How to Read an MRE and Avoid Costly Mistakes by Neil Ringdahl
Summary
Mining Economics: Neil Ringdahl discusses the importance of understanding mining economics, specifically how to recognize a good ore body in a Mineral Resource Estimate (MRE) or Preliminary Economic Assessment (PEA) to avoid investing in projects that are unlikely to become operational mines.
Resource Reporting Standards: The podcast highlights the role of standardized reports like JORC or NI 43-101 in providing a framework for comparing different mining projects, though each project has unique challenges and opportunities.
Feasibility of MREs: While MREs are designed to report economically viable resources, only a small percentage of these estimates result in actual mines due to various factors such as permitting, feasibility, and external influences like political or social issues.
Investment Timing: The discussion touches on the strategic timing of issuing an MRE, which should ideally be based on sufficient drilling data and independent verification, rather than solely on market cycles or promotional opportunities.
Project Evaluation: Investors are advised to look at factors such as grade, tonnage, and potential risks like water availability when evaluating mining projects, using tools like desktop studies and scenario analysis to assess potential economic value.
Metallurgy and Recovery: Understanding the metallurgy of a deposit is crucial, as it affects the recoverability of metals and the economic viability of a project, with potential red flags including refractory ores and complex mineralization.
Manipulation Tactics: The podcast warns of potential manipulation in drill results and resource estimates, such as optimistic cutoff grades and misleading presentation of data, emphasizing the importance of independent verification and thorough due diligence.
Risk Management: Ringdahl stresses the importance of applying economic analysis to minimize investment risks, especially in high-risk junior exploration companies, by focusing on the economic potential and realistic assessments of mining projects.
Transcript
Today on resource talks, a mining engineer seems to have gotten bored with the summer doldrums. Because of all people in the world, he's chosen to talk to me for the next hour or so. And he's talking to me about mining economics and uh specifically what makes a good or body. more specifically how to recognize a good OR body in an MRE or a PE or even before all of that uh and be able to position yourself into the decent projects that will actually eventually come out of the ground instead of keep on giving money to people who know that they're sitting on stuff that are never coming out of the ground. But of course, we're not going to tell you about that. Uh just briefly for people watching or listening, if you want a summary of this conversation and all the other interviews that we do on resource talks, go to resourcealks.com. There's a free newsletter. It goes out once a week with a bullet point summary of all the conversations from the week before. The mining engineer I'm talking about is Neil Ringdal. Uh your next door mining engineer if you will follow him on Twitter and watch my previous conversation with him from about 6 months ago. But the gist of it is that he's um he's a friendly South mining a South African self mining self mining engineer. You might want to coin that uh coin that there Neil. But he's a friendly South African mining engineer. decades of experience in building and running mines, fourth generation of um miners and uh his daughter is a mining engineer as well. So I guess that gives him a lot of credentials and I I am not doing too much justice with that intro there, Neil, but it's probably time for me to shut up already and let you do the talking. So thank you for being here today. >> No worries. Good to see you again. >> Pleasure is mine. uh because we're dissecting one of your Twitter threads again essentially and this one is about resource modeling and um I I think it makes sense maybe to talk about why companies even put out a resource in the first place. What does that really tell investors like does it add any material value than just simply reading the assay tables uh or yeah why do they even do that? >> Well, of course it's worth it. I mean the whole idea of a ME is to define something you know what the economic value is of whatever asset is that's being reported on. >> Mhm. Um so yeah of course it's important and then I guess the ME you know with a standard either J or 43101 um type type report is a standardized report where you know where the authorities have tried to put put you know enough rules rules together to to you know to basically um standardize the reporting as much as possible so that you compare resource A with resource B. Okay? Or you know opportunity A versus opportunity B which is kind of difficult because individually each one's unique and they have their each one has their own problems and its own their own you know their own upsides and so on. So it's very difficult to quantify it but I guess the only way to do it is to declare a resource and and the resource really is you know how much metal is in their ground that's economic that's economically extractable and uh that helps most investors who don't really have a clue about mining understand what the potential economics could be. So I think it is very valuable. Yeah. what the potential economics could be is actually an important sentence especially said that way because I think a lot of retail investors see an MRE as a oh this is going to be this is what this mine is going to be worth but it's very far from that right and I suppose in your experience what percentage of the MREs that you encounter are realistically economically minable >> well by definition they most of them are because if they're not they can't be reported as an MRE Um but but uh how many MREs get turned into mines? Um that's a good question. I guess it's the same as how many you know exploration companies become mining companies. Uh very few. But as resource become resources become more and more scarce um you know lower grade resources that were previously uneconomic become economic with time. So, so I guess it's probably fair to say that a lot of them will eventually become a mine. But whether they become a mine in our lifetime is another story. Okay. And to say how many, I don't know, but it's probably very few because of the timeline taken to build a to build a mine. You know, you've got to permit it. You've got to do more drilling. You got to turn the MRE into a reserve, a mineral reserve rather than a mineral resource estimate. um which is which is a lot more constraints and put a feasibility together and then even then your feasibility economics may not be that good and project gets shelved or for other external reasons you know social reasons political reasons um or other reasons you know maybe company's not well managed or there's some drama that happens at a corporate level um or a strategy change you know these mines just won't get built or these resources won't get bull and so am I. >> Well, I I think to to your point that by definition it is is realistically feasible. I think a lot of the things get turned and twisted and and smeared and so on and so forth that we can talk about and I do want to talk about how companies actually achieve that because I think most of them are actually not realistic uh that I see. But when do you think is the right time for companies to do issue an M in the first place? uh and in your opinion specifically because I know there's a lot of disagreement about that out there like do do they need to have a you know have done a certain amount of drilling or or conversion or met work or something else or is it mostly market and cycles dependent? >> Um no I think it's definitely more about how much drilling you've done. Um also I think it's worth pointing out that these estimates norm they have to be done by independent party unless you're an operating issuer that's got you know well established track record and large you have to go external and you have to have independent you know uh qualified person or persons or company actually produced a report and they have a reputation themselves to protect um so that protects the investor and that's the whole idea care about, you know, the the the guidelines and the regulations for putting together one of these for public companies. Um, that that protects a lot of people. So, coming back to your question, at what point? Well, if you have one drill hole or two or three drill holes, it's obviously not enough information for you to put together a resource, even if you have grading sections. Uh, you need to you need to have enough there to at least define something of economic value. >> Mh. Um, a lot that a lot of that depends on the shape, the size, the type of mineral deposit. Um, so it is very subjective, very hard to kind of generalize, you know, an answer for you on that one. But I would say if I was a junior explore co out there, green fields, um, you know, you go out there and you you scratch around and you you have your geologist find something that's interesting and you do some surface sampling and you put those results out. Then maybe you scratch together enough money to start a drilling program. And if you can define something that can uh you know have a decent life of mine either something because a lot mine takes a lot of effort and capital to build you need to be able to repay that capital. Normally you need to have something 5 years or 6 years at least uh in operation. And then it's a scale of things. You know, it comes back down to what you know, what is the value of the rock you're you're looking at. And if the value is high, so let's say I find a gold deposit and it's amazingly running at 30 g a ton or an ounce per ton, it can be a very narrow vein. I could start a mine at 100 tons a day and make $20 million profit a year quite easily, okay, at that rate. And that doesn't require very much. So, you know, I just need to define how well if if I'm going to build a mine that's 100 tons a day, that's super valuable. It's going to cost me a few million dollars, maybe 10 maybe $10 million to build a plant, a little gold plant. Let's assume it's a basic, you know, fairly small plant, maybe even less if it's gravity gold, uh, and there's no, you know, there's not a lot, you know, if it's mostly gravity gold and there's not a lot of a lot of processing required or metaly to it, could be very cheap and you could build a mine, uh, you know, in inside 2 years, inside even a year at 100 tons a day is pretty easy to get to. Uh, low expectations. So, I may only need, you know, I might only have a mine life of 3 years and I could get away with making $40 million over 3 years. Hell, it' be worth it, right? >> Um, so, so, you know, but whether that will suit a, you know, large, you know, most of these junior companies want, you know, want to generate large large amounts of capital, relatively speaking, they're not looking at small small scale mines. you're generally looking at something a little bit more volume obviously a lot lower grade >> and that's also something if the grade's lower you have to move more tons which means you have to have more volume so you need to drill more to define that volume and so it's a balance of getting all those right to decide when or what point do you need to go and you know when when does this thing become economic have a couple of good hits and decide let's drill some more all right do we have enough here if we tabulate this let's say it's a you know elongated deposit and we know it's approximately this wide and we have so many meters long so many meters of depth define how many tons is that and if we process it at say 1,000 tons a day do we have enough to you know do to to mill for 5 years or more or even 3 years then maybe it's worth putting in M and then you can raise more money on the back of that because it's at least it's a piece of paper you can hold in the air and wave around potential investors and say this is this is what we've got and it's got you know it's open at depth and it's open on strike and we can we can we'd like to raise more money to further define this and and generate something that will be really exciting. >> Yes, that's what people will do. Yeah, >> I I think you have it wrong because you're almost approaching it as a real business which obviously this is not what we're doing here. You're supposed to do it when it will have the most impact on your share price so that you can raise more money and keep the lights on for another year and do some marketing, right? Yeah, I mean I'm I'm a it's I'm speaking from a mining engineering perspective, not necessarily a promoter perspective or or an issuers perspective. Okay. Yeah. >> If we got a public company and I have a I I go and stake a property, I'm going to have to be promotional about it and then anything that I find on that property, well, let's promote it. You everyone's talking about lithium a couple years ago. Suddenly all these companies changed their names to lithium companies, you know. >> Yep. >> They changed from zinc to lithium and then now it's over to gold. Gold's a new thing, you know. Lithium's off. Nickel's off. But, you know, 10 years ago, everyone was talking nickel. You have a nickel project. Very exciting. Very exciting. Right. >> So, so yeah, I I see where you're coming from. probably looking at a lot of small companies looking at uh uh trying to produce a you know attract investors. It's better if they have a a mineral resource estimate because it's something you can you can read and dissect and make your own mind up. you know, tons times grade times recovery times price less your costs and your selling costs uh gives you some kind of economic value and you can get some kind of idea what the scale might be help you make a it will help me make a decision as a mining engineer whether I'm interested in it or not. >> Mhm. I you know I I wouldn't really be interested in a project unless unless I could do that number in my head based on the draw results and I believe that there's a lot of potential and they don't yet have a minimal resource estimate. That's how I look at it. I look at it from the economics because at the end of the day, smart investors always look at it from an economics point of view and whether it's bu potentially building a mine, they're not, you know, those people who invest into explore coast in the hope that they're going to hit a, you know, a blue sky magnificent uh result. I think it's you might be better off going to a casino unless you're a geologist yourself and understand the geology. >> Yeah. And and I'm saying with all all respect to all the speculators out there, but it is a high-risisk business, Ryan. And and so you invest in a junior company. If a junior explore car, I'd be looking at the geologist doing the exploration program. I'd want to talk to them probably over the CEO and see what they say >> if I could get to that person. You know, >> I was mostly I was mostly trying to be funny there. uh when I said when I said that that's how you should look at it and and that's exactly the reason we want to talk to you about this because you're approaching it from again those decades of actually having operated these things and that's what we're eventually after. Uh so so it's good that you're covering it that way. What happens when that M is out though? What am I looking at? What's the first thing that I should be looking at when a company announces an MRE? I open it up. Am I looking at grade tonnage? What am I looking at? Yeah, I mean a multitude of things because it's the first step towards d-risking an asset. Okay, so these reports have standard standard things. First of all, they talk about where it is, the infrastructure, the climate, and then it gets into the nitty-gritty, the drilling, the so the deposit type, and uh you know, the drilling, the quality controls and all the rest of it. Um, so all of those chapters are important and I would if I look at a company with one, the first thing I obviously would look is tons and grades and generally I get turned off anything that's not that high grade right away because um, unless, you know, unless it's very substantial because I just know building a a lowgrade mine takes a lot more work and a lot more capital and while we've you know people mocked me previously you know when the famous you know Vikunia project in in Chile when the first numbers came out I was a little bit suspicious their numbers seem too too good to be true you know 1,000 mters at what is it.3% copper equivalent or whatever they have uh you it's it sounds crazy and I was suspicious when I see some numbers like that um but that's an exception Right. Um, and now, you know, it's a it's obviously going to be built uh as a massive, you know, copper mine, but but initially I I I missed it because I was naturally suspicious because it was low grade and I know building copper mines on the border. Well, back then, uh, building a border, you know, a mine on the border with Argentina and Chile was difficult to do. You know, big companies have failed doing that. Mhm. >> So, so that to me is that turns me off. I I look for something that easy to build. A good case would be Rio2. Uh I'm a shareholder by the way for but but Rio2 and I'm not promoting it uh per se other than you know I'm not I just think they were relatively easy mind to build. It's a relatively easy process me and it's a fairly low grade grade mine but it was a simple business case and I took the numbers what's the tons what's the grade times the metal price times the recovery that's my revenue less my potential costs and then you look at the things like the risks like well what about the water it's a mine in the desert at altitude okay >> and if I'm comfortable with those risks then I'll make a decision to maybe buy it or not okay and you get that information from a MRE. >> You won't necessarily get all that information with drill results. >> So, so, so that's the benefit of one. >> How did you make that decision specifically for Rio by the way, just for a second here, because uh you're mentioning the water risk there and uh I've interviewed Alex before and um we've talked about it before, but they they're going to be trucking water, right, which is is one of the things that people pointed out as a risk. How did you know not to get I suppose it comes down to experience but how how how would I know not to get you know scared off for example from you know trucking water up a mountain. Well, the things I would look as an operator and what I did look at was well, how many trucks of water will they need first of all, okay? And I can't remember the number was some years ago I did the calc, but it wasn't a ridiculous number. You didn't have to have like, you know, 500 truckloads a day or something crazy. Okay? Cuz that's the first thing. It's got to make sense. And you got to think about it from a social point of view because everybody along the road is going to be affected by trucks going past, right? So if there's a lot of trucks going past that would be a red flag for me. So that was the first thing. The second thing is well what is the cost of trucking water? There's no difference really in trucking rock and water. It's the only difference is uh the the you know solid you know solid or liquid and there's a bit more abrasion in the rock and you got dust problems. But water is heavy. It's heavy like rock. So, it's going to cost you a fair amount. And a rule of thumb number that I use is about 15 cents. Maybe should be a little bit higher these days, but 15 cents per ton per kilometer. Okay. So, I literally calculated how much water they mentioned they needed how much water they need per day. Okay. They need to get X number of trucks. I think it was 15 trucks. 20 was it 20? Something like that. and um per day of water and a truck does you know 20 tons and so you know how many you multiply that by the distance you know truck and can the same fleet is it the same trucks going back and forth or is it a larger fleet uh work out the cost and yep it's possible it was possible so that ticked off that one for me >> so >> um it was there were reasonable assumptions Okay. And and the answers made sense. So, you know, obviously there's a phase two in the project and all that, but I always want to look at the first phase of the project. Does the first page phase work. No point in investing in something if phase one doesn't make it doesn't make doesn't cover its costs. Okay? Then you know something's been hidden, you know, in that. I haven't seen a case like that, but it's got to make sense. And another thing that's often you'll see where the ME comes out often um a a company stock won't move. And I've been in that situation, you know, having, you know, being an issuer, working for an issuer. We put out a we put out a what we think is a pretty good PEA, okay, pre economic assessment or a feasibility study. Nothing moves. The needle doesn't move. And he's like, what's going on? And that's because people are not accepting. They either don't know enough about the project or they do and they don't believe you can execute for whatever reason. Okay. So I think a lot depend you know if you see a a a feas a feasibility or a a pa or M come out and it's the n and the stock jumps then you you very quickly get an idea if and you know this is obviously a good this is obviously a very good number a very good result uh it's a good project and it's likely to be built you know if it doesn't move there's still some risk there either it's financing risk or there's some social risk or there's some methological risk or there's something that somebody's picked up on or someone knows. And there's a lot of very smart people in the business who who follow these things in a lot more detail than I do. You know, I'm busy with my own mining operations and stuff. I don't get to look at stocks as nearly as much detail as as you do, for example, Antonio. Okay. >> Um and so I don't have the time for that. So So I have to rely on, you know, like many other investors who don't have the skills I've got, you've got to rely on on other people, too. And so yeah, it's not just the mineral resource estimate itself. It's also how does the stock react? What is the sentiment? Um and and I'm always thinking from an operator point of view as well. So you know that you know it might not be a great resource estimate, but there could be a lot of a lot of upside in the thing. Um and you know the company may be wanting to just demonstrate that they have something at least and that they can grow it. That's that's not necessarily going to move the share price, but at least that's something that investor can take courage with if if you want to take a risk and and invest into a company so that they can fund more drilling or whatever it is to increase, you know, hit the big hit the big one. >> If it if it's not going to double my position overnight, I don't want to hear it. Uh that's also the approach. But you know, you bring up a good point there, Neil, on on grade because you kind of brushed over it actually, oh, I wanted I want, you know, I want it to be a grade that works. I find that companies are being too optimistic with cut off grades often times because that's not something that a lot of us check. It's not something a lot of us understand in the first place. How do you how do you deal with that? How do you look at a cut off grade and be like, "No, this isn't, you know, from from a perspective of a non-technical person like myself, >> right?" So the cutoff grade is a minimum grade at which you can mine a ton of rock without losing any money. Okay. Um that's the def definition of a cut off grade. So when you calculate that you don't include you look at operating costs any cost or sustaining and sustaining capital costs any cost that would stop if mining stops. theoretically. Okay. So, when you do a resource estimate, generally you're a little bit more relaxed on the cutoff grade because you want to include mineral that potentially will be economic at a future date. Okay. Um, I guess it's a leeway to be a little bit more uh optimistic and you know, every company wants to put portray their resource or their asset in the best possible light. So, they're obviously going to want to choose a cut of grade as low as possible. And you have the consultants pushing back saying, "No, well, it's not a realistic for you to assume a 20 cent per ton mining cost for an open pit mine. Uh, in this hard rock environment, for example, we won't accept such a low cost." So, there is some balance, but it'll still be lower than what likely will be the final cost when you do a feasibility study. Um, and I think that's fair because at the end of the day, you want to make sure all blocks that potentially have marginal economic value are included as well because that can bring down your overall uh say bring down your overall cost, but it can it can change the dynamics of the project a little bit. Okay. Um, it's kind of hard to explain. Uh, I guess not that hard to explain. It's just you got to think about why why people use slightly low high cut off grades in in defining resources. You want to include all blocks that could potentially be mined. So if you end up with a cloud of blocks in one particular area, your mining block potential mining blocks and they cut off grade that fall below the cut off grade you exclude that cloud completely. But if you if there's a large cloud that are that are on the on that limit, maybe you can maybe with time you can do some more engineering to bring that cloud of blocks uh into into reserve by changing the mining method or maybe looking at the processing method. Maybe you know many companies start a mine like a uh uh with a with leech tanks and then they they they might say oh well we've got this low grapile here. What are we going to do with it? Why don't we heat leach it? Okay, so that low grade stockpile was built because it was below the cut off grade or that higher grade material that they could put in the plant instead. And so that material becomes an asset after a while. All right. Another good case um you know you have big mines there's one in South Africa big copper mine called Palabora uh many many years ago they started as an open pit mine and they they built a huge stockpile of magnetite I think it was magnetite anyway it was something like that uh that had no real value u but they built it uh in moving the waste out of the way and now there's another business or there was uh this is I'm talking decades ago but another business was built treating that magnetite and process and selling that reselling that magnetite it wasn't an asset until it became an asset until there was a heap of it stuff there all right and then you look at it oh wow suddenly this is economically viable so for that taking that that kind of way of thinking I think having not not you got to have something fairly realistic not off the charts optimistic but what would reasonably expect it to be the mining cost and processing cost for something and what would your reasonable expectation of recovery be? Um, and if the grade times the price covers that cost, then it should be included as part of the resource and let the mining engineers decide whether they can actually extract ext extract that that material at a profit. uh because most likely that stuff that's marginal in the resource falls out in the reserve when you put when you calculate into the reserve with much more strict much more better defined costs and much better defined recoveries and dilution factors and recovery factors and and you know selling costs all that stuff is defined a lot better when you go into a reserve from a resource and so keep that in there because if you exclude it it may mean the mind doesn't actually get built until someone has another look at it again in the future and does a new MRE. Um that's that's possibly why people are a little bit more lax on on these cut kind of grays. Is there a range uh where you want to see that ratio of inferred versus indicated and and measured for example where you're like I want >> because inferred is not you can't actually include any inferred any numbers really in a in a preliminary economic assessment you're allowed up to 30% I don't know if the rules have changed but the last time I did one you're allowed up to 30% in third resource in a num in the numbers in your planning numbers. Okay. But a preliminary economic assessment especially for a green fields operation is is a bit dubious. You need to go to feasibility of prefeasibility and there definitely you're not allowed to include inferred material in the economics. Okay. So why you want to have indicated category resources and measured category resources because there's a lot more confidence in the numbers you know and it all comes down to interpretation. You drill two holes and you you get a you get you get two intersects that are the same much you know roughly the same thickness and you're looking at let's say a tabular or body. Um if those holes are close together and you know the all body is flat and tabular you have higher confidence right and you can do some stats geio statistics and the geio statisticians will tell you okay they're close enough to have a high degree of confidence so we can make it a measured category or indicated category but as they get further and further apart becomes inferred. That's literally because we don't know if there's a bulge or if it shrinks between the two drill holes, right? And the same, you know, in terms of the shape of the or body. So your volume disappears and your grade becomes more, you know, your likelihood of hitting a similar grade in the hole in between these two. We don't know because grades and tons are spatial uh you know there spatial dimension. It's a spatial thing and the grade is a you know a function of the distance from what was sampled. That's how geostics works. It assumes everything is cons you know uniform isotropic and uh continuous and in the real world things are not isotropic and continuous. But we have to make some assumptions and you know it comes down to the detail. If you drill a hole, uh, if you were able to drill the same hole the second time, would you get the same result? If you, if it was possible, would you know, will your is your essay repeatable? Will you get the exactly the same result? And the assumption is yes. when it comes to geostatistics and then the argument is well if I drill a hole that overlaps another hole like that okay um I should get very close relationship between the two results right because there's overlapping portion if they drill next to each other there will be the results will be very similar we imagine that's the assumption made when you do the statistics >> but as you move further and further apart your two drill holes they have less of impact on on each other, right? You have less less confidence that the grades will be the same and at some point becomes too too far apart where there's no influence. And so that's how inferred that's how you should look at resources. When you see measured, you know, hand on heart this is it's there. If it's indicated, it's probably there. And if it's inferred, well, it's inferred. It's inferred that it's there. It's not necessarily economic. And you see that in the fine print at the bottom. But that's really what it means. It means there's a lower confidence. It's material that we have a low confidence is there. But it can be improved and inferred material can be moved into in me measured indicated categories simply by putting in a few more drill holes >> and that can be converted. So often we look at converting mining operations convert a lot of inferred into measured and measured and uh indicated category and that obviously improves the robustness of the project when you do that. So, as the project develops, sorry, I know you want to say something, but as a project develops, you go from early exploration where you've got too few drill holes, too scattered to to find something, and as you put more drill holes in, you start to define the shape of this thing. And you start to realize, okay, there's mineralized economic horizons that you can mine, can potentially be mined, and you can start to infer what's between them, right? Um and then as you as you f as you further fill it in, you get more and more information and you can put together at some point you decide all right I put together mineral resource estimate and then normally as the project progresses drilling continues and infill drilling continues to happen to firm up on those numbers. So I like to use inferred when I do my desktop studies. I generally include inferred numbers to see what potentially a project could look like. >> Mhm. >> Okay. But I always remember it's not necessarily going to be like that. So you hope for for me it's to calculate what I hope the project could be and then I plan on what it will be based on measures that indicated. >> Yeah. >> Okay. Yeah. I like how you made a a mining engineer joke there with with inferred and then you laughed at it yourself. That's that was a wholesome moment right there. I think that's that's that's like at least half the reason why I have you on here and I will have you on again. What do you uh metallergy is something that we should talk about as well because it sort of inferred indicated to tell you what what how much could you pull it out of the ground. Metallergy tells you how much of what you've pulled out of the ground can you actually sell in concentrate or dory or whatever it might be. Um yeah, guidelines for metallergy. Is there like a cut off where you look at oh if it's below 80% I'm not looking at it or anything like that? >> No no no I don't look at anything like that. I look at the number as a as a factor multiply the the grade by to reduce the the recovered grade. Okay. So I can work out a lower price. But what I do look at is the mineralization. Oh, and this part can be sometimes a bit tedious to read in a report. You look at the mineralization and you look at the the deposit type and if you know your stuff you it can tell you a lot uh about what to expect. All right. Certain projects certain uh deposits have issues you know with uh recovery. Uh there's arsenics to consider in some copper projects. In in VMS projects, you have problems. In some some projects, you can't recover the uh the metals that easily unless you grind very very fine. These things come with experience and uh if you do a lot of reading, you'll learn about it. Okay? There's some really good resources out there like 911 Metalist is a good place to start. Okay? Um, and so if you go into it, there's a lot of work done on this stuff. And so if you're prepared to do the reading, you can become quite knowledgeable about this and and it'll help you make your decisions because often what will happen, someone will look at it, you'll be given a recovery, but that is an estimate. And so I read the minology, I read the deposit type, and then I look at the metalical test work, and I look at the recommendations in the test work section. Okay. Quite often there will be there will be a get out of jail clause in there put by the competent person. Okay. To say we recommend that the further further work is done to recover the tin from this deposit or we recommend that looking at recovering three concentrates is viable because you know sometimes you get a poly metallic where there's you know there's copper, zinc, lead and tin. I was looking at one fairly recently and they want to produce concentrates and everything. Okay. And so they take, you know, tons time great time recovery for each one. But the problem is some of those metals float out in the other concentrates and you don't get payabilities in those concentrates. All right? So you're being over. So that's where metaly becomes important. Like can I actually produce a salailable concentrate? It's no good if I produce a a copper concentrate that's only running 8%. I can't sell a 8% copper concentrate very easily. Maybe I could in this market, but it's a bad example. Probably zinc. Zinc below below 40%. A zinc concentrate below 40% is not salailable. Okay. Very unlikely unless you can blend it with something else and then you'll be taken to the cleaners by whoever does that blending. So um I think you've got to be careful about that and you got to read that part of it. So what type of concentrates being produced? If it's a flotation concentrate or if it's a doray or a cyanide process in a go in a precious metal situation, are there any, you know, are there any things that will give you red flag in terms of refractory? And you'll hear the word refractory or which just means it's harder to recover something out of it. An or can be refractory because it has it is in a sulfide form. So you have to break that sulfur bond which means you have to roast the or first before you can leech it with cyanide. So maybe we better just to produce a concentrate and give it to someone else to do. Um you know rather than building a roster on site which is not done very often at all these days. Um or maybe look at bio oxidation or biolleaching or maybe pressure oxidation. And these methods of processing, people talk about it, but they're hard to do. You know, operating a bish plant is not easy. Uh there's all kinds of all kinds of snags and issues you've got to get around in operating one of those. Um and so when they mention it, I'm always a little bit nervous if it comes up, right? It can work, but it's a risk to be considered. >> Yeah. Um, and then you know looking at refractory ore, if they say the ore is refractory and they can get a 90% recovery, then they're doing miracles because a refractory or probably only has 50 to 80% recovery depending on what what is wrong with it. It could be just something simple like there's a lot of carbon uh near the near the gold uh you know carbon uh in in the rock or surrounding the gold vein. I've seen it in West Africa where we had a graffitic filite next to the or body in the hanging wall of the or body and no matter how hard we tried to mine it, we always got graphitic fill mixed with the ore cuz it was a soft shelly stuff. It made a lot of issues for us and the graphite or the carbon uh is a naturally it's uh it's it's you know it absorbs the gold and in your carbon and leech process if you're using carbon and leech or carbon and pop cyanide process to using carbon to recover your gold through cyanide you lose that because it's too fine. It goes straight through tailings and so you don't get the recovery. And so you got to know these things. Um, and so I'd recommend to your listeners to read up about it. Read what they say in the and then read up about that type of deposit and the problems encountered if you can >> and uh otherwise ask people, you know, online and Twitter. Mining Twitter is pretty good actually. There's some pretty smart people out there. They'll tell you if something's good or not pretty quickly if they know it. There's I'm trying to find out right now, but Lobo Tigree has a cheat sheet, I believe, for metallurgy uh that I remember reading a while back where he goes over the uh different recovery methods and whatnot. Uh he's independentspeculator.com. Not paid to say this or whatever, but I just remember that was a good resource that he had there. So, if you go into the website, there's um magnifying glass that you can use to look for stuff. So, probably there that you can find. I cannot find them right now to give the exact title, but it's on there. And I know that's uh independent speculator.com that's log website he's got some good um he definitely has a couple of uh good articles on there about previsibility and stuff like that talking about metallergy recoveries and stuff like that very important as well >> Neil what are the uh what are the most widely known kind of manipulation tactics when companies put out a resource what do they what do they use like I don't know optical illusions maybe I mean when I open up a news release even if it's only drill results actually even if it's not an MR I'm generally drawn to the images. I want to go and look at the images, the cross-sections, the long sections and whatnot. And there's stuff like smoothing, wide surges, uh, no capping, and so on and so forth. Just optical tricks essentially that companies use. What's the worst one that you see out there? >> Not so much in mineral in mineral resource estimates because as again it's the independent guys doing putting them together and they are doing it independently, right? Um, so look at who's putting together the resource. If they're reputable firm and have done good good work for other companies, that's always a plus. I actually look at who writes the reports um, as well. But to get back to your question, I think press releases are much more easily manipulated, especially drill hole results. People neglect to mention, well, they have to mention true width or drilled width. For one, that's the one that everyone forgets about. You know, you've got to you've got to correct when you go through a a tablet of deposit at an angle, you've got to correct for the true width. So, people tend to say, you know, I drilled 90 m at 15 g per ton gold, but if you drill it down the length of a table or body, it seems very thick, but it's actually not. It's only 1 m wide or, you know, that would be like the worst case. And I've seen that, you know, uh what I also really don't enjoy is the way press releases for drill results are put out. They always talk about an intersection and then they include the high-grade part of the intersection in there in three lines. So they have including they have from 9 to 20 m including 9 to 10 you know 9 to 20 m is running at at let's say 5 g a ton but from 9 to 10 m it's running at uh 15 g a ton. Okay. And so if you take if you work out what the rest is worth the the 10 to 20 m it's worth virtually nothing versus the that one meter. All right. And I think that's where people get caught. They get caught on these supposedly big intersections, but they're not. >> Time and time again, I've seen that. Okay. Uh so I think that's the biggest one you got to be careful of. Um I I prefer to see companies that put out the full tables uh in the end of their press release. Makes for a very long press release and a lot of reading. But uh in that regard, I'll say the way the Australians do is pretty good because uh they have to put out the col I think they have to put out the collar positions and the downhole distances and everything in there and the inclination and the and the depth. So you can take that data and you can put it into Excel and create a database and then if you have if you have some software uh you can actually load up draws and actually get to turn it around in 3D and see what actually going on. Uh there's a couple of people on Twitter who do that. Uh I do that if I get the chance if I'm interested in a project. Um so so yeah that's uh that's one that's one I think that people like to manipulate. Also people like to use channel sampling results or or grab sample results. I mean a grab sample is a spot sample. It doesn't represent very much at all. I could take a another grab right next to it and it could be nothing in it. >> Yeah. >> So it's nice that you have a good result in a grab sample, but it's a meaningless number. All right. um let's see what the thing comes out if we drill it or if we actually go and put a tunnel into it. What's the average grade of that? It's not going to be anything close to what the grab sample is. >> Yeah. >> And then you got to think of the nuggety effect of the a lot of these deposits, especially precious metals. Um you can get drill holes. I once saw a drill hole that was one and a half kilos of gold per ton. Okay. Over over one and a half meters. The grade was so high they stole the call. Someone stole the call. It was in Zimbabwe. Okay. So, we couldn't actually confirm that grade. Um, but can I use that grade to now assume that there's a massive thing? No, you have to drill another hole because you can actually hit a nugget and that'll spike your grade tremendously. So when I see very high-grade deposits, I get nervous. Unless there's a lot of high grades everywhere, if it's just a few like three or four out of 20 out of 20 samples, say results, I will tend to cap those down to something that I think will be perhaps, you know, perhaps a little bit more meaningful. Uh because to assume the high grade uh uh unless there's like all your hits are really high grade then you got to look at the sampling is the sampling you know QAQC group good you know we all remember what happened at BX or maybe we don't I don't know 1997 okay BX they salted the samples and that stuff still happens okay but it doesn't happen as ubiquously as it used to and that's why they have these reporting standards Now, when you put out results, you have to show that you've done quality control and quality assurance. >> What do you mean that still happens? Where do you I've like I I would have absolutely assumed it does not happen anymore. Like I'm not even kidding. >> Yeah. Well, I guess some of the some of the individuals I speak to might not be the same that put out issue reports for public companies, but I've seen that. Okay. where people people will tell you they'll tell you crazy stuff >> and the less drilling there is on something especially if it's a public company that's why you got to be care on the one hand you got to be very careful of historical numbers in that regard but on the other hand you've got to if you got a company that doesn't have much drilling and that all they talk about is grab samples you might as well be I could be you know I scratched my ring as I took the sample oh wow the grade's a lot higher you know there's no cure accuracy in a grab sample. Okay? Because by the nature of the fact it's a grab sample. So I I'm not very impressed by grabb samples at all. Um drill hole results they have to and they're published under a public issuer. They have to they have to talk about the QAQC as well. >> Mhm. And that's that's to you know but it's road language and I'm sure people have written stuff that they you know not true. So take it, you know, and that's where it helps. If you have more information, there's less likely for it to be uh misreported. You know, you can you can have a competent person as a junior company who works for the company writing the disclaimer at the bottom of the KC was done when you put out draw results, but when you do the ME, it's independent. Those people are obliged to go and check, are the samples really been taken correctly? are is anyone adding any gold to the to the to the sample before it goes and that's why we do QAQC. Okay. And so when it gets to M now I've got a little bit now a little bit more assure assuredness that there's at least something that's that's probably there. >> Yeah. >> Okay. Does that make sense? I don't know if I'm >> it. Well, it I think it does, but I think it's something that goes like you seem to be, you know, put in a big importance on on QA QC whereas like most retail investors and and now I'm talking just for myself really. >> That's something that you'd quickly go and ignore, right? It's just something at the bottom of news release and it's just there and you do really read it. I >> reading it doesn't help, right? >> Yeah. >> Uh you can put whatever you like in there, but that's why I say bear that in mind. Okay, unless it's an independent person signing off in that press release, it could be skewed. But we know with further down the road, I you no one's going to I don't think anyone's going to buy well, I certainly wouldn't buy a company that's got one really star drill stellar drill hole unless they've got a little bit more information. Okay. And so do more drilling and if they're all stellar drill holes, you're going to be found to be a fraud if it's liing. Right. >> Yeah. very quickly. Um, so a lot of that's been removed, but there's still people who promote promote like crazy and and that's where the grab samples. When I see grab samples, I glaze over right over >> drill hole results a little bit better. But if there's only a couple drill hole results, same thing. All right. Wait until they've got a decent, you know, 15 drill holes, 25 drill holes, 100 drill holes, 300 drill, 1,000 drill holes. Then you now now you've got something that's representative. Remember that's what comes back to geostats as well or the uh you've drilled one hole in a resource. You you don't know what the grade is. You've got to drill you've got to get something that represents best what is there. And even that's an inexact science. Even then with you know with people have got it wrong. We've seen like the classic Madson mine we were talking about a bit earlier. Um it's been through two changes of management before the current owners have it and they seem to be doing okay so far but it's one that I watch with interest because that was a highly nuggety highly variable or body and there's been many cases like this not just this I'm just using an example where people have made big decisions financial decisions based on assumptions that were wrong because what they drilled was not representative or what they thought they drilled and they modeled was not representative what was actually there. >> That's where the specialist comes in that you know and even with that you can still get it wrong, right? >> So, so that's the ris that's inherent risk that's there. So when you talk to me about what about people spiking numbers and or spiking data sets and stuff like that, that's just another risk on top of it really, right? There's already risk with the thing even if none of that is happening. >> Yeah. >> Yeah. That's I think that a lot of what you're telling me here comes down to kind of having experience with these things and having seen all of these things, you know, >> not go well essentially. >> Um, which makes it harder, you know, for someone like I even have been thinking about and kind of wanted to talk to you about this uh as well is can I be ahead of the herd and kind of do my own resource calcs on the back of an envelope? um you know that old formula grade by volume by density and then you apply a discount factor to it and then go on from there or is that a fool's game how do you see that? >> No, it's not a fool's game but do it with your eyes wide open and acknowledge you know even I acknowledge I don't necessarily know all the answers and sometimes I make mistakes even with my experience looking at things. Okay. Um, so bear that in mind. But I definitely would encourage people to work it out. Um, if you think especially when it comes to an expiration thing, you know, if you can see some kind of structure there that you've seen somewhere before or a similar deposit and you think it's like that, that's good. You can use that as to assume, well, maybe maybe this is what it is. And with these two or three drill holes that have been reported, I've got something really good here. And but what does that really mean? I've got to go and take those four drill hole results. Take the way I take I take drill hole results and I do a mean on those drill hole results. Okay. Over the width that they think that they've reported. And I check that it's a true width. Okay. So those drill holes, this drill hole is 50 m. The clump of drill holes are sort of over maybe let's say 200 m width uh in an area 200 m. So it's 200 m long and I'm averaging let's say a 5 m wide or body. Uh so it's 200 * 5. Now I'm going to project how deep is the deepest hole? How deep is the shallowest hole? Are there surface trenches? Are there grab samples on surface to show that it's yeah continues. Okay that's where grab samples are useful just to see okay there's continuity there. We don't know what the grade is. I won't use that grade but let's use the drilling results mean those drilling results calculate the volume now you need to take a shot of the density most people that's where we can go wrong if it's a but the rule of thumb is if it's a very soft ground choose 1.8 as a density 1.8 8 ton per cubic meter. Most rocks are around about two 2.7 tons per cubic meter. Um, unless there's iron or or or heavy metals in there, you can go with that assumption. So, times by 2.7 times the volume. Now, I've got my tonnage, right? And if on basis, if it's going to be underground method, well, what method is it going to be? What's that cost for that method? And what is the processing cost going to be? If it's a small mine, the processing cost be higher per ton than if it's a large mine. Um, so I know these numbers, but but you can find out this stuff. Okay, it's not that hard. There's lots of mines out there which have uh you know that produce cost results for processings for that type of deposit. So you find that, use that cost, use the mining method that you think can be used for your mining costs. then your administration cost. Don't forget to include corporate overhead expenses and um and uh you know plug that in there and see if the thing makes money >> and if it does great now you can see okay this is the potential this is how big it needs to be for it to be worthwhile for me all right um I think I definitely think it's worth doing and I and I encourage it but and if you're unsure ask somebody there are people out there who who who will answer you if you if you if you're tenacious enough. >> Yeah, >> I I typically run tell me if that's a good idea or not. I typically run three scenarios for me. So, I do that calc and then I do uh you know positive case scenario. So, that'd be about 80%. So, I'd multiply by 08. I do an average. So, I put a a.5 and then I do what if I'm wrong scenario. So, a 0 2. So, let's say I've come up with two million ounces. I do, you know, a 0.2 in two and then it comes out, oh, this is less than a half a million ounces, not really worth it for me in the worst case. That's kind of how I I think about these things and and and essentially try to figure out if that really makes sense, if the valuation on the on the company makes sense. >> I think that's exactly what you should do. And definitely when you calculate the volume and the ounces in the ground, you know, you should definitely discount those ounces because not all of them will be mined. >> Yeah. >> Okay. So, and unless of course you think this thing's huge and could be, you know, it could be really worthwhile. >> Yeah. Yeah. Do is that something you typically do like do do you buy prem yourself? Like if you see a company that's done a lot of drilling u like for your own portfolio? >> No, I generally buy mines that are already in operation because I understand them better and they are I buy them because of the business value. I don't buy them. And and I'm obviously speculating a little bit on mental prices, too, like everybody else. But I guess I'm oldfashioned that way. I actually look for companies that pay dividends if I can. And right now, I'm not holding any that pay big dividends, but I'm holding three, I think, that pay dividends, but I like big dividend payers. And there's not many miners out there that pay dividends or do buybacks. >> Yeah. >> Um, so that's what I prefer to do. Um but I will buy a company if I know if I know a company well that is an exploration stage and uh I know the team >> but for me a lot a lot depends on who's on the ground as well. I I look at who's on the ground what kind of experience they've got and uh you know I always pick up the phone and talk to them first if especially if it's a small operation right uh or a small uh small company. Mhm. Yeah. I I suppose a lot of it comes down to um understanding rocks in that case. And I think what's the thing about mining engineers and geologists kind of all the time going at it a little bit going at it each other. >> Yeah. It's it's just I guess it's just in our blood in our wiring. Um because we both need each other. That's the truth. But but we don't want to admit it. You know, a lot of the questions you've asked me today really should be answered by a geologist. >> Okay? So, I'm giving you a mining engineer's opinion. >> Um, I've done a lot of geology, so I guess I I can uh I can answer those questions, but bear that in mind. Geologist would probably answer things a little bit differently to me. >> Yeah. Yeah, and that's also something to take into account when you ask me about that's one of the reasons why I don't necessarily invest that much in exploration companies because it's not my business. Okay. My business is building and operating minds um not deciphering whether the resources uh what could be okay that's I leave for them and and it's a bit of a casino for me it's a bit of a more of a casino than a mining company is so although although I suppose there's plenty of arguments to be made that mining company is more of a casino than an exploration player but there you go. So, >> no crying in the casino. Uh, that should be the moto for no crying underground as well. I think I poke you away from going underground today, didn't I? >> Yeah, you did. I'm able to go underground, but that's okay. Uh, >> well, do you not have Starlink underground? >> No, we don't have Starlink underground. We do have networks, but not Starling. >> We should uh we should do uh an interview once when you're underground. Uh maybe take you on on a virtual tour. Show me what's going on there. Um, >> I'll I'll let you do your thing now though. You told me about an hour and it it's been almost an hour now. So, thank you so much for doing this. What am I forgetting to ask you though? What else is important to talk about here that you think I failed to bring up? >> Uh, haven't given it much thought to be honest. I think I think the key takeaway should be know what the economic value is, the economic potential there is when you look at something. Okay. Um do the sums, do the math because there is, you know, otherwise we're just dreaming, right? So try and try and associate put an economic value to whatever it is you're looking at when you're looking at a exploration or or a junior company. Um because a lot of it is just the romance of of exploration and mining. Okay? I really do think so. And there's a lot of failures out there. So it's very high risk. And so minimize the risk by putting this the little science there is on it into it. so that you can minimize any, you know, minimize the tears. Yeah. >> Yeah. Well, you you have to because there's no crying in the casino as you said. It is uh for people listening, it's Neil Rendal on uh Twitter and uh it's probably on your screen right now so people can see it and follow him on uh Twitter. Yeah, he puts out some really good stuff. We're We still have to do that episode on underground mining. Actually, I was just reminded of it from your uh you did a thread on it not too long ago. What is it? Yeah, but you know what, two weeks ago or something, you did a you know, mining 101, the economics of open pit versus underground mining. We'll turn that into a podcast one day as well because it was really good. But yeah, thank you so much for doing this, Neil. I really appreciate your time. >> Thanks, Antonio.
How to Read an MRE and Avoid Costly Mistakes by Neil Ringdahl
Summary
Transcript
Today on resource talks, a mining engineer seems to have gotten bored with the summer doldrums. Because of all people in the world, he's chosen to talk to me for the next hour or so. And he's talking to me about mining economics and uh specifically what makes a good or body. more specifically how to recognize a good OR body in an MRE or a PE or even before all of that uh and be able to position yourself into the decent projects that will actually eventually come out of the ground instead of keep on giving money to people who know that they're sitting on stuff that are never coming out of the ground. But of course, we're not going to tell you about that. Uh just briefly for people watching or listening, if you want a summary of this conversation and all the other interviews that we do on resource talks, go to resourcealks.com. There's a free newsletter. It goes out once a week with a bullet point summary of all the conversations from the week before. The mining engineer I'm talking about is Neil Ringdal. Uh your next door mining engineer if you will follow him on Twitter and watch my previous conversation with him from about 6 months ago. But the gist of it is that he's um he's a friendly South mining a South African self mining self mining engineer. You might want to coin that uh coin that there Neil. But he's a friendly South African mining engineer. decades of experience in building and running mines, fourth generation of um miners and uh his daughter is a mining engineer as well. So I guess that gives him a lot of credentials and I I am not doing too much justice with that intro there, Neil, but it's probably time for me to shut up already and let you do the talking. So thank you for being here today. >> No worries. Good to see you again. >> Pleasure is mine. uh because we're dissecting one of your Twitter threads again essentially and this one is about resource modeling and um I I think it makes sense maybe to talk about why companies even put out a resource in the first place. What does that really tell investors like does it add any material value than just simply reading the assay tables uh or yeah why do they even do that? >> Well, of course it's worth it. I mean the whole idea of a ME is to define something you know what the economic value is of whatever asset is that's being reported on. >> Mhm. Um so yeah of course it's important and then I guess the ME you know with a standard either J or 43101 um type type report is a standardized report where you know where the authorities have tried to put put you know enough rules rules together to to you know to basically um standardize the reporting as much as possible so that you compare resource A with resource B. Okay? Or you know opportunity A versus opportunity B which is kind of difficult because individually each one's unique and they have their each one has their own problems and its own their own you know their own upsides and so on. So it's very difficult to quantify it but I guess the only way to do it is to declare a resource and and the resource really is you know how much metal is in their ground that's economic that's economically extractable and uh that helps most investors who don't really have a clue about mining understand what the potential economics could be. So I think it is very valuable. Yeah. what the potential economics could be is actually an important sentence especially said that way because I think a lot of retail investors see an MRE as a oh this is going to be this is what this mine is going to be worth but it's very far from that right and I suppose in your experience what percentage of the MREs that you encounter are realistically economically minable >> well by definition they most of them are because if they're not they can't be reported as an MRE Um but but uh how many MREs get turned into mines? Um that's a good question. I guess it's the same as how many you know exploration companies become mining companies. Uh very few. But as resource become resources become more and more scarce um you know lower grade resources that were previously uneconomic become economic with time. So, so I guess it's probably fair to say that a lot of them will eventually become a mine. But whether they become a mine in our lifetime is another story. Okay. And to say how many, I don't know, but it's probably very few because of the timeline taken to build a to build a mine. You know, you've got to permit it. You've got to do more drilling. You got to turn the MRE into a reserve, a mineral reserve rather than a mineral resource estimate. um which is which is a lot more constraints and put a feasibility together and then even then your feasibility economics may not be that good and project gets shelved or for other external reasons you know social reasons political reasons um or other reasons you know maybe company's not well managed or there's some drama that happens at a corporate level um or a strategy change you know these mines just won't get built or these resources won't get bull and so am I. >> Well, I I think to to your point that by definition it is is realistically feasible. I think a lot of the things get turned and twisted and and smeared and so on and so forth that we can talk about and I do want to talk about how companies actually achieve that because I think most of them are actually not realistic uh that I see. But when do you think is the right time for companies to do issue an M in the first place? uh and in your opinion specifically because I know there's a lot of disagreement about that out there like do do they need to have a you know have done a certain amount of drilling or or conversion or met work or something else or is it mostly market and cycles dependent? >> Um no I think it's definitely more about how much drilling you've done. Um also I think it's worth pointing out that these estimates norm they have to be done by independent party unless you're an operating issuer that's got you know well established track record and large you have to go external and you have to have independent you know uh qualified person or persons or company actually produced a report and they have a reputation themselves to protect um so that protects the investor and that's the whole idea care about, you know, the the the guidelines and the regulations for putting together one of these for public companies. Um, that that protects a lot of people. So, coming back to your question, at what point? Well, if you have one drill hole or two or three drill holes, it's obviously not enough information for you to put together a resource, even if you have grading sections. Uh, you need to you need to have enough there to at least define something of economic value. >> Mh. Um, a lot that a lot of that depends on the shape, the size, the type of mineral deposit. Um, so it is very subjective, very hard to kind of generalize, you know, an answer for you on that one. But I would say if I was a junior explore co out there, green fields, um, you know, you go out there and you you scratch around and you you have your geologist find something that's interesting and you do some surface sampling and you put those results out. Then maybe you scratch together enough money to start a drilling program. And if you can define something that can uh you know have a decent life of mine either something because a lot mine takes a lot of effort and capital to build you need to be able to repay that capital. Normally you need to have something 5 years or 6 years at least uh in operation. And then it's a scale of things. You know, it comes back down to what you know, what is the value of the rock you're you're looking at. And if the value is high, so let's say I find a gold deposit and it's amazingly running at 30 g a ton or an ounce per ton, it can be a very narrow vein. I could start a mine at 100 tons a day and make $20 million profit a year quite easily, okay, at that rate. And that doesn't require very much. So, you know, I just need to define how well if if I'm going to build a mine that's 100 tons a day, that's super valuable. It's going to cost me a few million dollars, maybe 10 maybe $10 million to build a plant, a little gold plant. Let's assume it's a basic, you know, fairly small plant, maybe even less if it's gravity gold, uh, and there's no, you know, there's not a lot, you know, if it's mostly gravity gold and there's not a lot of a lot of processing required or metaly to it, could be very cheap and you could build a mine, uh, you know, in inside 2 years, inside even a year at 100 tons a day is pretty easy to get to. Uh, low expectations. So, I may only need, you know, I might only have a mine life of 3 years and I could get away with making $40 million over 3 years. Hell, it' be worth it, right? >> Um, so, so, you know, but whether that will suit a, you know, large, you know, most of these junior companies want, you know, want to generate large large amounts of capital, relatively speaking, they're not looking at small small scale mines. you're generally looking at something a little bit more volume obviously a lot lower grade >> and that's also something if the grade's lower you have to move more tons which means you have to have more volume so you need to drill more to define that volume and so it's a balance of getting all those right to decide when or what point do you need to go and you know when when does this thing become economic have a couple of good hits and decide let's drill some more all right do we have enough here if we tabulate this let's say it's a you know elongated deposit and we know it's approximately this wide and we have so many meters long so many meters of depth define how many tons is that and if we process it at say 1,000 tons a day do we have enough to you know do to to mill for 5 years or more or even 3 years then maybe it's worth putting in M and then you can raise more money on the back of that because it's at least it's a piece of paper you can hold in the air and wave around potential investors and say this is this is what we've got and it's got you know it's open at depth and it's open on strike and we can we can we'd like to raise more money to further define this and and generate something that will be really exciting. >> Yes, that's what people will do. Yeah, >> I I think you have it wrong because you're almost approaching it as a real business which obviously this is not what we're doing here. You're supposed to do it when it will have the most impact on your share price so that you can raise more money and keep the lights on for another year and do some marketing, right? Yeah, I mean I'm I'm a it's I'm speaking from a mining engineering perspective, not necessarily a promoter perspective or or an issuers perspective. Okay. Yeah. >> If we got a public company and I have a I I go and stake a property, I'm going to have to be promotional about it and then anything that I find on that property, well, let's promote it. You everyone's talking about lithium a couple years ago. Suddenly all these companies changed their names to lithium companies, you know. >> Yep. >> They changed from zinc to lithium and then now it's over to gold. Gold's a new thing, you know. Lithium's off. Nickel's off. But, you know, 10 years ago, everyone was talking nickel. You have a nickel project. Very exciting. Very exciting. Right. >> So, so yeah, I I see where you're coming from. probably looking at a lot of small companies looking at uh uh trying to produce a you know attract investors. It's better if they have a a mineral resource estimate because it's something you can you can read and dissect and make your own mind up. you know, tons times grade times recovery times price less your costs and your selling costs uh gives you some kind of economic value and you can get some kind of idea what the scale might be help you make a it will help me make a decision as a mining engineer whether I'm interested in it or not. >> Mhm. I you know I I wouldn't really be interested in a project unless unless I could do that number in my head based on the draw results and I believe that there's a lot of potential and they don't yet have a minimal resource estimate. That's how I look at it. I look at it from the economics because at the end of the day, smart investors always look at it from an economics point of view and whether it's bu potentially building a mine, they're not, you know, those people who invest into explore coast in the hope that they're going to hit a, you know, a blue sky magnificent uh result. I think it's you might be better off going to a casino unless you're a geologist yourself and understand the geology. >> Yeah. And and I'm saying with all all respect to all the speculators out there, but it is a high-risisk business, Ryan. And and so you invest in a junior company. If a junior explore car, I'd be looking at the geologist doing the exploration program. I'd want to talk to them probably over the CEO and see what they say >> if I could get to that person. You know, >> I was mostly I was mostly trying to be funny there. uh when I said when I said that that's how you should look at it and and that's exactly the reason we want to talk to you about this because you're approaching it from again those decades of actually having operated these things and that's what we're eventually after. Uh so so it's good that you're covering it that way. What happens when that M is out though? What am I looking at? What's the first thing that I should be looking at when a company announces an MRE? I open it up. Am I looking at grade tonnage? What am I looking at? Yeah, I mean a multitude of things because it's the first step towards d-risking an asset. Okay, so these reports have standard standard things. First of all, they talk about where it is, the infrastructure, the climate, and then it gets into the nitty-gritty, the drilling, the so the deposit type, and uh you know, the drilling, the quality controls and all the rest of it. Um, so all of those chapters are important and I would if I look at a company with one, the first thing I obviously would look is tons and grades and generally I get turned off anything that's not that high grade right away because um, unless, you know, unless it's very substantial because I just know building a a lowgrade mine takes a lot more work and a lot more capital and while we've you know people mocked me previously you know when the famous you know Vikunia project in in Chile when the first numbers came out I was a little bit suspicious their numbers seem too too good to be true you know 1,000 mters at what is it.3% copper equivalent or whatever they have uh you it's it sounds crazy and I was suspicious when I see some numbers like that um but that's an exception Right. Um, and now, you know, it's a it's obviously going to be built uh as a massive, you know, copper mine, but but initially I I I missed it because I was naturally suspicious because it was low grade and I know building copper mines on the border. Well, back then, uh, building a border, you know, a mine on the border with Argentina and Chile was difficult to do. You know, big companies have failed doing that. Mhm. >> So, so that to me is that turns me off. I I look for something that easy to build. A good case would be Rio2. Uh I'm a shareholder by the way for but but Rio2 and I'm not promoting it uh per se other than you know I'm not I just think they were relatively easy mind to build. It's a relatively easy process me and it's a fairly low grade grade mine but it was a simple business case and I took the numbers what's the tons what's the grade times the metal price times the recovery that's my revenue less my potential costs and then you look at the things like the risks like well what about the water it's a mine in the desert at altitude okay >> and if I'm comfortable with those risks then I'll make a decision to maybe buy it or not okay and you get that information from a MRE. >> You won't necessarily get all that information with drill results. >> So, so, so that's the benefit of one. >> How did you make that decision specifically for Rio by the way, just for a second here, because uh you're mentioning the water risk there and uh I've interviewed Alex before and um we've talked about it before, but they they're going to be trucking water, right, which is is one of the things that people pointed out as a risk. How did you know not to get I suppose it comes down to experience but how how how would I know not to get you know scared off for example from you know trucking water up a mountain. Well, the things I would look as an operator and what I did look at was well, how many trucks of water will they need first of all, okay? And I can't remember the number was some years ago I did the calc, but it wasn't a ridiculous number. You didn't have to have like, you know, 500 truckloads a day or something crazy. Okay? Cuz that's the first thing. It's got to make sense. And you got to think about it from a social point of view because everybody along the road is going to be affected by trucks going past, right? So if there's a lot of trucks going past that would be a red flag for me. So that was the first thing. The second thing is well what is the cost of trucking water? There's no difference really in trucking rock and water. It's the only difference is uh the the you know solid you know solid or liquid and there's a bit more abrasion in the rock and you got dust problems. But water is heavy. It's heavy like rock. So, it's going to cost you a fair amount. And a rule of thumb number that I use is about 15 cents. Maybe should be a little bit higher these days, but 15 cents per ton per kilometer. Okay. So, I literally calculated how much water they mentioned they needed how much water they need per day. Okay. They need to get X number of trucks. I think it was 15 trucks. 20 was it 20? Something like that. and um per day of water and a truck does you know 20 tons and so you know how many you multiply that by the distance you know truck and can the same fleet is it the same trucks going back and forth or is it a larger fleet uh work out the cost and yep it's possible it was possible so that ticked off that one for me >> so >> um it was there were reasonable assumptions Okay. And and the answers made sense. So, you know, obviously there's a phase two in the project and all that, but I always want to look at the first phase of the project. Does the first page phase work. No point in investing in something if phase one doesn't make it doesn't make doesn't cover its costs. Okay? Then you know something's been hidden, you know, in that. I haven't seen a case like that, but it's got to make sense. And another thing that's often you'll see where the ME comes out often um a a company stock won't move. And I've been in that situation, you know, having, you know, being an issuer, working for an issuer. We put out a we put out a what we think is a pretty good PEA, okay, pre economic assessment or a feasibility study. Nothing moves. The needle doesn't move. And he's like, what's going on? And that's because people are not accepting. They either don't know enough about the project or they do and they don't believe you can execute for whatever reason. Okay. So I think a lot depend you know if you see a a a feas a feasibility or a a pa or M come out and it's the n and the stock jumps then you you very quickly get an idea if and you know this is obviously a good this is obviously a very good number a very good result uh it's a good project and it's likely to be built you know if it doesn't move there's still some risk there either it's financing risk or there's some social risk or there's some methological risk or there's something that somebody's picked up on or someone knows. And there's a lot of very smart people in the business who who follow these things in a lot more detail than I do. You know, I'm busy with my own mining operations and stuff. I don't get to look at stocks as nearly as much detail as as you do, for example, Antonio. Okay. >> Um and so I don't have the time for that. So So I have to rely on, you know, like many other investors who don't have the skills I've got, you've got to rely on on other people, too. And so yeah, it's not just the mineral resource estimate itself. It's also how does the stock react? What is the sentiment? Um and and I'm always thinking from an operator point of view as well. So you know that you know it might not be a great resource estimate, but there could be a lot of a lot of upside in the thing. Um and you know the company may be wanting to just demonstrate that they have something at least and that they can grow it. That's that's not necessarily going to move the share price, but at least that's something that investor can take courage with if if you want to take a risk and and invest into a company so that they can fund more drilling or whatever it is to increase, you know, hit the big hit the big one. >> If it if it's not going to double my position overnight, I don't want to hear it. Uh that's also the approach. But you know, you bring up a good point there, Neil, on on grade because you kind of brushed over it actually, oh, I wanted I want, you know, I want it to be a grade that works. I find that companies are being too optimistic with cut off grades often times because that's not something that a lot of us check. It's not something a lot of us understand in the first place. How do you how do you deal with that? How do you look at a cut off grade and be like, "No, this isn't, you know, from from a perspective of a non-technical person like myself, >> right?" So the cutoff grade is a minimum grade at which you can mine a ton of rock without losing any money. Okay. Um that's the def definition of a cut off grade. So when you calculate that you don't include you look at operating costs any cost or sustaining and sustaining capital costs any cost that would stop if mining stops. theoretically. Okay. So, when you do a resource estimate, generally you're a little bit more relaxed on the cutoff grade because you want to include mineral that potentially will be economic at a future date. Okay. Um, I guess it's a leeway to be a little bit more uh optimistic and you know, every company wants to put portray their resource or their asset in the best possible light. So, they're obviously going to want to choose a cut of grade as low as possible. And you have the consultants pushing back saying, "No, well, it's not a realistic for you to assume a 20 cent per ton mining cost for an open pit mine. Uh, in this hard rock environment, for example, we won't accept such a low cost." So, there is some balance, but it'll still be lower than what likely will be the final cost when you do a feasibility study. Um, and I think that's fair because at the end of the day, you want to make sure all blocks that potentially have marginal economic value are included as well because that can bring down your overall uh say bring down your overall cost, but it can it can change the dynamics of the project a little bit. Okay. Um, it's kind of hard to explain. Uh, I guess not that hard to explain. It's just you got to think about why why people use slightly low high cut off grades in in defining resources. You want to include all blocks that could potentially be mined. So if you end up with a cloud of blocks in one particular area, your mining block potential mining blocks and they cut off grade that fall below the cut off grade you exclude that cloud completely. But if you if there's a large cloud that are that are on the on that limit, maybe you can maybe with time you can do some more engineering to bring that cloud of blocks uh into into reserve by changing the mining method or maybe looking at the processing method. Maybe you know many companies start a mine like a uh uh with a with leech tanks and then they they they might say oh well we've got this low grapile here. What are we going to do with it? Why don't we heat leach it? Okay, so that low grade stockpile was built because it was below the cut off grade or that higher grade material that they could put in the plant instead. And so that material becomes an asset after a while. All right. Another good case um you know you have big mines there's one in South Africa big copper mine called Palabora uh many many years ago they started as an open pit mine and they they built a huge stockpile of magnetite I think it was magnetite anyway it was something like that uh that had no real value u but they built it uh in moving the waste out of the way and now there's another business or there was uh this is I'm talking decades ago but another business was built treating that magnetite and process and selling that reselling that magnetite it wasn't an asset until it became an asset until there was a heap of it stuff there all right and then you look at it oh wow suddenly this is economically viable so for that taking that that kind of way of thinking I think having not not you got to have something fairly realistic not off the charts optimistic but what would reasonably expect it to be the mining cost and processing cost for something and what would your reasonable expectation of recovery be? Um, and if the grade times the price covers that cost, then it should be included as part of the resource and let the mining engineers decide whether they can actually extract ext extract that that material at a profit. uh because most likely that stuff that's marginal in the resource falls out in the reserve when you put when you calculate into the reserve with much more strict much more better defined costs and much better defined recoveries and dilution factors and recovery factors and and you know selling costs all that stuff is defined a lot better when you go into a reserve from a resource and so keep that in there because if you exclude it it may mean the mind doesn't actually get built until someone has another look at it again in the future and does a new MRE. Um that's that's possibly why people are a little bit more lax on on these cut kind of grays. Is there a range uh where you want to see that ratio of inferred versus indicated and and measured for example where you're like I want >> because inferred is not you can't actually include any inferred any numbers really in a in a preliminary economic assessment you're allowed up to 30% I don't know if the rules have changed but the last time I did one you're allowed up to 30% in third resource in a num in the numbers in your planning numbers. Okay. But a preliminary economic assessment especially for a green fields operation is is a bit dubious. You need to go to feasibility of prefeasibility and there definitely you're not allowed to include inferred material in the economics. Okay. So why you want to have indicated category resources and measured category resources because there's a lot more confidence in the numbers you know and it all comes down to interpretation. You drill two holes and you you get a you get you get two intersects that are the same much you know roughly the same thickness and you're looking at let's say a tabular or body. Um if those holes are close together and you know the all body is flat and tabular you have higher confidence right and you can do some stats geio statistics and the geio statisticians will tell you okay they're close enough to have a high degree of confidence so we can make it a measured category or indicated category but as they get further and further apart becomes inferred. That's literally because we don't know if there's a bulge or if it shrinks between the two drill holes, right? And the same, you know, in terms of the shape of the or body. So your volume disappears and your grade becomes more, you know, your likelihood of hitting a similar grade in the hole in between these two. We don't know because grades and tons are spatial uh you know there spatial dimension. It's a spatial thing and the grade is a you know a function of the distance from what was sampled. That's how geostics works. It assumes everything is cons you know uniform isotropic and uh continuous and in the real world things are not isotropic and continuous. But we have to make some assumptions and you know it comes down to the detail. If you drill a hole, uh, if you were able to drill the same hole the second time, would you get the same result? If you, if it was possible, would you know, will your is your essay repeatable? Will you get the exactly the same result? And the assumption is yes. when it comes to geostatistics and then the argument is well if I drill a hole that overlaps another hole like that okay um I should get very close relationship between the two results right because there's overlapping portion if they drill next to each other there will be the results will be very similar we imagine that's the assumption made when you do the statistics >> but as you move further and further apart your two drill holes they have less of impact on on each other, right? You have less less confidence that the grades will be the same and at some point becomes too too far apart where there's no influence. And so that's how inferred that's how you should look at resources. When you see measured, you know, hand on heart this is it's there. If it's indicated, it's probably there. And if it's inferred, well, it's inferred. It's inferred that it's there. It's not necessarily economic. And you see that in the fine print at the bottom. But that's really what it means. It means there's a lower confidence. It's material that we have a low confidence is there. But it can be improved and inferred material can be moved into in me measured indicated categories simply by putting in a few more drill holes >> and that can be converted. So often we look at converting mining operations convert a lot of inferred into measured and measured and uh indicated category and that obviously improves the robustness of the project when you do that. So, as the project develops, sorry, I know you want to say something, but as a project develops, you go from early exploration where you've got too few drill holes, too scattered to to find something, and as you put more drill holes in, you start to define the shape of this thing. And you start to realize, okay, there's mineralized economic horizons that you can mine, can potentially be mined, and you can start to infer what's between them, right? Um and then as you as you f as you further fill it in, you get more and more information and you can put together at some point you decide all right I put together mineral resource estimate and then normally as the project progresses drilling continues and infill drilling continues to happen to firm up on those numbers. So I like to use inferred when I do my desktop studies. I generally include inferred numbers to see what potentially a project could look like. >> Mhm. >> Okay. But I always remember it's not necessarily going to be like that. So you hope for for me it's to calculate what I hope the project could be and then I plan on what it will be based on measures that indicated. >> Yeah. >> Okay. Yeah. I like how you made a a mining engineer joke there with with inferred and then you laughed at it yourself. That's that was a wholesome moment right there. I think that's that's that's like at least half the reason why I have you on here and I will have you on again. What do you uh metallergy is something that we should talk about as well because it sort of inferred indicated to tell you what what how much could you pull it out of the ground. Metallergy tells you how much of what you've pulled out of the ground can you actually sell in concentrate or dory or whatever it might be. Um yeah, guidelines for metallergy. Is there like a cut off where you look at oh if it's below 80% I'm not looking at it or anything like that? >> No no no I don't look at anything like that. I look at the number as a as a factor multiply the the grade by to reduce the the recovered grade. Okay. So I can work out a lower price. But what I do look at is the mineralization. Oh, and this part can be sometimes a bit tedious to read in a report. You look at the mineralization and you look at the the deposit type and if you know your stuff you it can tell you a lot uh about what to expect. All right. Certain projects certain uh deposits have issues you know with uh recovery. Uh there's arsenics to consider in some copper projects. In in VMS projects, you have problems. In some some projects, you can't recover the uh the metals that easily unless you grind very very fine. These things come with experience and uh if you do a lot of reading, you'll learn about it. Okay? There's some really good resources out there like 911 Metalist is a good place to start. Okay? Um, and so if you go into it, there's a lot of work done on this stuff. And so if you're prepared to do the reading, you can become quite knowledgeable about this and and it'll help you make your decisions because often what will happen, someone will look at it, you'll be given a recovery, but that is an estimate. And so I read the minology, I read the deposit type, and then I look at the metalical test work, and I look at the recommendations in the test work section. Okay. Quite often there will be there will be a get out of jail clause in there put by the competent person. Okay. To say we recommend that the further further work is done to recover the tin from this deposit or we recommend that looking at recovering three concentrates is viable because you know sometimes you get a poly metallic where there's you know there's copper, zinc, lead and tin. I was looking at one fairly recently and they want to produce concentrates and everything. Okay. And so they take, you know, tons time great time recovery for each one. But the problem is some of those metals float out in the other concentrates and you don't get payabilities in those concentrates. All right? So you're being over. So that's where metaly becomes important. Like can I actually produce a salailable concentrate? It's no good if I produce a a copper concentrate that's only running 8%. I can't sell a 8% copper concentrate very easily. Maybe I could in this market, but it's a bad example. Probably zinc. Zinc below below 40%. A zinc concentrate below 40% is not salailable. Okay. Very unlikely unless you can blend it with something else and then you'll be taken to the cleaners by whoever does that blending. So um I think you've got to be careful about that and you got to read that part of it. So what type of concentrates being produced? If it's a flotation concentrate or if it's a doray or a cyanide process in a go in a precious metal situation, are there any, you know, are there any things that will give you red flag in terms of refractory? And you'll hear the word refractory or which just means it's harder to recover something out of it. An or can be refractory because it has it is in a sulfide form. So you have to break that sulfur bond which means you have to roast the or first before you can leech it with cyanide. So maybe we better just to produce a concentrate and give it to someone else to do. Um you know rather than building a roster on site which is not done very often at all these days. Um or maybe look at bio oxidation or biolleaching or maybe pressure oxidation. And these methods of processing, people talk about it, but they're hard to do. You know, operating a bish plant is not easy. Uh there's all kinds of all kinds of snags and issues you've got to get around in operating one of those. Um and so when they mention it, I'm always a little bit nervous if it comes up, right? It can work, but it's a risk to be considered. >> Yeah. Um, and then you know looking at refractory ore, if they say the ore is refractory and they can get a 90% recovery, then they're doing miracles because a refractory or probably only has 50 to 80% recovery depending on what what is wrong with it. It could be just something simple like there's a lot of carbon uh near the near the gold uh you know carbon uh in in the rock or surrounding the gold vein. I've seen it in West Africa where we had a graffitic filite next to the or body in the hanging wall of the or body and no matter how hard we tried to mine it, we always got graphitic fill mixed with the ore cuz it was a soft shelly stuff. It made a lot of issues for us and the graphite or the carbon uh is a naturally it's uh it's it's you know it absorbs the gold and in your carbon and leech process if you're using carbon and leech or carbon and pop cyanide process to using carbon to recover your gold through cyanide you lose that because it's too fine. It goes straight through tailings and so you don't get the recovery. And so you got to know these things. Um, and so I'd recommend to your listeners to read up about it. Read what they say in the and then read up about that type of deposit and the problems encountered if you can >> and uh otherwise ask people, you know, online and Twitter. Mining Twitter is pretty good actually. There's some pretty smart people out there. They'll tell you if something's good or not pretty quickly if they know it. There's I'm trying to find out right now, but Lobo Tigree has a cheat sheet, I believe, for metallurgy uh that I remember reading a while back where he goes over the uh different recovery methods and whatnot. Uh he's independentspeculator.com. Not paid to say this or whatever, but I just remember that was a good resource that he had there. So, if you go into the website, there's um magnifying glass that you can use to look for stuff. So, probably there that you can find. I cannot find them right now to give the exact title, but it's on there. And I know that's uh independent speculator.com that's log website he's got some good um he definitely has a couple of uh good articles on there about previsibility and stuff like that talking about metallergy recoveries and stuff like that very important as well >> Neil what are the uh what are the most widely known kind of manipulation tactics when companies put out a resource what do they what do they use like I don't know optical illusions maybe I mean when I open up a news release even if it's only drill results actually even if it's not an MR I'm generally drawn to the images. I want to go and look at the images, the cross-sections, the long sections and whatnot. And there's stuff like smoothing, wide surges, uh, no capping, and so on and so forth. Just optical tricks essentially that companies use. What's the worst one that you see out there? >> Not so much in mineral in mineral resource estimates because as again it's the independent guys doing putting them together and they are doing it independently, right? Um, so look at who's putting together the resource. If they're reputable firm and have done good good work for other companies, that's always a plus. I actually look at who writes the reports um, as well. But to get back to your question, I think press releases are much more easily manipulated, especially drill hole results. People neglect to mention, well, they have to mention true width or drilled width. For one, that's the one that everyone forgets about. You know, you've got to you've got to correct when you go through a a tablet of deposit at an angle, you've got to correct for the true width. So, people tend to say, you know, I drilled 90 m at 15 g per ton gold, but if you drill it down the length of a table or body, it seems very thick, but it's actually not. It's only 1 m wide or, you know, that would be like the worst case. And I've seen that, you know, uh what I also really don't enjoy is the way press releases for drill results are put out. They always talk about an intersection and then they include the high-grade part of the intersection in there in three lines. So they have including they have from 9 to 20 m including 9 to 10 you know 9 to 20 m is running at at let's say 5 g a ton but from 9 to 10 m it's running at uh 15 g a ton. Okay. And so if you take if you work out what the rest is worth the the 10 to 20 m it's worth virtually nothing versus the that one meter. All right. And I think that's where people get caught. They get caught on these supposedly big intersections, but they're not. >> Time and time again, I've seen that. Okay. Uh so I think that's the biggest one you got to be careful of. Um I I prefer to see companies that put out the full tables uh in the end of their press release. Makes for a very long press release and a lot of reading. But uh in that regard, I'll say the way the Australians do is pretty good because uh they have to put out the col I think they have to put out the collar positions and the downhole distances and everything in there and the inclination and the and the depth. So you can take that data and you can put it into Excel and create a database and then if you have if you have some software uh you can actually load up draws and actually get to turn it around in 3D and see what actually going on. Uh there's a couple of people on Twitter who do that. Uh I do that if I get the chance if I'm interested in a project. Um so so yeah that's uh that's one that's one I think that people like to manipulate. Also people like to use channel sampling results or or grab sample results. I mean a grab sample is a spot sample. It doesn't represent very much at all. I could take a another grab right next to it and it could be nothing in it. >> Yeah. >> So it's nice that you have a good result in a grab sample, but it's a meaningless number. All right. um let's see what the thing comes out if we drill it or if we actually go and put a tunnel into it. What's the average grade of that? It's not going to be anything close to what the grab sample is. >> Yeah. >> And then you got to think of the nuggety effect of the a lot of these deposits, especially precious metals. Um you can get drill holes. I once saw a drill hole that was one and a half kilos of gold per ton. Okay. Over over one and a half meters. The grade was so high they stole the call. Someone stole the call. It was in Zimbabwe. Okay. So, we couldn't actually confirm that grade. Um, but can I use that grade to now assume that there's a massive thing? No, you have to drill another hole because you can actually hit a nugget and that'll spike your grade tremendously. So when I see very high-grade deposits, I get nervous. Unless there's a lot of high grades everywhere, if it's just a few like three or four out of 20 out of 20 samples, say results, I will tend to cap those down to something that I think will be perhaps, you know, perhaps a little bit more meaningful. Uh because to assume the high grade uh uh unless there's like all your hits are really high grade then you got to look at the sampling is the sampling you know QAQC group good you know we all remember what happened at BX or maybe we don't I don't know 1997 okay BX they salted the samples and that stuff still happens okay but it doesn't happen as ubiquously as it used to and that's why they have these reporting standards Now, when you put out results, you have to show that you've done quality control and quality assurance. >> What do you mean that still happens? Where do you I've like I I would have absolutely assumed it does not happen anymore. Like I'm not even kidding. >> Yeah. Well, I guess some of the some of the individuals I speak to might not be the same that put out issue reports for public companies, but I've seen that. Okay. where people people will tell you they'll tell you crazy stuff >> and the less drilling there is on something especially if it's a public company that's why you got to be care on the one hand you got to be very careful of historical numbers in that regard but on the other hand you've got to if you got a company that doesn't have much drilling and that all they talk about is grab samples you might as well be I could be you know I scratched my ring as I took the sample oh wow the grade's a lot higher you know there's no cure accuracy in a grab sample. Okay? Because by the nature of the fact it's a grab sample. So I I'm not very impressed by grabb samples at all. Um drill hole results they have to and they're published under a public issuer. They have to they have to talk about the QAQC as well. >> Mhm. And that's that's to you know but it's road language and I'm sure people have written stuff that they you know not true. So take it, you know, and that's where it helps. If you have more information, there's less likely for it to be uh misreported. You know, you can you can have a competent person as a junior company who works for the company writing the disclaimer at the bottom of the KC was done when you put out draw results, but when you do the ME, it's independent. Those people are obliged to go and check, are the samples really been taken correctly? are is anyone adding any gold to the to the to the sample before it goes and that's why we do QAQC. Okay. And so when it gets to M now I've got a little bit now a little bit more assure assuredness that there's at least something that's that's probably there. >> Yeah. >> Okay. Does that make sense? I don't know if I'm >> it. Well, it I think it does, but I think it's something that goes like you seem to be, you know, put in a big importance on on QA QC whereas like most retail investors and and now I'm talking just for myself really. >> That's something that you'd quickly go and ignore, right? It's just something at the bottom of news release and it's just there and you do really read it. I >> reading it doesn't help, right? >> Yeah. >> Uh you can put whatever you like in there, but that's why I say bear that in mind. Okay, unless it's an independent person signing off in that press release, it could be skewed. But we know with further down the road, I you no one's going to I don't think anyone's going to buy well, I certainly wouldn't buy a company that's got one really star drill stellar drill hole unless they've got a little bit more information. Okay. And so do more drilling and if they're all stellar drill holes, you're going to be found to be a fraud if it's liing. Right. >> Yeah. very quickly. Um, so a lot of that's been removed, but there's still people who promote promote like crazy and and that's where the grab samples. When I see grab samples, I glaze over right over >> drill hole results a little bit better. But if there's only a couple drill hole results, same thing. All right. Wait until they've got a decent, you know, 15 drill holes, 25 drill holes, 100 drill holes, 300 drill, 1,000 drill holes. Then you now now you've got something that's representative. Remember that's what comes back to geostats as well or the uh you've drilled one hole in a resource. You you don't know what the grade is. You've got to drill you've got to get something that represents best what is there. And even that's an inexact science. Even then with you know with people have got it wrong. We've seen like the classic Madson mine we were talking about a bit earlier. Um it's been through two changes of management before the current owners have it and they seem to be doing okay so far but it's one that I watch with interest because that was a highly nuggety highly variable or body and there's been many cases like this not just this I'm just using an example where people have made big decisions financial decisions based on assumptions that were wrong because what they drilled was not representative or what they thought they drilled and they modeled was not representative what was actually there. >> That's where the specialist comes in that you know and even with that you can still get it wrong, right? >> So, so that's the ris that's inherent risk that's there. So when you talk to me about what about people spiking numbers and or spiking data sets and stuff like that, that's just another risk on top of it really, right? There's already risk with the thing even if none of that is happening. >> Yeah. >> Yeah. That's I think that a lot of what you're telling me here comes down to kind of having experience with these things and having seen all of these things, you know, >> not go well essentially. >> Um, which makes it harder, you know, for someone like I even have been thinking about and kind of wanted to talk to you about this uh as well is can I be ahead of the herd and kind of do my own resource calcs on the back of an envelope? um you know that old formula grade by volume by density and then you apply a discount factor to it and then go on from there or is that a fool's game how do you see that? >> No, it's not a fool's game but do it with your eyes wide open and acknowledge you know even I acknowledge I don't necessarily know all the answers and sometimes I make mistakes even with my experience looking at things. Okay. Um, so bear that in mind. But I definitely would encourage people to work it out. Um, if you think especially when it comes to an expiration thing, you know, if you can see some kind of structure there that you've seen somewhere before or a similar deposit and you think it's like that, that's good. You can use that as to assume, well, maybe maybe this is what it is. And with these two or three drill holes that have been reported, I've got something really good here. And but what does that really mean? I've got to go and take those four drill hole results. Take the way I take I take drill hole results and I do a mean on those drill hole results. Okay. Over the width that they think that they've reported. And I check that it's a true width. Okay. So those drill holes, this drill hole is 50 m. The clump of drill holes are sort of over maybe let's say 200 m width uh in an area 200 m. So it's 200 m long and I'm averaging let's say a 5 m wide or body. Uh so it's 200 * 5. Now I'm going to project how deep is the deepest hole? How deep is the shallowest hole? Are there surface trenches? Are there grab samples on surface to show that it's yeah continues. Okay that's where grab samples are useful just to see okay there's continuity there. We don't know what the grade is. I won't use that grade but let's use the drilling results mean those drilling results calculate the volume now you need to take a shot of the density most people that's where we can go wrong if it's a but the rule of thumb is if it's a very soft ground choose 1.8 as a density 1.8 8 ton per cubic meter. Most rocks are around about two 2.7 tons per cubic meter. Um, unless there's iron or or or heavy metals in there, you can go with that assumption. So, times by 2.7 times the volume. Now, I've got my tonnage, right? And if on basis, if it's going to be underground method, well, what method is it going to be? What's that cost for that method? And what is the processing cost going to be? If it's a small mine, the processing cost be higher per ton than if it's a large mine. Um, so I know these numbers, but but you can find out this stuff. Okay, it's not that hard. There's lots of mines out there which have uh you know that produce cost results for processings for that type of deposit. So you find that, use that cost, use the mining method that you think can be used for your mining costs. then your administration cost. Don't forget to include corporate overhead expenses and um and uh you know plug that in there and see if the thing makes money >> and if it does great now you can see okay this is the potential this is how big it needs to be for it to be worthwhile for me all right um I think I definitely think it's worth doing and I and I encourage it but and if you're unsure ask somebody there are people out there who who who will answer you if you if you if you're tenacious enough. >> Yeah, >> I I typically run tell me if that's a good idea or not. I typically run three scenarios for me. So, I do that calc and then I do uh you know positive case scenario. So, that'd be about 80%. So, I'd multiply by 08. I do an average. So, I put a a.5 and then I do what if I'm wrong scenario. So, a 0 2. So, let's say I've come up with two million ounces. I do, you know, a 0.2 in two and then it comes out, oh, this is less than a half a million ounces, not really worth it for me in the worst case. That's kind of how I I think about these things and and and essentially try to figure out if that really makes sense, if the valuation on the on the company makes sense. >> I think that's exactly what you should do. And definitely when you calculate the volume and the ounces in the ground, you know, you should definitely discount those ounces because not all of them will be mined. >> Yeah. >> Okay. So, and unless of course you think this thing's huge and could be, you know, it could be really worthwhile. >> Yeah. Yeah. Do is that something you typically do like do do you buy prem yourself? Like if you see a company that's done a lot of drilling u like for your own portfolio? >> No, I generally buy mines that are already in operation because I understand them better and they are I buy them because of the business value. I don't buy them. And and I'm obviously speculating a little bit on mental prices, too, like everybody else. But I guess I'm oldfashioned that way. I actually look for companies that pay dividends if I can. And right now, I'm not holding any that pay big dividends, but I'm holding three, I think, that pay dividends, but I like big dividend payers. And there's not many miners out there that pay dividends or do buybacks. >> Yeah. >> Um, so that's what I prefer to do. Um but I will buy a company if I know if I know a company well that is an exploration stage and uh I know the team >> but for me a lot a lot depends on who's on the ground as well. I I look at who's on the ground what kind of experience they've got and uh you know I always pick up the phone and talk to them first if especially if it's a small operation right uh or a small uh small company. Mhm. Yeah. I I suppose a lot of it comes down to um understanding rocks in that case. And I think what's the thing about mining engineers and geologists kind of all the time going at it a little bit going at it each other. >> Yeah. It's it's just I guess it's just in our blood in our wiring. Um because we both need each other. That's the truth. But but we don't want to admit it. You know, a lot of the questions you've asked me today really should be answered by a geologist. >> Okay? So, I'm giving you a mining engineer's opinion. >> Um, I've done a lot of geology, so I guess I I can uh I can answer those questions, but bear that in mind. Geologist would probably answer things a little bit differently to me. >> Yeah. Yeah, and that's also something to take into account when you ask me about that's one of the reasons why I don't necessarily invest that much in exploration companies because it's not my business. Okay. My business is building and operating minds um not deciphering whether the resources uh what could be okay that's I leave for them and and it's a bit of a casino for me it's a bit of a more of a casino than a mining company is so although although I suppose there's plenty of arguments to be made that mining company is more of a casino than an exploration player but there you go. So, >> no crying in the casino. Uh, that should be the moto for no crying underground as well. I think I poke you away from going underground today, didn't I? >> Yeah, you did. I'm able to go underground, but that's okay. Uh, >> well, do you not have Starlink underground? >> No, we don't have Starlink underground. We do have networks, but not Starling. >> We should uh we should do uh an interview once when you're underground. Uh maybe take you on on a virtual tour. Show me what's going on there. Um, >> I'll I'll let you do your thing now though. You told me about an hour and it it's been almost an hour now. So, thank you so much for doing this. What am I forgetting to ask you though? What else is important to talk about here that you think I failed to bring up? >> Uh, haven't given it much thought to be honest. I think I think the key takeaway should be know what the economic value is, the economic potential there is when you look at something. Okay. Um do the sums, do the math because there is, you know, otherwise we're just dreaming, right? So try and try and associate put an economic value to whatever it is you're looking at when you're looking at a exploration or or a junior company. Um because a lot of it is just the romance of of exploration and mining. Okay? I really do think so. And there's a lot of failures out there. So it's very high risk. And so minimize the risk by putting this the little science there is on it into it. so that you can minimize any, you know, minimize the tears. Yeah. >> Yeah. Well, you you have to because there's no crying in the casino as you said. It is uh for people listening, it's Neil Rendal on uh Twitter and uh it's probably on your screen right now so people can see it and follow him on uh Twitter. Yeah, he puts out some really good stuff. We're We still have to do that episode on underground mining. Actually, I was just reminded of it from your uh you did a thread on it not too long ago. What is it? Yeah, but you know what, two weeks ago or something, you did a you know, mining 101, the economics of open pit versus underground mining. We'll turn that into a podcast one day as well because it was really good. But yeah, thank you so much for doing this, Neil. I really appreciate your time. >> Thanks, Antonio.