the PRs (obviosuly promotional in the way that the data is shows) appears to suggest that several areas could have significantly different grades as thought.

As we have seen at Brucejack (and several other underground mines), there is a desire to define as large a resource as possible, and as quickly as possible, which can lead to the situation where mine plans, scale of mining, are being advanced before the true nature of gold distribution in the veins is properly understood.