Stages of Discovery : KGC, NG.TO, and ABX on TSX

Yesterday we talked about Mineral Resources of various exploration projects. Today I wanted to cover further aspects of various types of Mineral Resources. Which is better and why? (cost is a factor)

Mineral Resource is defined as :

a concentration or occurrence of natural, solid, inorganic or fossilized organic material in or on the Earth’s crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a mineral resource are known, estimated or interpreted from specific geological evidence and knowledge. Mineral resources are subdivided, in order of increasing geological confidence, into inferred, indicated and measured categories.

Remember stats from school? Degree of confidence once again plays into reserve calculation.

In a perfect world mining exploration companies can drill 1,000 holes to confirm a deposit's existence. But when you calculate how much it costs to drill a hole (usually $400-1000 per meter)... things add up real fast. Think about an average of 300-500 meter per hole. Thats' a potential of $300k -500k per hole when most drill programs will have 5-10 hole each. Even with multi-million budgets per projects for the year, it won't last very long!

So people came up with the next best alternative: different levels of confidence of estimates depending on the available data, proximity of drill holes, depth, and more. Before we go over what each means... let's remind ourselves what drill targets and mineral deposits are like.

So we have a drill set up here:

And the core logs it comes up with looks like this:

At which point the core logs are cut and labelled, and sent to the assay labs for analysis. Essentially what the labs do is to find the percentage % of precious and/or base metal that exist in the drill cores. See the drill hole diagram below from Solitario Resources, a large exploration company operating in Latin American with large venture partners such as Newmont Mining Inc (one of the largest mineral exploration companies in the world).


The red line represent drill holes and the numbers beside it are official assay lab results of the % make up of the drill logs. From these results geologists are able to combine their theoretical models of what the deposits look like with actual results and modify future drill hole locations. Below is a sample of what a projected deposit would look like.Of course, if things were that straight forward, mining companies woulnd't have budget over runs and delays as they usually do! Hope this brief and simple over-view presentation help visualize alot of this mining jargon that new investors run into. In future we'll go over a sample assay result / table and how one would interpret it.

Back to the various levels of confidence now. From the weakest level of confidence to strongest...

An Inferred Resource is that part of a mineral resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes.

An Indicated Resource is that part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geologic and grade continuity to be reasonably assumed.

A Measured Resource is that part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters to support production planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geologic and grade continuity.

Hope that helps! Happy investing.