Great link Jeannie.  Within this site I found an interesting couple of articles that the newbies and other more seasoned investors may find useful relative to assay results.  Sorry again about the format. This is huge... 

 

Understanding Drill Assays: Part 1

Pretty much every week I get shown some assays and asked on the spot if they

are “any good”. Is there a quickie way of telling? Is there a “Drill Core Assays for

Dummies” Handbook?

The short answer is “No”. It can be very hard to interpret drill hole results outside

of any context – even for a career geologist.

So, how would an investor who is not a geologist or a geological engineer be

able to tell if results are any good….is it a “buy” signal? A “sell”? A “hold”?

Suppose it is the only information out there? Such things can be tough to decide,

but I’ve boiled it down to a few guidelines.

Firstly, something that may sound rather obvious - if you aren’t already fully

comfortable with the metric system, take time to learn it. If you don’t know what a

metre is you’re setting yourself up for disaster. Any dictionary or encyclopedia

should be able to give you conversion tables for weights and measures. The

overwhelming majority of mining and exploration companies listed on the ASX,

JSE, TSX, or AIM give assay values in grams per tonne and measure drill core

lengths in metres.

Continuity and Geological Models

To make sense of press releases you have to navigate your way around the

jargon we geologists use. Before any drilling takes place the geologist should

always have an idea of which way the mineralization is trending. Geologists will

often refer to the “strike” of the mineralized rock (you can think of it as “direction

trend”), and the “dip” (which way the mineralization is tilted or inclined). As

important as the metal content or “grade”; is demonstrating continuity – does the

mineralization extend to depth and along the strike? You can’t “build tonnage”

(incrementally increase the size of the mineralization through discovery) if you

don’t have continuity. So the geologist will try to hit the buried mineralization with

drill holes both along the trend, and at increasingly deeper levels. Sometimes

geologists will use early information to drill “step out” holes, to test for continuity

some distance away from earlier drill holes. They’re called step-out holes

because they step away or jump some distance from the known to the unknown

(sometimes these step-outs are a very real “leap of faith”!). A positive result from

a step out hole will often make the share price rapidly move because it’s a way to

quickly demonstrate size potential. If a step-out hole is successful, the geologist

might want to track back in the opposite direction with “in-fill” holes. The

geologist will also want to know how thick the mineralization is, and the best way

to do that is to try to intersect it underground at right angles in drilling. A perfect

right angle intersection will give you a “true thickness”. If you hit it at any other

angle the mineralization will appear wider in the drill hole than it actually is in

nature. This is a function of geometry. With a couple of drill holes at different

inclinations you can use trigonometry and figure out the thickness (yes, High

School Trig is important…tell your kids!) What any competent geologist will try to

avoid is “drilling down the dip”. You can think of it this way: take any hardbound

book and pretend that the closed book is an ore-bearing geological unit. Prop up

one end so that the cover is inclined. Now take a pencil and rest the tip on the

inclined cover. Orient the pencil so that it sticks straight up out of the cover at an

angle of 90 degrees. That’s the best angle you should use if you were going to

“drill” your book. A hole at this orientation is going to give you an accurate

representation of the book thickness. However if you drilled through and down

the spine of the book between the covers that’s like drilling down dip and will give

you a false impression of thickness. Sometimes it can be tricky to figure the dip

of mineralization, and it can often take a couple of cracks at it, drilling from

different angles, to begin to sort it out. If a Company has been drilling narrow

high grade veins and suddenly comes up with an extremely wide vein

intersection, always be a bit skeptical and ask yourself if they may have drilled

“down the dip”.

The geologist should also have a fair idea of a geological model. He may not

have it completely understood at first pass but he or she should have it down to a

few possibilities. This is one of the most important considerations in whether or

not mineralization has the potential to eventually be “proved up” into an economic

orebody. Let’s say that we’re drilling a gold-bearing quartz vein, which is

“shallow” (near the surface). It might be possible to eventually mine that vein

with a small open pit from surface. If it’s rich enough, it might pay you to

afterwards go underground and sink a shaft to mine it from the subsurface. But if

the vein is narrow and low grade, and only starts a couple of hundred metres

down and not from surface, mining it will probably never be a paying proposition.

Some quartz veins however can be very rich, and will support economic mining

to very great depths. Let’s say you have a second orebody which is a vuggy

silica unit (vuggy silica is very hard and porous quartz which has formed by

replacing pre-existing rock, often by very acidic hotspring waters). The vuggy

silica may be low grade, say 1 or 2 grams/tonne in gold and possibly 50 or even

a hundred metres thick. Vuggy silica is usually a shallow mineralization type,

and at those grades, if there is a considerable thickness, it can be very lucrative

to mine it using open pit methods.

High grade has always moved markets, but today, in 2004, many mining people

have noticed a trend in North America towards rewarding companies that come

up with high grade numbers and paying less attention to anything else. My own

personal “take” on this is that investors have been spoiled by the grades that

have come out of Goldcorp’s Red Lake Mine. Many of the investors who were

around in the early 1990’s during the last junior mining boom were permanently

shaken out by the triple whammy of the Bre-X scandal, low gold prices, and

expansion of the internet bubble which siphoned away venture capital (much of

which historically went into junior mining). Over the last several years Bob

McEwen has done a splendid job of promotion, giving the Red Lake Mine a high

profile (even advertising on the radio!) so that many of the new crop of investors

around today may falsely believe that all profitable gold mines have to have

super high grade. The Red Lake mine has so much gold in some areas that

visible gold can actually be mapped underground! You can draw a chalk line

around the visible gold and enclose a sizable area. Proven and probable

resources as of Dec 31, 2003 were 3.178 million tons at a grade of 1.23 oz/ton

[42.17 g/t] gold for 4.939 million contained ounces. I was underground in 1987

when the mine was called the Dickinson, and was privileged to see such extreme

high grade, which the miners explained to me they got into only twice or so a

year. The miners call such places “jewel boxes”. I saw a drill bit clogged with

gold, and two muckers horsing around trying to kick a piece of high grade down

the drift (tunnel) with their steel-toed boots that was so heavy with gold it was

reluctant to easily budge. Unless I get invited to go underground there again I

don’t expect to see such high grade gold soon, if ever. I want to stress again,

grades like these are pretty rare and the new discoveries over the next few years

are not going to look like this.

You have to realize that the majority of highly profitable mining operations mine

much lower average grades, and that many operating mines don’t have any

“bonanza” grades like the example above. In fact, there are a number of senior

mining companies that shy away altogether from high grade vein deposits. They

may represent highly profitable low cost ounces but they typically represent a

small number of contained ounces, say less than 1 million gold ounces – Red

Lake is highly unusual. Many of the big Senior Gold Producers are trying to grow

their reserves and want to do it in one foul swoop through finding a low grade but

high tonnage and high number contained ounces deposit – like Barrick Gold has

done with Pascua Lama (almost 300 million tons containing 16.862 million

proven & probable gold ounces at a grade of 0.057 oz/ton [1.95 g/t], as of

December 31, 2003). Exploration success doesn’t come easily and so most

Senior Companies can only grow or even keep their reserve numbers level

through mergers and acquisitions – witness the Harmony – Norilsk - Gold Fields -

IAMGOLD bun fight currently in progress. High grade vein deposits are also very

drill intensive (need to be very intensively [and expensively] drilled to accurately

forecast the grade and tonnage), and the grade in veins can be erratic and veins

themselves difficult to follow underground. Many Senior Miners want deposits

that their engineers can plan for 5, 10 or even 20 years production, and they

want to boast to fund managers that their reserve profile has been boosted by 3

or 5 million ounces. These big senior producers are looking to grow their ounces

and are looking 5 or 10 years outboard. Meridian Gold took it on the chin

recently from investors who didn’t like how much money was being spent on

exploration, but if you’re going to find those low cost ounces, as Meridian has a

track-record of doing – it gets pretty spendy.

Low grade big tonnage versus high grade low tonnage – both are important and

both potentially highly valuable. As a rule-of-thumb many geos look at grammetres

as to whether or not a drill result is interesting. Simply put, this is the

grade multiplied by the width. A vein that is 5 metres wide and averages 60 g/t

will represent 300 gram-metres, but so will a zone that is of lower grade, say 100

metres wide, grading 3 g/t. It of course would depend on the geological context

as to which is the more interesting drill hole, but any exploration manager would

be ecstatic to receive either result! An intersection of 10 gram-metres may or

may not make it. An intersection of 50 gram-metres is pretty good; of 100 or 200

gram-metres is pretty gosh darn good, and anything higher becomes exceptional.

Minimum Mining Widths – Stretching the Interval

Fourteen years ago I received a spectacular assay of 800 g/t gold for a quartz

vein I examined in Kirkland Lake, Ontario. The Vice-President of the company I

worked for got busy the day the results were in, working out “if we average the

grade out over 2 metres, we get x, and if we average over 3 metres we get y, and

if we average it to 5 metres we get z”. Us guys in the field kind of rolled our eyes

at this, because we knew that the vein was only 28 centimetres wide and that

there was no gold in the wallrock (walls of the vein). He was “stretching theinterval”. Now, there’s nothing wrong with someone “in house” making a few idle

calculations. If you were to average the grade over 3 metres, assuming the

wallrocks contained zero gold, you’d get 75 g/t gold over 3 metres, which is a

pretty respectable number. However you’d be honour bound if not legally

obligated to disclose in a press release that the gold occurs only over 0.28

metres width.

There’s a lot of gray area here, and there are a couple of things to consider.

Firstly, a minimum mining width. This is the minimum width in which miners and

machinery can safely work and is often legally mandated in a lot of jurisdictions

by government Occupational Health and Safety folks, or by unions. Narrow mine

workings can be difficult to get around which makes them unsafe in an

emergency situation. In the old days, “rat holing” on the vein was a common

practice. In a modern mining scenario it is not possible now, though it is common

in places like South America, Mexico and China in artesanal mines. The thing to

note here is dilution of grade from wall rock. In a modern mining scenario you

have to take the minimum mining width - guts feathers and all, and can’t

selectively mine narrow veins. Taking the barren wallrock is what is called

“dilution”. In the above scenario it might be justifiable to stretch the interval to a

minimum mining width of say 2 metres or so – but never to 5 metres.

The general industry practice is that assay intervals have to carry their ownweight. This means that when you are calculating a weighted average amount of

gold over a certain width you shouldn’t be including long sections of rock that is

very low grade or barren in your calculation. It is however totally appropriate to

include small sections in the width if the width represents one geological unit –

say one big wide quartz vein with a couple of short sections here and there

containing no or very low gold content. In a mining scenario you’d never leave

these short sections behind as waste rock in any case, and you’d take the whole

vein. This sounds a bit complicated and there is considerable latitude given to

mining professionals when reporting grades and widths, but you should also be

aware that this reporting can be open to abuse. When reporting drill

intersections it’s good practice for a company to also report their highest

individual assay alongside. Some companies even publish all the assays in table

format - that way investors get the whole picture.

In Part 2, I’ll discuss the Nugget Effect, Cutting Assays and Stripping Ratios –

more geo jargon you need to understand.

I