Wednesday, November 23, 2016

USA - The Mining Law of 1872

While I was putting together the data on the Lone Mountain Project, i noticed something quite interesting.

The short version

If you are a Canadian Company exploring in the US, please make sure you understand the quirky mining laws and protect your assets.

This is a complicated image
Black dots = Nevada Zinc's drill-holes
Green line = property boundary
Red lines = surface projection of the Zinc Oxide zone based on

  1. Projecting the intercepts to surface
  2. The Zinc soil anomaly image
  3. Surface prospects (cyan dots).
You will notice that to the bottom right of the image you can see the red lines starting to leave NZ's property. You also see the some to the SW of their drilling.

Let's zoom in.

and in 3D

You are probably thinking, what is that retarded geologist thinking. Well my friends, in this case I'm not the retarded one. It is actually a 'feature' in the General Mining Act of 1872 (link). Specifically the "Law of Apex" that gave extra lateral rights to owners of lode claims that gave the owners of the surface outcrop (the exact language is "the highest point of economic mineralization") of a vein (or mineralized body) wherever it led, even if its subsurface extension continued beneath other mining claims.

This means that is you owned the top of the mineralized zone, even with 1 concession, you owned the entire deposit. Here is an example, the Montanore project in Montana, a crap silver project in the US and therefore inevitably owned by Hecla Mining.

The entire(!) deposit (230Moz Ag and >200Mlbs Cu) is controlled by just TWO concessions (HR133 and 134 - covering just 40 acres).

This also means that the "Apex" can move over time (especially in poly-metallic deposits) as the prices for different metals go up and down.

You would expect expect a company would be very careful and protect their primary asset, and imaging what would happen if someone went to Lone Mountain and put a few claims over the areas where the zinc mineralization outcrops up slope from Nevada Zinc's drill-hole (they would need to take a sample that contained 'economic' zinc values). They could legally claim that they own the entire deposit.

Nevada could be nice this time of the year.....

El Cobre - pure green!!

El Cobre, I was put onto this project by some chums in the UK, as they are getting massive erections over this project, hoping that the Poliquin's can work their magic again and make everyone rich.

The El Cobre project was spun out of Almaden Minerals as it was a bit overshadowed by Ixtaca. They've released some drill-results recently (here and here), which are either:
  • Crap and deep or
  • Deep and crap
  • There is evidence of massive grade smearing from short, high-grade inconsistent type veins
  • All the obvious targets have been drilled and hit nothing decent.
I'm also confused why Almadex are advertising this project as a 'new' discovery in their current presentation? El Cobre has been explored on and off since 1995 and 'new' project don't often have 35 holes (~7,000 m) drilled into several targets around the property.

Historic holes = yellow points; 2016 drilling = red points

We know that in the past there were different metal prices which can turn one exploration company's junk into another's treasure...

nothing special here.

Wow, those are the best of the bunch? So basically 23 out of 35 holes hit anything that graded >0.1 g/t Au or >0/1% Cu. So 12 (about a third) hit nothing at all.

Overall, those intercepts are rubbish - 0.1% copper and ~0.2 g/t Au aren't very special! That's a green skid-mark, not a gold-rich copper porphyry deposit.

Did Kermit wipe his ass (and his gold-plated cock ring) on the drill-core?

This is what Blackadder thinks....

We'll ignore the old data and focus on the recent results.

They look pretty decent, abut when we sweep away the PR BS and look at the data in 3D we can quickly see that the thick moderate grade intervals dissolve away into a series of high-grade (relatively speaking), narrow zones surrounded by low grade crap.

PR data

Some decent, thick intercepts

 Split apart assays

a bit different.....
The last hole reported, EC-16-013 is returning consistently lower grade than holes 010 and 012 and it really shows that this 'new' zone isn't very big and doesn't really have any potential to grow.

WTF! Where did all the grade go? However, I'm saving the best for last, drill-hole EC-16-008

ohh, you can't see the high grade zone? Let me zoom in a bit for you....

yup, 1.5m @ 109.5 g/t Au
When you split out the narrow higher grade zones the background grades fall through the floor, and it become obvious that all you have is a few high grade structures surrounded by low grade rubbish.

You can find a series of 3D views here (link), I've also included the geochemistry and geophysics for fun.

Tuesday, November 1, 2016

Nevada Zinc - not all Zinc deposits are equal

My chum down south has been beating the drum recently about Tinka and their base metal project in Peru and showing us lots of lovely charts about how zinc prices have been shooting up. So, I took his advice and bought shares in Teck....

I can't see a difference.....
So I thought I would try and be clever and went looking for companies with zinc projects, and I stumbled on Nevada Zinc (link), they have been hitting some great zinc intercepts from their Lone Mountain project in Nevada.

I thought, at last I've found a decent project that no-one knows about, but a crap load of shares and wait for the retail investors to pile in and make me rich (ok, being realistic - slightly less poor).

I brought the drill-data into 3D (you can get the model from here).

look at those grades....

magnificent, thick, juicy zinc intercepts
Everything was looking good until I saw this in their presentation (slide 16) where it states: "Potential for sulfide mineralization at depth"

Crap, we have a zinc carbonate deposit. How many of those are operating around the world? I only know of one - the Skorpion Mine Namibia (link), that produces around 125Kt of zinc metal a year from a alluvial zinc deposit.

All other carbonate zinc deposits I know are hosted in limestone:
  • Accha and Yanque in Peru (Zincore Metals Inc (link))
  • Sierra Mojada in Mexico (Silver Bull Resources (link))
  • The tops of zinc deposits (e.g. Tsumeb, Broken Hill and the MVT deposits in the USA, UK and Ireland that were mined in the 18th century,
So they aren't common, but Skorpion is/was the 8th largest zinc mine in the world, that is good, no?

Skorpion is a bit different, most non-sulfide zinc mines are generally found in limestones, and you know what happens when you tip a load on acid on them, they fizz. Hypothetically you can leach the zinc minerals, but will have massive acid consumption.
Don't worry, Nevada zinc state that they can use dense media separation (DMS) to remove a lot of the waste and they they can leach the zinc, but that is the big issue, the real elephant in the room is the lead.

There is a bit of lead...
There isn't much, but lead carbonate, so what's the problem? Well lead carbonate is romantically called "white lead" and for the older readers it was used as a pigment in paint. Those of you who are or have renovated an old house, you know what a hemorrhoid it is to remove and dispose of the old paint.

This is what Wikipedia tells us:

It tended to cause lead poisoning, and its use has been banned in most countries...

So why is mining lead carbonate bad? Why don't we ask Magellen Metals what they think (link)?

Magellen (now called Rosslyn Hill Mining) operated the Wiluna Mine in Western Australia (link). A oxide lead-zinc deposit. Back in 2006 it was noticed that ~9000 birds died in the town of Esperance, that was discovered to be caused by lead poisoning. The source of the lead was the concentrate from the Wiluna mine that was using the port at Esperance to ship the concentrate overseas.

They also found that 10% (about 1400 people) have blood Pb levels above WHO levels. The concentrate contained lead carbonate which is absorbed much more easily that lead sulfide. The end result was that they had to pay AU$30M to clean up Esperance, and were very much under the microscope from the state government. the mine is currently closed.

So, Nevada Zinc have a carbonate zinc deposit in the USA, a country well know for being incredibly environmentally friendly. Imagine the fun you'll have with the EPA over:
  • Mining ore with lead carbonate - you gonna need good dust control
  • Transporting concentrate with lead carbonate in it
  • Having waste dumps on surface that may contain lead carbonate
    • they don't have any wind in Nevada?
I'm surprised they haven;t had a slap on the wrist for doing RC drilling, which looks like this...

Bit like a steam train, puffing all that dust over the desert. Imagine that dust contained something nasty.....

So in essence, not all zinc deposits are created equally, and if you see a company talking about their great oxide zinc depoist (e.g. Zincore, Silver Bull, Nevada Zinc), just ignore them and move on.

Darkstar - Don't give me any of that intelligent life crap, just give me something I can blow up?

Gold Standard have been releasing some decent new hits from North Dark Star over the last couple of months, and so I cajoled (thanks Rob) into revisiting the project to see where these holes were drilled and to see what is new.

My updated model can be found here (link) and I've also uploaded the drill-hole data as well (link).


TAG's officially bad BoTE (back of the envelope) resource calculation for North Dark Star is: 
  • 43.7Mt @ 0.78 g/t Au or
  • 1.1 Moz Au
Basically this is a small, moderate grade deposit which is similar to the others they have found around the project:
  1. Pinion - 1.7Moz Au (92 Mt @ 0.58 g/t Au
  2. Dark Star - 0.38Moz Au (23Mt @ 0.51 g/t Au)
Is there potential for Railroad to host a big gold deposit? It is possible, but the drilling is telling us that in reality, there are probably just a few small deposits like NDS scattered around.

Why don't we have a look at the recent drilling in a bit more detail. 

If you ignore holes 07 and 10, all they are hitting are narrow, low grade zones.
We can quickly see (heck they draw lines to them) where the good holes are located! They are all drilled into that nice yellowy-pink blob, and all the crap holes (narrow low grade zones or no mineralisation) are located around it, and all of their holes exploring the South Dark Star corridor found diddly squat!

Let's look at the sections - going from north to south

Section 4480200N

Hole DS16-01 - very disappointing
Hole DS15-10, 11 and 13 all hit zone high high grade mineralisation (again these 3 holes are only 40m apart) but as soon as we move away from the core zone, the grade disappears. Look at hole 16-01 - just a few narrow, low grade zones and it is only 30m from 150m @ 1.4 g/t Au! 

Section 4480080N

Same again, high grade (>1g/t Au) core that quickly dies out
DS16-08 hit a nice thick gold zone and this has continued down to hole DS16-24, but up-dip the story is totally different, hole DS16-21 drilled just 60m away hit precisely SFA.

Section 4479960N

Same again....
We see the same again, some great values in hole DS16-03B, but holes 17 and 23 again drilled 60m and 70m away respectively again hit a bit of grade (hole 27) or no grade (hole 23).

All of the drilling data is telling you that there is a small, high grade core 100m wide x 500m long) at North Dark Star and grades quickly drop off.

But it isn't all bad news, hole DS16-07 hit, what may be the continuation of the Main DS deposit to the NW or maybe just a small zone of mineralization wedged between 2 faults? 

Do these narrow zones come together at depth?
Some drilling to the west of these holes would answer that, but if there is any decent mineralization out there, it is going to be deep (greater than 200m depth).

So, if I'm correct-ish, GSV now have ~3 Moz of gold at a moderate grade (0.6-0.7 g/t Au), which is nothing special, so why do they have a market cap of ~US$500m?

They don't have anything special (ok, they have a good postcode and some rich neighbors), but not a project like Juanicipio that sell themselves. There is nothing in drill data that shouts "World Class Deposit"

However, what they have done is focused on drilling out and extending the known high grade zones. You will notice that they maximize the value of their drill data by:
  1. Always including a 'stellar' intercept in all their press releases.
  2. Never have release 'bad' results on their own. You'll see that GSV always include a decent intercept with poor results 
    • e.g. Oct 20th PR - data released from 12 holes, 6 (50%) contained no gold, and only 2 (DS16-07 and 10) had semi-decent results.
  3. Release news regularly to maintain momentum and interest in the company:
    • 10 PRs since August
    • 34 PRs in 2016 - one every 10 days
  4. Raise money when you can, not when you are desperate!
    • They already had a healthy cash position but they raised >$33m to have a "significant treasury for annual strategy and beyond"
It is a good strategy, and it has allowed them to raise a lot of cash, but will the market be disappointed when they do a resource calculation on North Dark Star and tell the market that it is a bit average?

Here is an example from North Bullion - the August 30th PR data

Great assays, but at 322m depth below surface, can you do anything with it?

Just some comments regarding the DH data.
  1. Elevation data was obtained from the USGS 10m DEM downloaded from Earth Explorer
  2. Collar locations were obtained from:
    • 43-101 reports (exact)
    • digitising them from the plan maps that accompany the press releases (within 20m)
  3. Downhole survey data was taken from the assay tables, they do not include deviation.
  4. Assay data was taken from the press releases and residual grades were back calculated using Core box's excellent drill interval calculator.