Free 7-day Trial
All Articles and Columns »

Drilling Results - How Can You Determine If a Mining Company's Drill Results Are of Low, Medium or High Grade

This article about how you can determine if a mining company's drill results are of low, medium or high grade is a great resource for investors in individual mining stocks. However, I recommend you to read this article too when you are investing in mining stocks through a Stock Based mineral ETF.

Drilling Results - UndervaluedEquity.com

While drilling results of base metals are reported in a percentage per tonne (%), drilling results of precious metals are reported in grams per tonne (g/t).

For an investor it is very important to know if a drill result is low-, medium- or high grade: This gives you the first impression of the possible financial outcomes of the deposit.

After analyzing and interpreting various drill reports to distinguish low grade, medium grade and high grade mineralization from each other, I have summarized my findings in the following table:

Low Grade, Medium Grade and High Grade Mineralization

Mineralization Symbol Low Grade Medium Grade High Grade
Base Metals Cobalt Co less than 1% 1% - 2% over 2%
Copper Cu less than 0.5% 0.5% - 1.5% over 1.5%
Iron Ore Fe less than 25% 25% - 35% over 35%
Lead Pb less than 2.5% 2.5% - 10% over 10%
Molybdenum¹ Mo less than 0.15% 0.15% - 0.5% over 0.5%
Nickel Ni less than 1% 1% - 2% over 2%
Zinc Zn less than 2.5% 2.5% - 10% over 10%
Energy Uranium² U3O8 less than 0.15% 0.15% - 0.40% over 0.40%
Fertilizers Phosphate Rock P2O5 less than 25% 25% - 30% over 30%
Potash K2O less than 20% 20% - 25% over 25%
Precious Metals Gold Au less than 1.5 g/t 1.5 g/t - 5 g/t over 5 g/t
Palladium Pd less than 1.5 g/t 1.5 g/t - 5 g/t over 5 g/t
Platinum Pt less than 1 g/t 1 g/t - 2.5 g/t over 2.5 g/t
Silver Ag less than 10 g/t 10 g/t - 50 g/t over 50 g/t

Of course it is not only the grade that counts since there are a lot of profitable mining operations around the world which are developing low to medium grade ore. Therefore it is better to use gram-meters instead of only looking at the grade when comparing the drill results of different companies. An example:

  • Company ABC reports drill results: 1 meter, containing 250 g/t Gold = 250 gram-meters
  • Company XYZ reports drill results: 50 meters, containing 5 g/t Gold = 250 gram-meters

As you can see, both companies report the same amount of gram-meters. In order to determine which project would be the better investment you need to know about the mining costs, the break-even analysis and the metal value, after which you can compare both projects with each other and draw your own conclusions. To learn more about the mining costs, the break-even analysis and the metal value, I recommend you to read these pages too, which you can by clicking the links provided.

¹ Depending on the deposit, some companies do not report in pure molybdenum (Mo), but in molybdenum sulphide (MoS2). To determine MoS2 to be high, medium or low grade you should first convert it back to Mo by dividing it by 1.6681.
² Uranium grade is often reported in parts per million (ppm). To convert ppm back to a percentage (%) you have to divide it by 10,000.

About the author:

UndervaluedEquity.com
Jeroen Snoeks is the founder of UndervaluedEquity.com, a website for investors passionate about investing in undervalued stocks. Through www.undervaluedequity.com, he shares his experience and knowledge and will soon reveal his personal stock portfolio.

Visit UndervaluedEquity.com's Website


Rating: 3.7/5 (3 votes)

Comments

LwC
LwC - 2 months ago

Before anyone assumes that they can evaluate a mining stock if they have no experience in the industry, I suggest that they read up on Bre-X Minerals Ltd.

http://en.wikipedia.org/wiki/Bre-X

gurufocus
Gurufocus premium member - 2 months ago

Thanks!

UndervaluedEquity.com
UndervaluedEquity.com - 2 months ago

Thanks for your comments!

Knowledge is everything, but as we also learned how to walk and talk I believe we can also learn how to invest.

In addition to LwC's link regarding Bre-X you can read more about how Bre-X changed the international reporting standards via this link: http://www.undervaluedequity.com/Mining-Industry-Standards-How-Bre-X-Changed-the-International-Reporting-Standards-for-Mineral-Resources.html

Please leave your comment:


Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK
Hide