A junior mining news release is written in a dialect. A speculator needs to know the lingo.
The vocabulary takes more than one letter to present. This is Part 1: the rock and the paperwork. Part 2 covers the money. Part 3 covers the economics and the markets and the methods. I figure I will revise and update these, in part based on your comments and suggestions, and turn them into a PDF to help new subscribers (and old ones) orient to the language.
The Rock
Assay. The lab result. A sample goes in, a number comes out. Everything before the assay is guesswork, opinion, hope or hype, depending on who’s saying it. And the data, when they come, are often used to promote the guesswork, opinion, hope and hype.
Grade. Metal per tonne of rock: grams per tonne (g/t) for gold and silver, percent for copper and zinc. One gram per tonne of gold is a paperclip’s weight of metal in 1,000 kg (a metric tonne, about 2,205 pounds) of rock.
Intercept. A stretch of drill core with enough target metal to brag about (or at least bother to mention), reported as “X meters of Y g/t.”
True width. The actual thickness of the mineralized zone, as opposed to the distance the drill happened to travel through it. A hole drilled down the length of a vein produces a spectacular intercept that may be worth little. If the release omits true width, ask why.
Cutoff grade. The grade threshold used to decide which material gets included in a resource estimate or mine plan, given specified technical and economic assumptions. Lower the cutoff and the reported resource may grow, but the additional material may be uneconomic to mine and process, especially if metal prices fall or costs rise.
Recovery. The percentage of metal the mill can pull out based on metallurgy/testing. Metal the rock won’t surrender isn’t going to turn into cash.
Circuit. The sequence of equipment the ore passes through in the mill: crushing and grinding, followed by recovery using gravity, flotation, or leaching. A gold mill might use gravity to capture coarse gold, then a carbon-in-leach (CIL) circuit, where cyanide dissolves the gold and activated carbon captures it from solution. Every additional processing step adds complexity and may add capital and operating costs. It may also improve recovery. A conventional circuit can reduce technical risk; an unusual circuit may introduce another thing that has to go right.
Strip ratio. Tonnes of waste moved per tonne of ore in an open pit. Lower the better. A high strip ratio can be more of an earthmoving enterprise than a mine.
Oxide vs. sulfide. Near surface, weathering oxidizes the rock, and oxide gold is easy to process. Deeper down, sulfide ore needs grinding and often flotation or more. Many deposits are oxide on top and sulfide below, and the economics change at the boundary.
Refractory ore. Gold locked inside sulfide minerals where cyanide can’t reach it, or ore laced with carbon that grabs the dissolved gold before the plant can (“preg-robbing”). Freeing it takes roasting, pressure oxidation, and other methods, all of which add expense.
Heap leach. Crushed ore stacked on a lined pad (a very big lined pad!) and sprinkled with dilute cyanide solution that dissolves the gold over weeks or months. Commonly used for oxide ores.
Nugget effect. Coarse gold scattered unevenly through the rock, so two samples a foot apart can assay wildly differently. Deposits with a strong nugget effect are hard to estimate and easy to oversell.
Visible gold. Gold you can see in the drill core. It makes a fine photograph for a news release.
Grab sample. A bit of rock a geologist picked up that looked like it might hold a lot of metal. It has slightly more meaning than that. But only slightly.
Metal-equivalent grade. Several metals converted into one number, such as gold-equivalent (AuEq) or copper-equivalent (CuEq), at prices and recoveries the company chose. Useful for comparing projects. Also a convenient place to hide a weak primary grade.
Greenfield vs. brownfield. Greenfield exploration hunts where no mine has been. Brownfield exploration hunts near existing mines or old workings.
Deposit types. Porphyry deposits are huge, low-grade copper-gold or copper-molybdenum systems that need billion-dollar mines. Epithermal veins form near surface from hot fluids and can be high grade and narrow. Orogenic gold forms along major faults in ancient mountain belts and supplies much of the world’s gold. Knowing the type tells you roughly what kind of mine is needed.
The Paperwork and the Data
NI 43-101. I love regulators. This is Canada’s rule for disclosing scientific and technical information about material mineral projects. Written disclosure identifies the Qualified Person responsible for the information. Drill-result releases have additional requirements, including reporting true widths when known. US SEC registrants follow Regulation S-K 1300 for mineral disclosure, while Australian-listed companies follow the JORC Code. The systems use comparable resource and reserve categories.
Qualified Person. An engineer or geoscientist with at least five years of experience relevant to the deposit type and the work being reported, in good standing with a recognized professional association. Some reports require a QP independent of the company. When the QP is also the company’s VP of Exploration, there is going to be some bias, some malincentive, some concern. But it’s common.
Resource vs. reserve. A mineral resource is a concentration of mineralization estimated from geological evidence and sampling, with reasonable prospects for eventual economic extraction. Resources are classified by geological confidence: inferred (least), indicated, and measured (most). A mineral reserve is the economically mineable portion of a measured or indicated resource, after applying the relevant mining, metallurgical, economic, environmental, and other modifying factors. A pre-feasibility or feasibility study must support the determination. Measured resources can become proven or probable reserves; indicated resources can become only probable reserves. Inferred resources can’t become reserves at all. Inferred ounces are mostly hope. Proven and probable reserves are used for planning a mine.
Historical estimate. An estimate made by a previous owner, often before NI 43-101 existed, that no Qualified Person has since verified as current. A company may mention it with a disclaimer but can’t treat it as current. A historical estimate tells you where to drill, but not the value of the rock.
PEA, PFS, FS. Preliminary Economic Assessment, Pre-Feasibility Study, Feasibility Study. Each one provides more confidence than the previous. A PEA may be based just on inferred resources, but comes with a big caution. The feasibility study is a key determiner of the mine build decision and the funding needed for it.
That’s Part 1 of this lexicon, and enough for today. Part 2 covers the money terms: how juniors raise it, how they spend it, and what the taxman takes on the way out.
Paid subscribers see all of these words applied as we consider companies in this sector and as we follow the companies in our portfolio.
I hope this helps. Send it on to friends who are new to the sector and suggest they subscribe. I will send out Part 2 of the lexicon soon.
Sincerely,
John Hunt, MD
Editor, Doug Casey’s Crisis Investing
Thank you. Plain, simple language with just enough humor to denote a need for wariness. One of the best explanations of basic mining terms. Every investor should read/reread this piece. Look forward to #s 2 and 3.