Porphyry preamble

Ahh porphyries, conjuring vision of untold riches hidden in the bleak hills of the Andes or the mosquito infested jungles of Indonesia and Colombia.

However, ignoring the BS that explo-cos spout about their project being great because in reality, most aren't.

The CAPEX for a decent sized porphyry (or any large scale mine) typically run into the billions. No junior company can ever develop them, and so the best that they can do is entice a major to fund the project beyond the resource drilling stage.

However, ignoring the FOMO-mania that happens when metal prices go crazy, in general, most mining companies like to focus on projects that can support a minimum production profile, for example:

• 100,000 tonnes of copper or 100,000 ounces of gold a year for >10 years

The idea is that the project will pay back the CAPEX (a novel idea), produce lots of cash for many years.

Here is a nice chart from the USGS (link) that displaying CuEq% grade vs tonnage for various copper deposits. Porphyries sit towards the large but low grade end of the spectrum. I've added some annotations and some well known projects.

blue crosses = porphyry projects

Remember: this chart uses the total resources for a project. Many projects have a high-grade core or are a combination of heap leach oxide and higher grade sulfide ores (with economics and cut-offs).

Smaller and/or lower grade projects do get developed, but often they are brownfield projects adjacent to an operation that mined a neighboring higher grade deposit.

What you want is:

• A project that is in the top right part of the chart = takeover target 
• An exploration stage project that shows the potential to get into the top right area.

What you want to look for are projects that are a decent size >200Mt and a reasonable grade - around 0.6% CuEq or >1 g/t AuEq, or show the potential to get there.

However, grade and tonnes aren't the only factors that impact a project's economics, but it is a good starting point.

Pretium - everything is great

Good news, Pretium at the BMO Conference is telling us that everything is great (link), no need to worry. Production at Brucejack is swell, and everything is going to be super-good after the mill expansion. For fun, they are looking for the source porphyry, because, why not.

We also got the Brucejack ramp up production figures, you know, the ones where grade and ounces produced went down. We actually get to see the 'official' head-grades, and they were worse than Otto calculated (link).

Tonnes up, production down - Pretium going for the win!

They also included a nice long section of the Brucejack block model, which was interesting.



The reserves aren't nice and consistent, there are distinct area of high and low mineralization, but there is an awful lot of the Proven Reserve blocks that are green and yellow (i.e. 5-10 g/t Au).

This isn't uncommon, but if Pretium want to maintain consistent production level, they'll need to be very good at balancing the production from high and low grade areas (mine scheduling), and for me, the erratic nature of the mineralization is the reason why Pretium gave such a huge range for the H1, 2018 production. They just can't quite nail down the grades.

TL:DR version - it is going to be hard to consistently maintain a head-grade at 14.5 g/t Au.

I apologize for the next section, it contains a very naughty word. If you are sensitive, please go here (link)

It would have been interesting to have seen a a slide on reconciliation to see why they had missed their targets, was it due to:

• Poor reconciliation - mined graded not equaling reserve grade
• Slow development - unable to access proposed 2017 production areas and forced to mine peripheral, low grade zones.

We all know it is grade reconciliation, hence the reason they are doing a new grade control program and drilling the stopes on 5-7m centers. However, the slide that concerned me the most was this one (slide 17)

According to Paths, Pretium are retards, and are actually using the Reserve figures in their own technical reports (who the feck does that?!?), and are projecting that after the mill is expanded, the 2019 production will be:

• ~580,000 oz Au per year 
• A head grade at the Reserve Grade - 14.5 g/t Au*
• AISC @ ~$570/ounce

*if you plug the numbers into excel you get a recoverable grade of 13.2 g/t Au or a recovery rate of 91%

So, to do this, all they need to do is solve the grade control issues, improve mine scheduling, improve recovery, and increase the underground development. Nice and easy.

If they don't manage this, at 3,800 tonnes per day each 1 g/t decrease in head-grade means a drop in production by 44,000 ounces, or $57M decrease in revenues. That is a lot of money, especially if you want to do this:

Alacran - Sting of the Scorpion

PDAC season is in full flow, and lots of companies are pushing out press releases to telling us that they are great, everything is going super-well and please don't ignore us and sell our stock as we have no real news.

One of my favorite pig in lipstick press releases was from Cordoba Minerals (link), not only announcing an updated resource for Alacran, but telling us that theyz got cobalt az well, m8.

Fuk uz Forst Cobalt

We'll ignore that and look at the resources.

Original, Jan 2017 resources

hard to read, but resources calculated at $1300/oz Au and $2.50/lb Cu

New and improved resources:

@ $1400/oz Au and $3.15/lb Cu

I liked the interesting metal prices used, Cordoba was a little generous with the gold price, but why don't we do some maths and see how the project has grown with another successful year of exploration.

I mean, look at that, they increased resources by ~27%. That deserves a good hug and a nice pat on the back, we'll ignore the fact that as the tonnes have increased, those nasty little copper and gold atoms have been efficient with their New Year resolutions. Those pricks have been on a diet!

and given the deposit a stunningly unimpressive negative increase in contained metals.

• Copper 
• Grades dropped by 22%
• contained metal stayed essentially the same
• Gold
• Grades dropped by 32%
• contained gold dropped by 15% or 94,000 ounces

So, basically you've made Alacran worse. Well done!

GT Gold - don't sniff the Saddle

GT Gold Corp's saddle deposit was causing a lot of excitement last year and have recently announced some decent new results (link and link).

Summary

• Drilling has defined a small, moderate grade deposit.
• Moderate expansion potential:
• South Zone: partially open to the East and West
• North Zone - TTD057 hit good values, but surface Au samples suggest that this zone is small.
• Porphyry mineralization in hole TTD062 is interesting, but not economic. Highest grade zone appear to be restricted to narrow zones (dykes?).
• Decent Au recoveries from initial metallurgical studies.

I was pleasantly surprised that GT gold include a full breakdown of the DH assays (link) on their website, and as this is a new project for me I want to look at 3 areas:

1. Size
2. Upside
3. Potential problems

For your viewing pleasure, you can download the Leapfrog viewer file from here (link). Please note, I haven't found the RC collar information, so they are not included.

Size

I did my normal thing, brought in the assays, had a look at the data to see if there were any trends confirm GT Gold's interpretations, that gold occurs in a series of steeply dipping veins.

Green arrow = mineralization plunge

I used this trend to create a series of grade shells.

To calculate a guesstimate of contained gold.

It looks like GT Gold have defined a small, but moderate grade resource. How can they make it bigger?

Upside

I want to see how easily GT Gold can expand the gold mineralization. So I decided to compare the drilled gold zones against the prospect-wide soil sampling maps found in the 2016 technical report.

Gold

Au DH assays and Au in soil

Arsenic

Au DH assays and As in soil

We can see that surface gold and arsenic correlate well with the gold mineralization hit by the drilling. You can also see that the 2 large soil anomalies haven't been completely drilled.

South Saddle

proposed hole = cyan lines

The South Saddle Zone has been well drilled, but we can see that the Au soil anomaly continues for another 300m to the NW. We can also see that hole TTD051 missed, at GT gold should drill a hole (highlighted) from this platform to the NE to check for the continuation of the multiple Au zones hit in drill-hole TTD053

We also see a partially tested anomaly ~250m to the East. Drill hole TTD059 hit several >1g/t Au structures and a few holes between this hole and TTD028 will test the continuation of the main South Saddle deposit to the east.

GT may also want to drill a DH to the N from the platform of hole TTD061 to test another small Au soil anomaly to see if these three zones link up.

North Saddle

The North Saddle gold anomaly is virtually untested, and is 400m long and ~250m wide. The anomaly does appear to be following a drainage and may just be an erosion anomaly, but drill-hole TTD057 hit multiple >1g/t Au structures along the eastern edge of this anomaly and a couple more holes should be drilled to see if there is anything bigger to find in the area.

Porphyry

Hole TTD062 hit some weakly mineralized porphyry (210m @ 0.16% Cu and 0.14 g/t Au - i.e. waste) and the hole was drilled into the center of the large magnetic anomaly, so it it doesn't look like it will turn into anything.

Magenta = magnetic high

Regionally

The 2016 technical report does discuss additional targets, I've been happy to see that there is good correlation between soil Au and As and drilled mineralization, and maybe a good step would be to expand the soil sampling program across the project, and if GT gold want to save a few bucks (and get quicker results), they could use a pXRF on the soil samples and map out the Arsenic as a proxy for gold distribution.

Metallurgy

We got a Valentine's gift from GT (link) with some initial metallurgical results. I quickly checked Head grade against recovery to make sure that GT tested material with different head-grades (it is common for companies to only test the 'best' material which can skew the results).

We see a nice range of head-grades from low to high, and the recoveries are sitting nicely around the 80% level. I didn't see anything in the text to explain why 2 composites had 0% recovery, it would have been nice to have had a bit of text explaining why. It would have been nice to have seen a summary of ore type (oxide, mixed and sulfide - if it is important) and maybe where the samples had come from, but these are minor niggles.

I've created a new view showing the location of the Cu assays in the DH data (link)

Conclusion

GT gold have defined a small, moderate grade gold deposit. There is reasonable expansion potential laterally, the depth extents to the South Saddle appear to be well drilled), and my gut-feel max size for Saddle/Saddle north is sitting around ~1Moz @1 g/t.

The metallurgical studies are positive, and appear to minimize any potential impact that the elevated As could have had on the deposit.

However, I can't see, from the data presented, how GT will significantly expand the project to a size where larger companies would be looking at acquiring it (say around 2Moz). Maybe with some regional exploration, several additional gold zones could be defined for drilling later on this year.

The porphyry potential, albeit from a single hole, seems to be minimal.

Pretium - Opportunity costs

Archaeologists near Stewart, BC have discovered what is believed to be the missing front cover of the Brucejack Feasibility study.

Thank you Grant Naylor

If genuine it belongs at the beginning and is believed to have read "To my darling Daniela. All figures portrayed within this report are fictitious and any resemblance to the truth is purely coincidental"*

*Just my warped sense (lack) of humor.

Why don't we state the obvious:

1. The mine is profitable
2. The first 6 months production was a big miss
3. H1 2008 guidance - will be a big miss when compared to the FS

The nice thing about Brucejack is that we can compare the actual production figures against Tetra tech's feasibility study.

Here are the projected gold and silver projections:



1st Year production (essentially July 2017 to June 2018)

• Feasibility Study = projects 402,393.74 oz production
• Pretium guidance:
• Low end = 302,000
• 100,000 oz or 24.85% less than the FS
• High-end = 352,000 oz
• 50,000 oz or 12.4% less than the FS

What does that mean? 

Simply, Pretium will be receiving much less revenues from Brucejack than original calculated by:

• At $1100/oz = $55.4M - $110M less revenues for Year 1
• At $1300/oz = $65.5M - $130M less revenues for Year 1

Ouch...

Pretium - an admission of failure?

As Otto mentioned (link) the grades 'that should not be mentioned' mined during Q4 at the Valley of the Kings Wangs* was a lot lower than planned - 8.4 g/t vs 15.4 g/t, a 45% difference.

*I'm pandering to my Chinese overlords

The market didn't go yippee!

down 35%

Fortunately, the Brucejack web-page (link) contains all the answers to those irritating questions about grade, production and so on.....

I was interested that they included a set of guidance figures for H1, 2018.

Steady state - like Brownian motion and the infinite probability drive. The last sentence is very intriguing...

A 50K or 33% (or 25%  if you are using the upper end of the prediction) swing is massive, that equates to a variance of up to 8,333 ounces per month.

However, this isn't too surprising if you are mining a highly variable deposit with many erratic, inconsistent ultra high-grade veins in a low grade host rock. So, why don't we have some fun, and interrogate the information that we've been given.

I want to calculate the planned head-grades for H1, 2018 to see how they compare to the 2016 reserves (link).

Assumptions:

• Recovery =  95% - slightly below average recovery for 2017
• Mill Throughput = 2850 tonnes per day - slightly less than average throughput in 2017
• Mill utilization = 100% or 181 days
• Production - Pretium PR
• Top end = 200,000 ounces
• Bottom end = 150,000 ounces

Step 1 - Recovery

I'm going to apply the recovery, 95%, to the production. This will tell us how much gold they'll mine before the 5% is lost through the milling process.

• Bottom end = 150,000 / 0.95 =  157,894.74 ounces mined
• Top end = 200,000 / 0.95 = 210,526.32 ounces mined

Step 2 - calculating the tonnage

• 2850 x 181 =  515,850 tonnes milled

Step 3 - Back calculating the head grade

• Bottom end
• 157,874.74 / 515,850 = 0.306 oz/t
• 0.306 oz/t = 9.52 g/t Au
• Top End
• 210,526.32 / 515,850 =  0.408 oz t
• 0.408 oz/t = 12.69 g/t Au

Even if Pretium meet the top end of their guidance, the planned head-grade at Brucejack will be >20% lower than expected, which poses some interesting questions:

• Are Pretium deliberately aiming low so that so that they don't over promise and under deliver?
• Are we seeing and indirect acknowledging that there is a problem with the deposit?
• Whoever designed the mill did a great job - it is over-performing, both with throughput and recovery!

However, there is no cause for alarm, Pretium are telling us that everything is going so well (ignoring teething problems like mining lower grade rock and producing less gold - nothing important), they've decided to make the mill bigger (link). We all know that bigger is better, but is this quick 'paper over the cracks' fix to bring short-term production up to levels stated in the feasibility study?

They admit to albeit indirectly, in the PR with the new grade control drilling and poor reconciliation,   is it wise to increase the mill capacity if they still don't fully understand the gold distribution?

They may find themselves in a position where they have a hungry hungry mill that they'll either start to shove any ol' crap through it (i.e. low grade development rock) or use bulk mining techniques (excessive dilution) to keep it fed.

Often this starts the death spiral for an operation, with decreasing head grades leading to decreasing production, lower revenues and so on. 

2018 is going to be an interesting year...

Garibaldi - the final cut

I'm so disappointed with Garibaldi. After 3 months of hibernation, they rudely awoke the market with the final drill-hole assays just in time to show some core at the Roundup Core-shack (link), and avoid some embarrassing questions...

Let's start with the good news:

• We got a plan map!!!!
• We got some geofizz polygons - rectangle marks the spot!!!

Errr, that's it...

And now with the bad less good news:

This is what our chum, Dr. Lightfoot has to say about the results:

Yawn...

On the surface Hole 10 look good, but when you see that it is just of twin (i.e. drilled right next to it) of hole 09, things fall apart. Leapfrog viewer file here (link)

UPDATE: Here is a updated LF viewer file with the topography, geology plan and section (link)

Visually, this is how far apart the 2 holes are:

2 sexy ass widths

Over 60 cm, the upper zone, at ~150m depth, decides to go on holiday. How sad is that, here is a company deliberately targeting known mineralization by twinning a good hole and one of the massive sulfide zones 'evaporates'.

Here it is visually

Sorry the bars are so small, it is the only way I could actually show the assays from both holes.

I'm sure this is what Senor Lightfoot is referring to the mineralization being 'entirely open', two words that you can't say about the GGI management team.

Hole EL-17-11

Drilled to explore for the continuation of the mineralization hit in holes EL-17-08 and the old holes (DDH_02 and 03).

Make sure you check the scale on any map!, In this hole we can see that it is only ~25m from previous drilling. The thick, low-grade mineralization surrounding the high-grade zones in hole EL-17-08 has appears to have disappeared and all that is reported in EL-17-11 is a narrow, albeit, high-grade massive sulfide lens.

Hole EL-17-12

Vertical hole exploring the down-dip extensions of the NW massive sulfides zones hit in holes EL-17-03, 06, 07 and 08. It hit an 18m zone of >1% Ni and >1% Cu, but no massive sulfides, even though holes EL-17-03 and EL-17-08 are only 18m and 26m away respectively.

I'm guessing hole 12 was designed to herd the Nickel closer to surface

Hole EL-17-13

This was drilled in the wide-blue yonder, and just clipped the edge of the MASSIVE geofizzical target and hit nothing.

Fore....

It was a shame that we couldn't have seen these target anomalies on a section and maybe see how they relate to the Q, but, we got a plan map (or should I say, GGI got someone to draw the original Silver Standard Map from the 70s), asking for a section wold have seriously taxed the highly professional geological team at GGI 

Summary

We see significant decrease in thicknesses and grades of the mineralization over very short distances, which is a bit of an Achilles heel if you are trying to give the impression that the mineralization is part of a big deposit, and before anyone sends me comments with Latin phrases, just spend a few moment looking at hole 10. It demonstrates the depths that GGI will go to get a 'good result' for a press release .

Nickel Mountain, futue te ipsi, es mundus excrementi!