Sorry, I apologize, I got confused with my google search. I should have been looking for the silver-base metal project in Mexico owned by Golden Tag resources.
oh, wow, maybe I'm biased, look at all that silver:
115.4 million ounces
>$2 billion contained silver
must be crap as it doesn't have any chromite....
This project has everything
- gold, silver, lead and zinc
- high grade veins
- bulk tonnage deposit
And if we compare market cap?
- GOG = ~$10M
- MAG = ~ $1.8B
- San Diego = 61.2 g/t Ag or 112.3 g/t AgEq (all zones)
- Juanacipio = 574 g/t Ag or 923 g/t AgEq
No, No, NO
- Not all resources are equal - look beyond the total number of ounces
- Grade is king - San Diego = very low grade (including the AgEq BS grades)
- High grade oxide veins are interesting but small, and probably have high As which was a problem in the adjacent Velardena mine.
- Small (90 Ha) project = low exploration potential. Basically, everything has been drilled
- Bulk tonnage zone is deep - ask BHP and Rio at Resolution how much it costs to sink a 1000m shaft.
- No work has been done on the project for several years = low interest, low potential
Sometimes I love my job, you get to look at some project that are so obviously awful and some resource calculations (thank you SGS) that are so bad that you have got to have some fun with them.
Lets look at those resources:
So lets look at the property:
|Wow that's small, basically 1km by 1km|
So we have a small project, minimal expansion potential and low grades. Not a winner.
But, I hear you yell, they have a bulk tonnage deposit:
|oh look, a dingleberry|
Oh, it is starts at 450m depth and runs a massive 51 g/t Ag, 0.65% Pb, and 1.17 % Zn. Let's start sinking a shaft and mine that bad boy....
Those grades are about 5 times lower than most underground base metal mines (that work). Lets compare that with Otto's fav - Tinka Resources:
|higher grade and close to surface|
These figure come form the SGS Technical report, by highly qualified, professional geologists. I recommend that you download the report (link) and have a look yourself.
Look at the top figure, you see these weird circular features - the bottom drill-hole is the best. Basically, you have a series of circles centered on each drill-hole and they produce these weird shapes where the circles overlap.
Why is this a problem? For me it shows that:
- The person doesn't really know what they are doing
- They don't know how to use the program they are using to calculate the resource correctly
- They are doing a quick and dirty calculation and aren't spending any time on it.
|Grade on the top, resource categories below|
|oh so pretty|
I've marked out some features for you:
A = we have 2 drill-holes very close together. One hole has no grade and the other a few meters away has good grades. SGS have carefully restricted the low grade zone to just ~25m around the hole filled in the rest with high grades for 200+ meters.
B = what's that weird red banana below the drill-hole? Again, the holes was slightly lower grade (~100 g/t = red), but we'll ignore that (ok, we'll have a 10m zone around the DH) and use >125 g/t Ag, because it looks prettier
C = Same again, we have an intercept between 80-100 g/t (orange), but look how the high grade mineralisation bows up into that nasty low grade zone.
SGS are repeatedly reducing the importance of the low grade intercepts, and therefore their impact on the overall grade of the resources. You see it on section after section after section. Each drill-hole needs to be treated equally. This is either:
- A Peter George (TM) - SGS trying to 'create' a big a resource as possible as bigger is always better.
- Consultants may do this to get a reputation of being 'good' to create business for themselves either:
- Directly - more resource calculations, overseeing exploration programs etc.
- Indirectly - We do great resource calculations, why don't you use some of out other great services.
- Golden Tag putting pressure on SGS to maximize the resources to make their project as good as possible as this is all that they have got and no-one want to have spent a bucket-load of cash on a crap project.
- often the hardest thing to do in exploration is walk away and write off your expenses, especially when it is the only project you have.
So it is important not just to look at the total contained metal, these are often inflated using a variety of tricks but check:
- overall average of the deposit - compare it against other deposits and even better - operating mines.
- How much of the resource is low, medium and high grade (a good resource report should include a summary table).
- having lots of low grade doesn't mean you have a lot of high grade ore.
- are they reporting an equivalent grade resource?
- Metal price
- Are they much higher than today's prices - a health discount is nice.
I haven't brought the San Diego data into 3D as this project obviously isn't very good. If you would like me to do so, send me a message and I'll spend a couple of days on it.