Geo-Insights

 

Geo-Insights:

Geological Excerpts and Explanations from Brent Cook 

Introduction

Making money in the junior mining and exploration equity markets is all about Turning Rocks into Money™. To do so requires an understanding of the geological characteristics of a mineral system and a reasonable sense of what it will cost to get the metal out of the rock. Because the odds of success—finding an economic ore deposit—are so heavily stacked against the explorationist it is just as imperative to know when a project is failing as when it is succeeding. Knowing more than the crowd is key.

Because we are usually dealing with early stage exploration projects at Exploration Insights we are as often as not dealing with limited data and projecting that into the third dimension—Earth. Exploration geology is not an exact science, it is an art supplemented by experience and imagination that evolves as mapping, sampling, drilling, etc., adds to the picture. Over the years we have discussed hundreds of companies and mineral properties. These discussions often involve examining and interpreting the exploration data.

Our goal is to help subscribers better evaluate their own investments in the junior mining and exploration sector, as well as stocks in the EI portfolio, therefore we have compiled this document of Geo-Insights. It is a compendium comprised of excerpts from Exploration Insights that we hope will be of help and value in your own research.

Good luck out there,

Brent Cook

August 18, 2011  

Table of Contents

General Geology.................................................................................. 2

Recumbent Syncline as site for mineralization: Serra Pelada......................... 3

Geology of Patagonia; Continental Drift...................................................... 3

Layered igneous complex: Ring of Fire....................................................... 4

Greenstones Belts.................................................................................. 5

Carlin Style gold mineralization at Long Canyon........................................... 5

Alkalic Rocks......................................................................................... 6

Epithermal Systems:............................................................................... 7

Low-Sulfidation Deposits:......................................................................... 7

High-Sulfidation Deposits:........................................................................ 8

The Geology of Colombia......................................................................... 9

Gold Porphyry....................................................................................... 11

Volcaniclastic........................................................................................ 12

Mineralization...................................................................................... 12

“Good” and “Bad” Grades--interpreting drill results and grades....................... 12

Ivanhoe Mine’s Bakrychik contrasted with Goldcorp’s Marigold mine................ 12

Comparing the Economics of a High Grade and Low Grade Deposit.................. 13

Comparing Newmont/Fresnillo Herradura and Great Basin Gold’s Hollister deposit.................................................................................................. 14

Gold Company Valuations and Economic Studies............................................ 15

Gammon Gold.......................................................................................... 16

Alteration................................................................................................ 18

Feldspar and Pyrite................................................................................... 18

Calcrete Uranium Deposits......................................................................... 19

Gold Mining: Exploration and Production Issues.............................................. 22

Mining in the Yukon................................................................................... 25

Carlin type mineralization.......................................................................... 26

Skarn type mineralization.......................................................................... 26

Geology and Mineralization: Ixtaca Epithermal Property.................................. 26

Resource Estimates................................................................................ 28

Resource Estimates Defined....................................................................... 28

Drill hole interval calculator....................................................................... 29

Assays and Resource Estimates.................................................................. 30

How a drill interval is converted to an assay................................................. 31

Bimodal Grade Populations: mineralization, faulting and eruption, grade distribution plot....................................................................................................... 32

Examples of mineralization........................................................................ 33

Capping or top cutting assays..................................................................... 34

Exploration and Mining Tools................................................................... 35

Radiometric Readings............................................................................... 35

Ore body and open pit: Whittle Pit of Lydian International............................... 35

Soil Samples........................................................................................... 36

CSAMT................................................................................................... 37

Stream sediment samples......................................................................... 37

Grab samples, chip samples...................................................................... 37

Metallurgy............................................................................................ 38

Oxide and Sulfide Mineralization at Camino Rojo........................................... 38

Aquiline (Navidad): Volcanogenic Sulfides and Metallurgy............................... 39

Vat and Heap Leach.................................................................................. 41

Metallurgy: Long Canyon, Amulsar and Miwah............................................... 41

Example: Fronteer Gold............................................................................. 41

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Glossary – Explanation of Strip Ratio

by Chris Wilson-- Exploration Alliance

Strip Ratio         The ratio of the tonnes of waste that must be removed for every tonne of ore.  A strip ratio of 1:1 indicates that one tonne of waste is removed for every tonne of ore, whilst a strip ratio of 5:1 indicates that five tonnes of waste must be removed for every tonne of ore mined.                

Strip Ratio/Depth   Strip ratio increases with increasing depth.  For example, in the illustration below the strip ratio increases from 1.8:1 in the uppermost pit to an average life-of-mine strip ratio of 3.3:1 by the time the lower most pit has been excavated.

                       Increasing strip ratio has a very significant effect on mine economics.  A reasonable average cost of blasting, loading, and hauling waste material in a large open pit is $5/tonne which, in the example above, could reasonably be expected to increase to $5.75/tonne as the haulage distances increase and the pit reaches its maximum depth. 

                       In the illustration below, Pit 01 development has an average strip ratio of 1.8:1, which means that 1.8 tonnes of waste are removed at a total cost of $9.17, for every tonne of ore mined.  If we assume a gold price of $1300 (one gram of gold is worth $40), 85% recovery and no dilution, then 0.27 grams of gold in every tonne of ore mined is required to cover the cost of waste removal. 

                       At the completion of Pit 04 (strip 3.3:1), 3.3 tonnes of waste have been removed at a total cost of $19.04 dollars for every tonne of ore mined.  At $1300 gold and 85% recovery, through the life-of-mine 0.55 grams of gold in every tonne of ore mined is required to pay for the cost of removing waste.  The cost of removing waste limits the ultimate depth of an open pit. 

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Strip Ratio Variables        A number of factors affect strip ratio: ore body shape and thickness, the angle of the pit-slope, gold price, and topography, to a name a few.

  Ore Body Shape/Dimensions and Strip Ratio:  Flat lying near-surface ore bodies (supergene-enriched and oxide ore zones) have better strip ratios than narrow, steeply dipping ore bodies.  Wider ore bodies have better strip ratios than narrow. 

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   Pit Slope Angle and Strip Ratio:  The pit slope angle is dependent upon the geotechnical properties of the country rocks, with the more competent and least fractured/faulted lithologies sustaining the steepest pit angle.  The steeper the pit slope the lower the strip ratio.

   Metal Price and Strip Ratio:  For any given ore body, metal price exerts a fundamental control on profit margins, which in turn impact the ultimate depth of an open pit and the strip ratio that can be economically sustained.   Assuming well implemented cost control and appropriate mine planning, larger strip ratios can be sustained at higher metal prices, generally allowing for deeper open pits.