Understanding exploration results

While the bulk of ASX's mining investors are made up of mineral explorers and miners themselves, resulting in announcements that are filled with industry jargon, the average investor may need a little more insight into what to look out for when investing in metals and minerals. We are here to help you, starting with understanding exploration results.?

The exploration process

Once a discovery has been made the next steps are for explorers to determine its economic viability to see whether they can be commercially extracted and whether future mining is possible. This is followed by an assessment of the mineralisation grade.??

1. Economic viability

There are two important things to take into account when assessing mining exploration results:?

• The depth of the intersection; and?
• The size of the intersection.?

The larger a mining zone is and the closer it is to the surface, the more economical it is.?

Other factors to take into consideration are:

• Its location; and?
• Potential operating costs and Capital Expenditure (CAPEX).?

When looking at the location it is important to consider if the discovery is in a new area or whether it is positioned near an existing mineralisation. A project located in an established mining area with access to transport, processing facilities and other infrastructure is considered to be more attractive due to the lower operating costs and CAPEX.?

2. Mineralisation grades?

The second thing to determine is the mineralisation grade. This essentially refers to the concentration of a particular mineral within the rock which is either expressed as grams of target minerals per tonne of rock to be mined (g/t) or, in the case of precious metals - such as Nickel and Cobalt, a percentage (%) of target mineral within the ore.?

Typically, Nickel grades above 2% and Cobalt grades above 0.1 per cent are considered high-grade.?

When reviewing grades, it is important to note the sample size. The more drill holes intersecting the orebody, and the larger the individual sample size, the higher the statistical accuracy of the data.?

What comes next?

Once the economic viability and mineral grades have been recorded, explorers need to compare all of their findings as the context and combination of results determines whether findings are attractive or not.?

For example, a low grade intersection with a high depth will not be deemed attractive since low grade deposits are only relevant if they can be mined in an open pit. Contrary to this, a high grade intersection with a high depth can still be viewed as attractive.?