Deep porphyries, what more could a geologist want. Several weeks ago I asked a simple question (link):
Will it be good or bad!!
We have some more results from Lower Timok (link) that put a few holes into this area.
They also drilled a few holes in the core of the deposit, and as they also announced that they'll have an initial resource estimate by mid-2018, i decided to have a go, and so here is one of my wonderfully pathetic resource guesstimates (TM). You can get the Updated LF views from here (link)
Quite big!
UPDATE - I used relatively crude grade shells for the CuEq calculations (multiples of 0.25% CuEq), I've updated this table using a 0.2% CuEq scale (so 0.2, 0.4, 0.6 etc).
This helps to smooth the data and prevents the final tonnages and grades being skewed.
In the last post (link) I used a 400m base range, and commented that this may be to large for resource calculation, so I've been conservative and reduced it to 300m, which I'm more comfortable with using as it is a reasonable value to define inferred resource.
Remember - using a very big search ranges is a good way to inflate resources in all deposits. In porphyries - anything above 300m is starting to look unrealistic, and is a good thing to check. In exploration, I like to use twice the average drill-hole spacing as a first pass.
It is looking quite robust, shame it is at ~800m depth, but the numbers are still good enough to support a large underground operation, especially as they'll be making oodles of cash from the upper deposit.
Exploration upside
I also want to see if it can get bigger, from just a giant deposit to a massive one. With the CAPEX required to develop a large underground mine, Nevsun will want something that will support a 20+ year mine life. Again, if you see a project with a <10 year mine life, unless it has exceptional grades, it is best to avoid. It may pay back the CAPEX, but you want something that will generate enough revenues to develop the next project.
Here we have good news and bad news. Looking at a few sections through it
Yellow = long section location
cyan = cross section locations
Long Section
Damn, my great idea was crap. The could of holes drilled to look for the SE (left) continuation hit virtually nothing, and to the NW, the grades are decent, but we are getting very very deep (almost 2km).
SE Cross section
We can see that to the NE mineralization is closed off, but maybe below the Upper zone, we could see more mineralization. It is relatively shallow (~900m depth). I've doodled on what I think is the high temperature core, where normally there isn't much mineralization, but potentially it could mean that they only half of the system has been drilled. It would be nice to see some section showing Moly and vein-type distributions (*cough* *cough*).
NW Cross section
We're much deeper, but the mineralization is open to the NE and SW.
So there appears to be some obvious areas to expand the mineralization. however, I would like to see Nevsun start to use directional drilling or drilling wedge holes (similar to SolGold at Alpala).
Some updates to correct for some inaccuracies, and to update the resource table to include additional information.
And now for something completely different...
I wasn't expecting the Spanish Inquisition over Nickel Mountain.
Back to reality, Nevsun have been releasing some great results from the Lower Timok Zone (link), we can see on the accompanying plan maps and sections that this zone is large, but deep.
Figure 1 - The Plan Map
You can clearly see the footprint of the Lower Zone, with approximate dimensions of 1.5km wide by ~1km. To the south, we can see the smaller, but very high-grade Upper Zone.
Figure 2: The Section....
So we can see that the Lower zone extends from 800m to ~2000m below surface. I've added some annotations.
Figure 3: The horse chestnut---hurrah!
We can see that there is potential to extend the known mineralization to depth, and maybe to the West, where no deep drilling appear to have has occurred beneath the Upper Zone.
However, I commented in previous posts that one of the problems at Alpala was its depth. The initial drilling didn't appear to outline a resource that was sufficiently large or high grade to support the development of a stand alone, large-scale, underground operation. Do we have the same issues at Lower Timok?
I've compiled as much data that I can find for Lower Timok, and I've also included the recent (2016-17) drilling from the high-grade Upper Zone as well, just to allow you to compare their location, depths and relative sizes.
You can download the 3D viewer file from here (link).
The first step was to evaluate the size and grade for the Lower Zone. I created a series of grade shells for Au, Cu and CuEq (I used Nevsun's CuEq calculation 1g/t = 0.7% Cu). These are all included in the Leapfrog viewer file as well as all the sections from the December 4th PR.
Disclosure:
I haven't factored in any recoveries for Au and Cu when calculating the CuEq values
I have not been able to find any assays for holes TC150073 and TC160073B
These holes go through the center of the Lower Zone, and therefore my Bad Estimates (TM) are likely to be slightly low. I'll keep looking for this data,and when I find it, i'll update the model.
Here are the assumptions I used to create the grade shells in Leapfrog Geo:
Base range = 400m - the holes are widely spaced (they may even be too wide to determine an initial inferred resource)
Interpolant = Spheroidal
Drift = None
Specific Gravity = 2.7 (assuming the rocks are granitic in composition with minor sulfides)
I applied a filter so that the Upper Zone drill-holes would not be used to create the various grade shells.
Here is an updated "officially bad estimates" (TM) for the Lower Zone:
Just a couple of observations:
There appears to be a lot of contained metal at Lower Timok,
the majority is too low grade for an underground operation and should be considered as 'mathematical' resources.
The overall gold content is low
Will the concentrates contain payable amounts of gold?
At the bottom of each table I've given a tonnage and grade at various cut-off limits. I'm going to use a 1% CuEq in the following section.
If we compare my 'resource' CuEq grades and plot them against the Macquarie Reseach report on large-scale underground porphyry projects.
Red dashed line = average grade for Lower Timok (using a 1% CuEq cut-off) = 1.28% CuEq
Blue star = cut-off value for a underground block cave operation for a brownfield operation
Green star = cut-off value for a greenfield block cave operation
Lower Timok grade vs other Block cave operations/development projects
We can see that Lower Timok isn't quite good as a stand alone greenfield development project, but as it is adjacent to Upper Timok, with a quite robust PEA, we can considered Lower Timok to be a brownfield project, and now we see that it is high enough grade to pass the Brownfield hurdle grade.
However it isn't quite as simple as that. If we look at the recently released PEA from the Upper zone (link), and we are told:
Initial Capex ~$US615M
Mine Life ~15 yeears
Mining rate ~8,900 tonnes per day
NAV = $1.5B
If we compare this to Stage 1 for Wafi-Golpu project (link), which I think could be a good analogue to the hypothetical costs to develop Lower Timok.
You can see that I've highlighted some important values.
Initial Capex = US$2.6B
Ore mined and milled = 149Mt (approximately similar to Lower Timok)
Mine life = 28 years or approximately 15,000 tonnes per day
First ore milled = project development time line = 60 months or 5 years
Steady-state production = time taken to reach full capacity = 90 months or 7.5 years
So, if Nevsun were looking to develop the and mine the Lower Zone, it will require significant additional CAPEX, larger milling and surface facilities (tailings and waste dumps) than proposed for the Upper Zone mine. This means that Lower Zone is a half-greenfield half-brownfield project - I'll call it an Olive Project, and that Nevsun have a couple of options:
Mine the Upper Zone, make lots of money and 'keep' the lower zone on their books as a large resource, but don't develop it.
Mine the Upper Zone, and after 5 years start the permitting and development of the Lower Zone, and slowly increase the size of the surface facilities (Mill, tailings, waste dumps etc.), and bring the Lower Zone into production towards the end of mining the Upper Zone.
This is my hypothetical scenario for Lower Timok
Initial Capex = US$1.5B (the topography is significantly easier around Timok so less earth moving, and assuming that they will use and expand on the Upper Timok surface facilities)
Ore mined and milled = 200Mt
Mining rate = ~15,000 tonnes per day
Need to expand surface milling facilities by 5000-6000 tonnes per day
Expand the flotation circuits
I don't know how feasible this is, but it is something that Nevsun may need to consider to include as part of the development of the Upper Timok project, especially permits for expansion of tailings facilities as these may taken several years to obtain.
Development period = 3-5 years
Time taken to reach full capacity = 5-7 years (including development period).
The idea is that the project would need to be developed while the Upper Zone is being mined and then Nevsun can extend the infrastructure from the Upper Zone development into the Lower Zone.
At the moment, there aren't a huge number of drill-holes into Lower Timok, and the drill hole density is still quite low (approx. 300-400m between drill-holes), but the initial data shows a robust porphyry system, that is open in a number of directions.
The initial (i.e. very bad) review suggests that it could support a medium-sized underground operation, but its development is dependent on the economics of the Upper Zone and how Nevsun/Freeport decide to develop the Lower Zone.
Will Nevsun just focus on the Upper Zone or will they factor in the development of the Lower Zone into their future decisions for the project?
For investors, the upside could be, that if the Lower zones becomes significantly larger (e.g.>500Mt at similar CuEq grades), would Freeport step in and take out Nevsun to consolidate their ownership of a large porphyry Cu-Au deposit not owned by a major mining company?
