Monday, July 8, 2019

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.


12 comments:

  1. https://www.continentalgold.com/en/continental-gold-mines-49-more-gold-than-estimated-from-second-long-hole-trial-mining-test/

    ReplyDelete
  2. Hi,

    Looking at BUUY433 the sample width is from 2.4 to 3.4m... if the standard sampling practice is to allow for 1metre either side of the vein, does this indicate that at said point the vein width is minuscule/virtually non-existent?

    ReplyDelete
    Replies
    1. That is what it looks like to me, unfortunately without a full breakdown of the sample maps, it is unknown exactly how much either side of the vein they are sampling, but the high-grade intervals in the drill hole data, which I'm assuming are the veins, appear to be quite narrow.

      Another factor to include when looking at the drill-hole intervals is that they are core lengths not true widths, meaning that the true width would be significantly shorter

      Delete
  3. Thanks for the publication. After reading it I sold all of my shares.

    Best

    Frank

    ReplyDelete
    Replies
    1. Yeah and Newmont are so screwed. All the geo's who got then into this debacle probably fired.

      Delete
  4. Haha. Welcome back. All true. Re their 'veins'.They are (stacked / parallel) fissures having a width of mm to a few cm. Ever wondered why you don't see too many pictures of the veins on their site? In those rare circumstances where the vein really resemble a narrow vein and not a fissure they rushed to take pictures. They probably had two mineralized fissures 2m apart that have been sampled. But there are more negative aspects that would create a lot of problems if someone would ever try to mine Buritica. Cheers.

    ReplyDelete
  5. Good overview of two things to be aware of with narrow vein mining. Well done!

    Whether it applies here is unknown at least to me at this point. Are the veins structural? What dip? How straight on strike and dip? Is the hanging wall competent? Is mining by hand held drills or longhole?

    All of the above can impact dilution. In my past I mined to about 1.5 meters wide but the miners who did this are pretty much gone. Two meters should be doable if the dip is not too flat.

    ReplyDelete
  6. The Merger Laser Miner was designed by Merger Mines Corporation (www.mergerminescorp.com) to mine narrow veins at one-third of the cost of traditional mining methods. With it you can selectively mine the high grade veins from their host rock leaving the waste rock in the mine. The Merger Laser Mines works by spalling (thermal fracturing) and the ore extracted is in the form of small chips which means there will be no need to crush the ore; it can go directly into a ball mill or leach pad. My name is Lex Smith and I am the President of Merger Mines Corp. You can reach me at lsmith@mergerminescorp.com. My office phone is +1 208-664-8801 in Coeur d' Alene, Idaho in the U.S.

    ReplyDelete
  7. I appreciate this excellent research and hard work that goes into this quality type of analysis. My only question is, "How can a Newmont get conned like this"??????
    Baffles me how a pro team, they must have, doesn't smell something fishy.

    ReplyDelete
  8. Yeah Newmont just put in millions more to maintain their 19.9 % position ( current standstill in effect) after Sprott just sank $25 million US into CNL. Kinda wondering if selling all my CNL shares based on this report was the wrong move.

    ReplyDelete
  9. Years ago, a high grade deposit and mine dev such as this one (and Brucejack and many others) would be given a year or two to sort out issues such capping, grade control and reserve model reconciliation while they develop a mine. And then they emerge, either victorious with questions resolved, or they don't. However now, perhaps because of the "up-to-the-minute" information age that we live in and related disclosure requirements, developers don't have a chance to work things out in the normal course of reasonable time. Developing a mine is hard enough, without suffering the slings and arrows of month-to-month information scrutiny.

    ReplyDelete
    Replies
    1. I don't know if this is because that these types of deposits have been generally ignored by the major companies (which would give them time to iron out any issues) and are being developed by companies where these types of deposits are their single operating mine, and therefore have a lot of pressure not only to deliver results (as it is their primary source of income), but deliver news flow.

      Delete