Drill Result Analysis Part 1
A Plea To All Explorers
Please put all your drill results into a downloadable spreadsheet. It is super annoying to copy/paste all your drill result data from all your press releases.
Overview
Pre-discovery you are mostly watching for if your explorer can find a grade thickness (grade in g/t times thickness in m) of at least 100 and hopefully 200 (g/t*m). You can build an economic resource without these types of big hits, but it is very rare.
Once you are convinced they have found something the question then becomes about how well their drilling is adding economic ounces to a potential mine. Eventually all the drillholes will get entered into software that will apply geostatistics and a geology model and spit out some resource numbers.
I'm a simple man, I want fifth grade math. Not because I can't do more advanced statistics, but because at this stage the raw data is so rough we are just looking for the feel of it. We don't want to be precisely wrong, we want to be roughly right.
This is how I look first pass at underground drill results. Worth noting that open pits are a different animal, as are bulk tonnage underground block cave operations.
Filter 1 - Minimum Width 3m
Pictured is a modern underground jumbo. Modern mechanized mining with machines like this really works best if you have 3m wide faces. If you are mining narrower than this you can use different methods that are more efficient, but your cost per ton of rock moved go up. Narrow veins also have more dilution and continuity problems.
Am I going to overpenalize some consistently narrow high grade results this way, maybe. I hope so. I hate those types of deposits.
Filter 2 - Minimum Grade 3g/t
There are different types of cut-offs in mining. If I have to move it as waste anyway would I go ahead and run it through the plant? If it's right next to ore I want to mine but not in my way would I grab it while I was there? Is it good enough that I would intentionally target it for development?
3 g/t is an arbitrary line in the sand, but if you are spending much time underground mining less than that you have to ask yourself what you are really doing with your life. 5 g/t would be better, and on average you want to be over that, but 3 g/t at least weeds out stuff that is less likely to get mined.
I'll also use a higher cutoff grade in other jurisdictions. But really at this stage any cutoff at all will clean up the data a ton.
Bold The Money Makers
3m or more in double digit g/t Au is where the money is made. Mark those in bold. The 3-5g/t ore gets sent to the mill, but it doesn't make a mine. It's the high grade that makes you money.
WAG Grade
This will be way off from the actual 43-101 or JORC numbers in a maiden resource or PEA, but we've isolated the kind of economic intersections by applying some cutoffs and dilution. As a result, maybe we have something that resembles an average ore grade for the mine. If we squint. It's a Wild A Guess kind of average, and would be better over a sample size that was a lot more drill holes, but it's still kind of useful.
The calculation is pretty simple, we add all the grade * intervals together and divide by the total intervals.
Example Kenorland August 8 Drill Results
I'm long KLD.V and like how they disclose their drill results including showing residual grade so I don't have to go calculate it myself. Great company. I also like this deposit. This press release is a small number of holes in the deposit, so it's not necessarily representative of the deposit overall. But I find it's always better to write about things with a concrete example.
Original Press Release
Quick Google Sheets Applying filters
Let's walk through what we are looking at.
23RDD165A
The first couple sections are below cutoff grade, so we cross them out.
The residual of the third section is below cutoff grade so we cross it out and dilute the smaller interval to 3m using the residual grade. We get very marginal rock.
The next section is less than 9gm/t so it's going to dilute to below cutoff.
Another residual below cutoff with a high grade interval. Technically the diluted to is outside the wider interval range but there's half a meter on that side of residual so we'll assume they won't dilute with barren rock. But it's pretty marginal rock.
Another interval just below cutoff.
One more interval below cutoff.
23RDD166
Again, what survives are narrow high grade veins that get diluted by residual material. We get two diluted intervals that are above cutoff, one of them is very nice (bold in the spreadsheet).
23RDD168
A couple more marginally economic intersections.
23RDD169
Dud
23RDD170
Marginal
23RDD171
Dud.
23RDD172
Lots of marginal hits and one very nice money maker. More importantly for the purposes of this drill program the money maker was at almost 1200m depth and there was some sub-economic mineralization at 1400+ m depth.
23RDD173
Dud
WAG Grade
7 g/t is the average grade of the economic intercepts. For an underground mine in Canada that's actually pretty respectable head grade for a mill.
What Jumps Out
There are 3 money maker intersections, two of them are driven by narrow high grade, which can be hard to make hold together and requires tighter infill drilling to upgrade into M&I or someday into P&P. None of these holes are real bangers, but they do add more ounces to expand the size of a project that already had a lot of very nice drilling. The 3 money makers are fairly deep (one of them really deep) which is inline with a drill program aimed to show depth extensions of the existing deposit.
In a mine plan stuff this deep (1182m, 1403m in the drill, less in vertical depth) will be mined so far out in the mine plan that it doesn't really add to the project NPV. But to a major like Sumitomo you want two things in a mine. The first is quick payback with good grades that are relatively shallow. The project already had those shallower economic intervals and a couple of these holes increased the confidence of that. The second thing a major wants is some indication that it will be relatively easy to continue to extend the mine once it's in operation by replacing reserves. The old standard 10 years of mine life that keeps replacing depletion every year and runs for 50 years. A money maker hole at 1182m (which lines up with results from hole 159) gives some confidence that the mine will be able to be developed in the future to that depth, even if it doesn't end up in the official mine plan or add much to NPV in the present. That's a mine that will be mined for a generation. The additional low grade hit at the end of the drill limit at over 1400m gives a hint it might be able to be developed even deeper.
Recap
Using our example news release there's 40 drill sections reported in this press release. Just applying a basic cutoff grade and minimum dilution width only one of those intervals doesn't get adjusted or eliminated. The number of sections of economic interest in the adjusted numbers drops from 40 to 12. The number of bolded money maker intersections is 3.
Companies can't report drill intersections this way. But as investors we don't have to be limited in our analysis. Just a quick analysis that can be automated (if you write code) or semi-automated (with a spreadsheet) makes raw drill result tables much easier to interpret for an average junior mining investor.