This is a repost of a repost from another board, so I'm not sure of the original source. It's a geologist's response to basic questions about interpreting drilling results. Pretty basic, but a nice refresher.

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When they give drill hole results they are giving you the length of a drill core intersection, not true width, that has been assayed. Mining drill core is small diameter, say 2- 5 inches. They should and often do show depths, measured from the hole collar, at which the assayed intersection began and ended. An example intersection might be say 20m from 130.5m (downhole depth) to 150.5m with a gold assay average of 10g/t. It is useful to know what the detailed results are, by sampled interval, over the whole of the 20m. If for example in this intersection there were an interval of 0.5m of 400g/tonne it would significantly skew the average in a misleading way. Assays on this type of short anomalously rich narrow interval should be ‘cut’ to a limit to avoid the ‘nugget’ effect which can skew the average, sometimes to the point of being meaningless. Whether to cut the assays, and at what limit, and how the assay sample interval is chosen, is the call of the geologist doing the sampling. Some are scrupulous, others are not.

For purposes of estimating tonnage one needs to know what the ‘true width’ of the intersection is. Most exploration holes are drilled at an acute angle from the surface. If the target is believed to be for example a tabular vein (shaped kind of like a book) the holes should be oriented to intersect the vein at acute angles or perpendicularly. If a hole is drilled at a right angle to the dipping tabular ore body the true width will be the same as the intersected width. Good operators will include their estimates of true width of intersections as the drilling progresses to the point where the orebody geometry is known. Holes are often drilled in fans. Unscrupulous operators will sometimes drill holes sub parallel to the tabular orebody in order to pull long drill intersections which look good.
Horizontal holes are for the most part drilled underground, only rarely from surface, and of course only in mountainous terrain. Vertical holes are used to drill up large dimension, large tonnage orebodies.

Tonnages are estimated using geostatistical techniques (Kriging and others) that extrapolate grades between drill holes with confidence varying based on the density of drilling, consistency of the assays and the complexity of the orebody. Ore is categorized as measured, indicated and inferred roughly paralleling the 1P, 2P and 3P categories for oil and gas. In practice I think the confidence level is lower for mine reserves and recoveries, especially in higher grade mines, than for oil reserve estimates and recoveries. For very rough back of the envelope calculations of tonnage one can use a specific gravity of 3 for most gold deposits (ie. 1 cubic meter is 3 tonnes) and 4 for massive sulphide deposits.

Deep for an open pit mine is in the order of 500m, although there are deeper. The geometry of the orebody is very important in determining the economics of mining and the ultimate depth of an open pit. For open pit mines an ideal orebody shape is kind of like a funnel with the top of the funnel at the surface. Since the sides of the open pit have to be sloped to prevent rock slides this shape minimizes the stripping ratio, the amount waste that has to be moved to get at the ore. A stripping ratio of 3:1 implies moving 3 parts waste to get 1 ton of ore. An orebody with the shape of an inverted funnel would have a high stripping ratio. Most open pit gold mines run about 1-2 g/tonne, more if the stripping ratio is high and less if the stripping ratio is lower. Physical rock conditions, gold recovery factors and reagent cost (if leaching) and milling costs, which are a function of the ore and waste rock chemistry, are also important factors.

Deep for an underground gold mine is 3000m. The high grade orebody that revived Goldcorp’s Red Lake mine was found at a depth of about 2000m by exploration drilling from the underground workings. It is rare to drill for targets at this depth from surface. Large underground gold orebodies, with simple metallurgy and where they can use bulk mining methods (long hole stoping/block caving) can run 2 to 5g/t. Most underground mines are higher grade. Vein gold deposits run 5g to 12g/t, sometimes more. Vein width is important. The narrower the vein the higher the unavoidable dilution of ore with waste rock. Ground conditions are also an important cost factor in underground mines.

On new prospects ‘grab sample’ or ‘spot sample’ grades mean almost nothing other than that there is mineralization and the chance of finding something further . Channel samples from the surface are a slightly better indicator but much depends on the care with which the sample was taken and the integrity and ability of the sampler. Geophysical (and geochemical) anomalies are a dime a dozen and mean much less than in the oil patch.

It is hard to evaluate mining exploration results and even harder to translate them into stock picks that pay off. It used to be that the ratio of prospects to operating mines was in the order of 3000:1 and it is probably higher now. Just about every mining geologist out there has a drawer full of old share certificates. Reading between the lines on mine drill results I find much harder than interpreting oil and gas drill results even though I long ago used to do mining exploration. The mining game is also populated with a lot more flat out promoters and shysters than the oil patch, although things are better than in the Bre X days. There are too many ways to skin the cat. Finally, even with a good ore body there is a huge hurdle to finance to production.

I usually try to make an assessment of the management group, the geological expertise and their ability to raise money. For small companies I try to buy in the drilling off season in anticipation of results and, yes, I usually sell on mystery. I used to spend a lot of time on the phone asking questions trying to fill in the blanks and get a feel for whether the operators were straight or not. These days I mostly stay away from juniors. It demands more time than I want to put in, and a trader’s mentality. I do play the producers and near producers.