How to Read Drill Results of Exploration Companies (PART 1)
Analysing the drill results of exploration companies appears to be harder than I thought it would be. I'm happy that I didn't make this video on my own, as it would've been very incomplete. Not that this is a complete guide on how to analyse drill results (I don't think that's possible to make) but for the ones ready to pay attention, I think there was a lot of value in this discussion on how to analyse drill results, especially if we're talking about gold, silver & copper exploration companies. So, I started by asking Quinton Hennigh if drill results of exploration companies really matter, or if there are other (more important) things to focus on. He told me that you definitely don't want to ignore the drill results of exploration companies, and that you should "smarten up, and learn how to read the drill results of exploration companies". We continued by covering the importance of metal grades in drill results. He explained to me why grade matters and what type of grade is economical. Summed up, to make a mine economical worth it, you need about: 1. Gold - underground: 4-6g/t - open pit: 1g/t 2. Silver - ug: 300g/t - op: 20-40g/t 3. Copper - mostly open pit: 0.4% Cu Grade is not everything. One should also be thinking about the length of the intercept. Sometimes, I would see grades of +100g/t Au, but I wouldn't get excited before having looked at the length of the intercept. Intercepts of under a meter don't excite me, even if it would be 1000g/t Au. It's important to look at how the project is drilled. There are (generally) 2 types of drilling: - RC = the cheaper one - Diamond drilling = the more expensive one (not only because of the diamonds, but also because it's slower). Something that could make a project not worth it, is the width of the veins. I prefer veins that are at least about 10ft or 3m wide, but dr. Quinton Hennigh told me that these days, even veins as wide as 1.2M (4ft) would work in some cases. However, I've always remembered: the smaller the vein, the harder, the slower, and thus more expensive to mine. So, depending on the grade, I don't want my veins too small, even if the grade seems attractive. I continued by asking about the cost of drilling, and that's where the difference between RC and diamond drilling was to be seen. Interesting part of the video here, at least for me. A member of the community on Discord had sent in a question, asking when to give up on a company, after announcing that they've failed on the first few drill holes. Dr. QH told me that what matters the most in those situations in having a good combination of an experienced technical team and a lot of cash to quietly keep on drilling. I like those situations where a company with a good story & a good team, in a good jurisdictions fails their first few drill holes, but still has money to keep on drilling for months to come. Often times the market overreacts on failed drill holes, and that gives me an opportunity to test my patience and enter the stock at a lower price, and see if my thesis is correct after a while. Of course, needless to say, given that I've been serious about natural resources for about a year, I don't always know what I'm doing and that makes for large risks. A very important point that I made in this video was about the size/cost ratio. Some projects are just too small to mine at the current commodity prices, and so even if they keep coming out with promising drill results, they may never become a mine. So, I asked dr. QH about what the smallest size project is, and he gave a very clear (to me) answer that made a lot of sense. Of course, it also matters where the given commodity is at on the price chart, at the time of releasing the results. Dr. QH told me that a project needs at least $60/ton in natural resources, in order for it to be worth the time of further analysis. So, at $2000 gold, that could be 0.03oz/t, whereas at $1000 gold, the project will need twice that. This is why we keep seeing new projects at higher commodity prices, because they make sense only at higher prices. TIMESTAMPS: 00:00 Intro 01:10 Important notice 02:10 Do drill results matter? 04:35 What to look for in drill results? 05:55 Does grade matter in drill results? 07:13 Average grades of gold, copper & silver drill results 12:35 Different types of drilling 17:30 Width of the veins 22:45 Are narrow veins expensive to drill? 25:45 The cost of drilling 30:20 When to give up on a company 35:00 Resource & Reserves NI 43-101 38:41 When is a project too small? 43:00 Does the price of the resource matter? 49:00 Closing thoughts I am getting paid for the production of this video, which not only makes me evil, it can also make me biased towards the companies mentioned in the video. So, don't listen to anything I say. I'm no a financial advisor. Read the full disclaimer at the beginning, before continuing. I may own shares of companies mentioned in this video, or have another type of interest in them.
Sandstorm Gold Royalties
Topic 1: Understanding Exploration Results
Sandstorm Gold mining engineer Tom Bruington, provides technical insights to help mining investors better understand exploration results. In Topic 1 of the series 'Technically Speaking', Tom discusses common concepts such as mining geometry, drill hole surveying and resource estimation.
Sandstorm Gold Royalties
Topic 2: Mineral Exploration
In the second installment of the 'Technically Speaking' series, Tom Bruington, mining engineer with Sandstorm Gold, discusses the tools and concepts behind mineral exploration. Tom’s lesson covers both simple and more complicated exploration techniques ranging from mapping to geochemistry to drilling.
Sandstorm Gold Royalties
Topic 3: Assaying Gold
Moving from exploration to discovery requires several tests to determine the quality and quantity of a gold deposit. In this video Tom gives us a complete overview of the steps involved for assaying gold and how to understand the results. This is the third instalment of the 'Technically Speaking' series with Tom Bruington, Mining Engineer for Sandstorm Gold.
Drill Results 101
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