Understanding mining results

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mum

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Friday, November 16, 2007 - 01:52 pm:

I would like to start a thread on how to interpret mining results.
What % are good results for each mineral and what depths are considered good or bad. I have hunted around but can't find any answers.
If someone knows of a book or web site, great.

Gold.
I believe 10g/t is a excellent result and 5g/t is ok. What depths are except able ?

iron ore ?
Zinc? and so on

captain_chaza

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Friday, November 16, 2007 - 04:57 pm:

Ahoy Mum

That's a good idea !
However from my limited experience only Officer Rederob has the slightest of clues

He works on 1 or 2 or 3 months delayed fundamental data

It seems to work for him
What can I say?

Our dear Friar works with 7 or 8 or 9 month Fundamental data

It seems to work for him
What can I say?

How quickly after these antiquated datum is released do you need to assess these figures

Perfection in this art of figures is as rare as hens teeth and flying pigs

Salute and Gods' speed

PS IMHO Officer Rederob is your best and only bet

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dug

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Saturday, November 17, 2007 - 03:16 pm:

there's too many If this Then it Could mean that in Mining Announcements for me to follow,Belinda.
Especially when first released.
You just have to watch how it Goes Over after any Trading Halt lift.

I have seen THX at 17 cents get a news break halt intraday,trading only 17/20 for some hours and then a 3pm hit taking it to 25ish.
There was a Lull,do you follow "mum"?
A Lull that took some impatient holders out thinking
the Announce isn't doing much Chop,so they sold at 19ish nervous-like only to have THX go at least 30centish following days.

so to conclude it seems like a really excellent bit of knowledge to gain about grades in Mining Announcements but seems it's defined by particular situations
this goes with that sort of thing

Complicated and even if you CAN
May Not Do ya all that much good.

r2r is the Only One here to ask Definitively.
just send him an email,he's not an Ogre [like some of us!!]

cheers bell.

Even 'til Jaded.

Dig for the sake of it.

mum

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Saturday, November 17, 2007 - 06:11 pm:

Well hours later and having scanned many forums I have found a bit of info. Not sure if its true but interesting never the less.
If any of this is wrong I stand corrected. Emailed journalists
in the know so look forward to replies (if i get any )

Platinum and Palladium are horrible to process and take 6 months to process a ton. Need massive amounts of capital

Nickel laterite is expensive to process
Sulphide nickel is easier

Gold
low grade 3g/t
good 12g/t

Copper
low grade 0.5%
good 2%

Nickel
low 2%
good 8%

Silver
low 25g/t
good 100g/t

Uranium
low .035(300ppm)
good .12%(1200ppm)

Iron ore , we want the haemetite rather than the magnetite

Then, how deep do we have to dig. Found nothing on this yet. Hopefully RR will breeze in and help and correct if needed.
Its getting more complicated, if the rock is very hard then you would need tons more to be profitable than softer rock : (

philr

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Saturday, November 17, 2007 - 07:27 pm:

mum

Very interesting keep up the good work.

Phil

** Let blockheads read what blockheads wrote.
Warren Buffett

rederob

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Sunday, November 18, 2007 - 11:56 am:

hello mum
There are no shortcuts to fundamental analysis.
The very simple bottom line is working out if the cost of mining will be well covered by sales.
It's therefore possible to mine 1g/tonne gold in a low cost environment and still come out ahead: You can check out EQI to confirm this - in fact most of their resource base is under 2g/t yet the company has paid dividends for many years now.
My advice would be to throw away rule books and look closely at what companies say they can do with what they have found. Then compare those results with peers, if any.
I mean no disrespect to what you have uncovered, but I would not rely on any of it.
For example, nickel laterite may be expensive to process, but the resource base of cheaper sulphide deposits is quite limited and will not meet global demand in years to come. Minara has a 40 year reserve base at around half your "low grade" number: Compare it to others in the field.
Silver is typically a mineral byproduct, so the idea of trying to pick a silver miner on the numbers you quote would be folly. Macmin is an excellent example of a (pure play) company with significantly better grades than quoted that struggles in the marketplace.
Your numbers on uranium might suggest that Cameco's Cigar Lake project - with grades of about 21% uranium - would be quickly brought to market to take advantage of high spot prices. Try as Cameco might, Cigar Lake is a mining nightmare and at earliest this project will have deliveries to market in 2011. My point here is that even when the figures look exceptionally good, other considerations can drastically affect proposed mining operations (do you think we will ever drill for oil on the Great barrier Reef?).

mum

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Sunday, November 18, 2007 - 12:45 pm:

hmm good grief. I need to work for a mining company!!!

"Might help for a quick trade if the numbers sound ok at first glance" she says, grasping at straws

Thanks for your help RR

mum

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Friday, November 23, 2007 - 04:24 pm:

My" Australian" journalist emailed back and is in the process of writing a book and hadn 't thought about this and will add some basic stuff for people like me : )

Come on someone , what else can we scratch up. I want info to short term trade news
I have been told 200m is not that deep for gold but what about other metals ?

Finding this kind of info is like finding hens teeth, hard work

I'm now reading "investing in Aust mining and resource stocks" but not much help.

We need to know the management of these pennies cos some are renowned around the traps for being , well less than truthful. I have noticed these companies regularly put out an announcement and then in the next few days the directors sell a pile of shares. This freaks out the traders,

hilarius

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Friday, November 23, 2007 - 04:30 pm:

Mum

Maybe we need a Directory of Mining Companies which have delivered consistent shareholder value ... and whose directors have a trustworthy record

Then the rubbish can be ignored?

Hilarius

I come in peace to share my thoughts and to shine my candle light on possible long term opportunities

captain_chaza

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Friday, November 23, 2007 - 06:10 pm:

Ahoy Mum

If you can't find Fundamental Analysis here on IC I don't know where to send you?

Maybe you will need to get a degree or 2 or 3 and earn those many letters after your name for yourself?

In the mean time I suggest you study the Long Term threads with their conceptions of Fundamentals

They mean well But! HEY!
"Why do we need the latest information anyway" they say

"It will take me weeks to work out"

They are just TOO busy doing nothing as if Nothing is the goal

"Crikey! Maybe it is??"

Salute and Gods' speed

(Message edited by captain_chaza on November 23, 2007)

mum

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Friday, November 23, 2007 - 07:22 pm:

umm, I don't want to analyze the figures too much, just want to work out what the traders like to hear.
Look at FDL, joint venture with FMG i suppose is what made it fly

Another nugget.

I have found 2 mining magazines you can get in some newsagents
Paydirt and Resourcestocks

Found this
Quote Breakaway CEO," you need a 5m budget to seriously explore for new nickel projects, so you need a float of at least this

Another area we could research or I could research : ( is who is next to who, eg MDX is right next to IRG so any results from them will effect MDX.

Anyway, I'm prattling on with all this basic stuff. Can anyone tell what is spudding a well means for oilers.

rockon

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Saturday, November 24, 2007 - 06:51 am:

Hi Mum,

Just stumbled onto this site. Plenty of reading material for everyone.

http://www.kgs.ku.edu/Publications/Oil/primer12.html

Cheers.

dug

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Friday, December 07, 2007 - 12:18 pm:

Well looks like Volatility/d'Big Gains aren't so much JORC related,at the moment.So one doesn't have to get a Geology Degree as an "Edge".
Probably because of Labs Waiting Lists,let alone the Expense of doing results proper,we now have New Speak in Announcements.

See FDL for the "Breakthru" of Conceptual Reserves done by really experienced Geomorphologists.
See GXY this very day do the TWIST.Up on News in first minutes only to be Swamp Sold 20%+ DOWN.
See CVI for day later Amending of Language in previous Report.

Seems the ASX allows all these variations/permutations of Announcement Language but one must first run it past them [the ASX].
Could be that Trading Halt delays/extensions are now caused by this Legalese Requirement of "Words Check" by the ASX?[MRX?]

Happy Trading.
Buy a Thesarus for ya Bookshelf?

Even 'til Jaded.

Dig for the sake of it.

pse

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Friday, December 07, 2007 - 10:49 pm:

Hi Mum,

I’ve done much research on the topic of trading news and I’ve also traded many news releases. Particularly, “resource discovery” news releases.

Not sure of your trading time frame, but what I write below applies to 1 to 2 day long trades. I don’t hold a stock in anticipation that the new resource discovery will, in years to come, turn a penny into a BHP. So I cant help you to figure out what types of mineral discoveries make a midget into a major. But I’ve got a pretty good idea as to what will, and what wont, whip the market into a short-term frenzy.

My thoughts:

In most cases I have no idea what the drill results actually mean in lay persons terms. But that never seems to thwart my news trading strategy.

If you are reading a news item and it is not obvious to you what the big deal is, then chances are there isn’t one and chances are the other readers out there are having the same experience as you. So, quite simply, don’t try to make something where there is nothing. If what you are reading doesn’t make you sit up with interest and take note then the market also is unlikely to be excited.

For example, I recently traded ADY. ADY released some news that it had discovered 400 years worth of potash and 1.5 million tones of lithium. The lithium alone was said to be worth $45 billion dollars. When I read that it grabbed my attention, I didn’t have to work out what the big deal was, it was obvious to me and as it turned out, it was obvious to everyone else. ADY gapped from 40 cents to open at 45.5 cents and the next day reached 67 cents, a 67% increase.

A word of warning about trading news disseminated by the materials sector. Companies from the materials sector often put out news that begins with, “Company XYZ are pleased to advise the shareholders . . .”, followed by a complexity of numbers, percentages and minerals. For most readers these numbers and the obscure explanations that come with them may as well be written in hieroglyphics. So even if a company is pleased to be telling you something, tread very carefully if you don’t understand exactly what it is they are pleased about. In the case of ADY above, the scientific was also put in lay-persons terms. I knew what 400 years meant and that $45 billion was a lot of money. If a company really wants you to know something then they are likely to spell it out for you. If they haven’t done that, be suspicious.

If I am unsure about the trade then I step back and watch what happens. If this trade is going to take off because of the news release then it is likely to do so either straight away or at least within the first couple of hours.

The market depth is also a key indicator. If the market depth is not a hive of activity, then I don’t get involved. But be careful of news driven stocks whose indicative open is a significantly exaggerated increase on the last trade. Such enormous gaps can end up being the high of the day.

My research (on a limited sample), indicates there are about 12 “resource discovery” driven rallies each year which generate returns over 100% within 1 or 2 days. Most of these stocks will die a nasty death on or shortly after, the second day.

- Peter

"TRADE WHAT IS, NOT WHAT MIGHT BE"

mum

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Sunday, January 06, 2008 - 02:00 pm:

Some Iron Ore points to keep in mind
Found this posted on our forum under TTY

Rio could trample iron minors
By Tim Treadgold

PORTFOLIO POINT: It’s plan to treble output of haematite, the higher-quality iron ore, would wreck the prospects of small magnetite producers.

When elephants fight smaller animals run for cover. It’s the same in the corporate world, which an entire sub-sector of the iron ore business is about to discover as it becomes potential “collateral damage” in the battle between Rio Tinto and BHP Billiton.

Yes, the BHP move on Rio is good for iron ore stocks but only haematite iron stocks. For magnetite iron stocks, it's very bad news. And the magnetite iron sector houses some of the best known punters’ favourites in the mining industry. There's Gindalbie Metals and takeover target Midwest Corporation, along with Atlas Iron, Cape Lambert Iron, Grange Resources, Australian Resources and Goldstream Mining. If you have bought – or are about to buy into – any of these stocks think, again. Here's why:

Magnetite miners were already in trouble but this week's Rio Tinto defence has loaded the odds against them. Rio has revealed plans for a spectacular increase in the production of haematite, possibly trebling output from about 200 million tonnes a year to more than 600 million tonnes, with 420 million tonnes coming from the Pilbara region of WA.

That expansion, which represents a dramatic acceleration of mine development plans, is designed to give Rio Tinto a bigger slice of the world iron ore market than it already has. However, it also means much less room for new, high-cost, miners – and the newest and highest cost are the magnetite hopefuls.

Put simply, magnetite is an inferior ore to haematite – and it's haematite that's preferred by the world’s major iron ore exporters, including BHP Billiton, Rio Tinto and the big Brazilian, Companhia do Vale Rio Doce (CVRD) – and, from next year, Fortescue Minerals. It's also the iron ore preferred by all the miners in my October feature Iron ore’s hotter prospects.

Why are the magnetite miners heading downhill?
The ore itself contains much less iron. Typically, haematite grades 55–60% iron, while magnetite is 30–35%.
Processing magnetite involves physical separation of the iron and the waste rock, and then intense heating, before conversion to a semi-finished product such as high-value pellets.
While the physical separation process is easy (as the name implies magnetite is strongly magnetic), the heating requires very large amounts of energy – a luxury at a time when the oil price is approaching $US100 a barrel, and coal prices are rising in sympathy.
The capital cost of magnetite processing is also high. None of the planned projects in Australia come in at less than $1 billion, and raising the debt component for all resource projects has become a lot harder as banks retreat under the sub-prime credit onslaught.

In a resources boom, when supplies are tight and prices high, mining and processing magnetite might make sense although very little of the material is transported over long distances without expensive upgrading.

Of course, those mining magnetite iron won't agree. True believers in magnetite argue that it is the iron ore of the future, that Chinese customers are comfortable working with it, and that Australia is endowed with vast deposits of the material.

They’re right on all three claims. The Chinese do want it, the outback of WA is littered with trillions of tonnes of the stuff, and it is an ore of the future.

But, those same Chinese steel mills that say they will buy magnetite, and are willing to invest in Australian projects, will soon be offered increased supplies of haematite thanks to existing expansion planned by CVRD and BHP Billiton, and even more now that Rio Tinto is running scared from BHP Billiton’s marriage overtures and seeks to impress its shareholders by expanding faster than anyone else.

The deciding factor for customers will be price and reliability of supply. On both of those measures haematite, whether from a mega-miner or one of the smaller producers, will be the winner.

What this means for stockmarket values is:
Companies offering a pure magnetite investment proposition, such as Grange, Cape Lambert, and Australasian will struggle. They might prosper in the future but it could be a very, very, long wait for a dividend cheque. Best advice: sell.
Companies that offer a mixed haematite/magnetite investment proposition, such as Gindalbie, Midwest, and Atlas, are almost certainly over-priced. They will make money from selling haematite, but they will struggle to raise the capital or secure energy at a reasonable price to make the jump to magnetite production. Best advice: sell.
Companies that are pure haematite propositions, even if small, have the appeal of production simplicity, and customer preference in their favour. Stocks such as BC Iron, Yilgarn Mining, and FerrAus are following the KISS principle of “keep it simple, stupid”. Best advice on KISS stocks: buy.
The debate over magnetite and haematite is broadly similar to the historic debate of replacing high-grade “sulphide” nickel ore with low-grade “laterite” ore, the key being that there is much more laterite ore in the world than scarce deposits of sulphide material.

But, that comparison fails two tests.
There is no shortage, yet, of haematite as Rio Tinto is demonstrating by casually rolling out a plan to triple output.
Processing laterite ore has been a disaster for everyone who has tried it. Anaconda Nickel (now Minara Resources) was almost destroyed by design failures. BHP Billiton has been hit by a doubling in cost and time at its Ravensthorpe laterite nickel mine in WA.

Sad as it might be, the simple truth about mineral processing is that Australia is not very good at it. High internal costs, such as long transport distances, expensive labor (and potentially getting more expensive), and high energy costs mean that more processing plans fail than succeed.

In WA, an epicentre of the current global commodity boom, and a centre of past booms, there is an appalling record of processing failure with the common thread being high energy costs and distance from markets.

Today’s “magnetite promotion boom” has the hallmarks of booms (and busts) past.

Readers with long memories will recall the time when WA was going to be home to a number of steel mills. In fact, the requirement to build a steel mill is contained in the original iron ore access agreements signed with the WA Government in the 1960s by the corporate ancestors to the modern BHP Billiton and Rio Tinto.

There are no steel mills in WA. But there are: a failed blast furnace at Kwinana; two failed iron pellet-making plants; and a failed hot-briquetted iron plant (that almost crippled the John Prescott-era BHP). There might be a successful HIsmelt plant.

It’s the same with plans for petrochemical plants along the west coast (Alan Bond and the late Laurie Connell promised one of those); numerous chlor-alkali plants converting salt and natural gas into caustic soda and plastics feedstock (none yet); paper pulp plants; and aluminium smelters – to name the best, and least successful.

Magnetite, despite its undoubted potential, is just the latest boom-time commodity, and it faces the same hurdles as all previous west coast boom-time commodities:
Isolation and long transport distances.
High energy costs.
Poor, or non-existent, infrastructure.
Dithering government.

Chinese demand for iron ore lies behind the rush to develop magnetite processing plants, and while one or two might be built they will be the high-cost source of iron and will deliver investment returns (if any) far below the simpler haematite mines of BHP Billiton, Rio Tinto and some of the smaller miners.

For the final test of this investment comparison between magnetite and haematite consider the level of involvement by BHP Billiton, Rio Tinto and CVRD in magnetite – zero. What else do you need to know?

qed

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Sunday, January 06, 2008 - 10:18 pm:

and the really frightening thing is ....WA ....nah she be right

krael

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Thursday, January 10, 2008 - 08:04 pm:

Grades bugged me for a while also. I think its hard to find definite numbers on acceptable/good grades because whats economic will also depend on depths/widths/lengths of the orebody, overburden, current metal prices, infrastructure (especially with bulks (coal,iron) where its so important how cheaply you can get it to customers) and plant/processing expenditure.

The mining valuation handbook by Doctor Victor Rudenno I found informative (some went totally over my head).

A few chapter headings-
Feasibility studies
Resource project considerations
Capital and operating costs
Valuation and pricing techniques
Cutoff grade theory and practice
Commodity profiles

And in the end you still have to worry about sentiment and crazy investors/traders effecting the SP. :-)

PS. I got the book from the moneybags website I think it was but I've seen it on a couple of other book and investment websites. Shouldn't be too hard to find. Published by Wrightbooks if that helps. 2004 print so the price info included is a bit off.

(Message edited by krael on January 10, 2008)