Or so says Bob Moriarty of 321Gold.com. And Bob should know having followed the Novo story from back when it was trading at a quarter.
“In placer mining you can make money at .2 g/t gold. With today’s price of gold, that makes a cubic meter worth about $8. As a rule of thumb, it costs you about $1 to move a cubic meter. The key to being profitable is to move the material as few times as possible.
Digging out a cubic meter of gravel with an excavator costs $1. Putting it in a dump truck costs $1. Running it through the mill costs $1. Taking the tailings and stacking them in a waste pile costs $1.
This is where Novo’s latest press release scared those who are servants to 43-101. Novo reported two assays, one of 10.4 g/t gold and the second of 1.5 g/t gold. But those are tons and you have to convert to yards and cubic meters to compare. 1.5 g/t is $60 rock if you think hard rock but it’s $150 rock if you understand you are mining placer.
Placer miners need to have some rough idea of grade. While there are reporting requirements, every placer miner understands the grade is nothing but a guess due to the variation in grade from one spot to another.
Determining grade because 43-101 says it’s a requirement is bullshit. The Romans didn’t do it, the Spanish didn’t do it and Novo doesn’t need to do it. The only value to knowing grade is to make a mining decision. And the chatboard cowboys who seem to know everything have forgotten or never knew why we drill to make a mining decision. Is it profitable or not? If it is not, move on.
The 43-101 regs make a lot of sense for a lot of projects; but they are not one size fits all. Trying to come up with a 43-101 compliant resource estimate in the Pilbara may be a fool’s errant.
If this really is some sort of paleo-placer there is no point in drilling it (other than for structure and width) because you will have only a random chance of hitting one or more nuggets. Unlike vein gold or finely disseminated gold, the amount of gold contained in one cubic meter of conglomerate may be entirely different from the gold contained in an adjacent cubic meter. The statistical estimation techniques which work well for standard gold deposits may be entirely useless in the Pilbara.
Which brings up an interesting point which I don’t think Bob has addressed in his very fine piece: leave aside trying to get a 43-101 resource estimate, what the hell do you do to come up with a mine plan? The runs of conglomerate go for kilometres out in the Western Australian desert. They are sometimes right at the surface and sometimes beneath overburden. While the question of how this gold bearing conglomerate got there and what controlled it remain open, the challenge of actually mining and processing the material is immense. Because there is no reason to believe that the mineralization is contiguous or consistent. It might be. But essentially Novo and the other companies in the Pilbara would be mining blind because none of the tools explorationists use to outline deposits seem to work with these conglomerates.
One way to proceed – assuming a company could get permits – would be to try and strip out all the conglomerate and then process that bulk material. If the achieved grade was high enough, the wastefulness of this approach would still make economic sense. And the fact is there may be no other way to proceed. It would be a risk, but not a huge risk, to mine “blind”. But the work Novo is doing now in trying to delinate the structure of the conglomerate will reduce that risk. Placer deposits, as well as being nuggetty, are also lumpy with barren areas and areas where the gold has deeply accumulated. Processing the material as the company finds it may be the best, and only, way to determine if Pilbara is another Wits.
Moriarty thinks it could be and Bob tends to be right about these sorts of things.