Well there is no feasibility done on the ground. On the other hand there were three mines operated on the ground. And there were 20 drill holes drilled on one property. After 25 years in this business, you get to know what the potential for ground that is drilled, and mined is.
But generally bankable feasibilities cost money. Few claims in companies on the VSE have them, they must be done by third party egineers to standards set by the exchange in order to establish reserves. The standard for a reserve is that it must have drill holes at certain spacings, and drifts or horizontal tunnels above and below the ore. Probable ore has greater standard of drill spacings and may not require drifts below the ore. Potential ore, as an exchange derived term, has still greater spacings up to 200 feet between drill holes perhaps.
These are legal terms defined by the stock exchange for public companies that are not producers. Engineers reporting to companies that are producers, may go by a different standard, that is acceptable to the company internally for their planning. I know that Dome Mines will call a reserve only what they have drilled at 50 foot spacing, drifted through above and below, channel sampled and in some cases in non mined ore areas, tower sampled or trial mined.
The way it works in the industry, is that buyouts for net smelter returns royalty or gross profits royalties are set by the seller for buyout at some arbitrary figure that most companies will entertain a smelter return might be worth after some sort of feasibility is done. This can be anywhere in practice from 500,000 per percent to 2 5 million dollars CDN. Generally you do not buy them out until you know you have a lot more ore than the percentage is worth. The only case I know of where a buyout was done and it was worth it on the selling side, was the deal negotiated by Larche and Mackinnon on the Hemlo claims. They made their smelter return royalties convertible to shares at two million shares each per their royalty. This came to be worth 50 million each.
The buyout Verbiski and Chislett negotiated on the Voisey Bay claims in Labrador was worth more, but was turned down by them and that was 150 million. That is called insanity as I would have grabbed it in a nano second. The buyout on the Texas Gulf Kidd Creek claims accepted by the patent owner was worth 38 million in 1964 and they had to sue for that. Non of these buyouts could be assessed until much drilling and work was done.
I can know the potential and probable ore that is there. But to absolutely state what may lie on strike, or at a depth of 2000 feet, perfectly possible to mine, I do not know. I can state it is probably there but I am not god. On the other hand I went to school to take geology and worked in many gold mines, so I can state the worth of drilling down that deep with great confidence. I would be insane to state I would take X dollars for it right now, if I could not positively state what it is worth to the dollar. I can say there is most probably by the great amount of work done, the mining, surface sampling, the gold in the tailings pond, and the drilling that there is good ore there. It is worth taking a chance on. But exactly how much to the penny so I am happy with cheque right now? I am not willing to say. Lets drill a few hundred holes first, then we both know.
In other words, you take your bets on properties based on what you know about the probabilities. Everyone does that. Some people's judgement is better than others. I like to think, perhaps naively, that any place you get 12.0 ounce samples on the surface, they mined 100,000 tons of one ounce per ton, has tailings ponds of 0.30 ounces per ton, and one ounce per ton, has 20 unmined drill holes on it at 6.0 ounces per ton, and has proven ore in three places up to to 1000 feet deep, is worth taking a chance on. So does the Msc Geological enginner I paid to make report on the area. He recommended work. He has to know it is worth if for his reputation to do that.
But that is just my judgement. Perhaps I am fooling myself. Perhaps I should be prospecting desert dirt in Nevada.
If I said I wanted X dollars for ore that is unproven to reserve standards, then I might be blowing smoke unless there is good paper in existence, done by unimpeachable people. But if say it is worth spending 2 million to establish a feasibility or any other amount for that matter, then it depends on the positive indications of mineability that I say are there. And they are, by my experience, there.
My experience with most companies is that what may a priori exist, in order to engineer a mine and locate veins, you have to drill and do your own work. You cannot establish the absolute unimpeachable grade, or the absolute 3 dimensional location of the vein, unless you drill it yourself and survey the holes in. And it would help to do your own metallurgical tests. And if raising more money is necessary it would help to hire a 3rd party qualified engineer to sign off on all your results and have chain of custody on all your samples.
No matter what the orebody or property tells you by back of the envelope or seat of the pants calculation, which may be in the end as right as rain, this is how it is done.
You have to go in and do the work no matter what. I know a few "turn key" mines, but get out a big checkbook to make them happen. Generally the people have sunk in 15 to 30 million dollars to get to that stage. On the other hand they have 500 million or more ore proven by exchange standards.
You may want to start with something a bit cheaper, that still has undeniable potential.
EC<:-} |
