Hi Folks,
December 17, 1997
A little controversy has developed over my questioning whether or not to prove up assay methods before proceeding with process development on new prospects. My goodness, a little common sense and I will help explain my concepts here a little bit better.
Historically, a prospector went out, discovered a prospect, sent the possible discovered ore to an assayer with a ton of experience and a vast understanding of rock chemistry for an assay and the process began. Charles O. Parker was such an assayer. Later, after a number of channel samples, larger sample splits were sent to custom milling plants for amenability tests. Some custom processors might reject the ore, others might make offers, others might offer to mill on a toll basis letting the prospector take his chances to find a market for the concentrates. The prospector usually had grub stakers (investors) that used the assay. The assayers reputation to do custom assays was important as a criteria to go forward with investment funds. Out right loans were available to prospectors from the United Bank of Denver and other larger and private lenders. Assays plotted into reserve models usually by the Anaconda Method of ore reserve calculations and sometimes supported by drill hole calculations were valuable financing criteria. Good custom mills were available in this state all the way up to the early 1960s. In 1960 Charles O. Parker was there to help also, as were a number of elderly old salt assayers. I was told by an executive of the United Bank of Denver, that for 30 years the bank had not lost money on a prospector loan. But that was then. Thirty years ago. That era died. It is dead in my opinion. Dead, dead, dead. But the custom of getting assays and soliciting funding continues.
Now when I say that the era died, I understand full well that the "old way" seldom changes easily. C.O. Parker is dead and so is his kind. He is followed by a number of non-custom assayers using assays that follow standard methods he never accepted. The new methods pursue predictability as more important than accuracy. But not all ores are or ever were standard or reliably predictable. Gone is the custom processing mill also. Gone with the custom processing mill are the likes of Wayne Hazen, a pioneer that helped many difficult ores to become successes with his process inventions, chemistry developments and most of all his respected reputation for pioneering into new areas of potential mineral developments. Wayne's field too has become al,ost as standardized. Only recently has some innovations of old ways started to emerge with re-deployment of old techniques to recent deposits by the majors mining companies in a few selected resources, including gold.
Another, problem the junior mining company has encountered is the mega-mine concept. Enormous ultra low grade mines with no prospects of a future in the past are the producers today. These mines process millions of tons of ore and waste each year. The ore is produced to dore' on site. The metal is sold as dore' right from the mine, no middle men. These companies can support professional staffs that will match a university for experts.
But the junior mining company must make the talent resources meet the needs or the project fails. Both the large company and the small companies that cannot solve their problems, wind up hiring consultants to share the blame where no blame should be shouldered.
So the follow the masses syndrome continues. It continues without leadership. That is find a deposit, try to convince some analytical expert without practical long terms custom assaying experience that your deposit is "real" and then try to get "investors" to purchase the contents of the package in the belief that production is around the corner. Well guys, the rules are changing. The investors are not going to pay for junior mining companies to run tutorial shops for assay offices that do not understand them any way. You have heard of the Certified Assay. Boy is that a "Crock". There are ten thousand assay procedures in the "Naked Desert". Who is to play the "supreme assayer in the sky" and choose the one that is qualified to be certified. Furthermore, who selected the bozo that is usually assigned with the job of doing the assay. The Certified Assayer wears a white shirt and tie and meets you at the door. When you leave he hands the sample to bozo. "Here assay this" he says to bozo.
Enter Voisey, Bay. I understand they had assay problems getting accurate nickel assays and even the petrologists missed the boat on that one. But persistence paid off, a new assayer found the nickel and the deposit was accepted and sold. A several billion dollar mistake turned out to be the success story of the last 20 years.. Then follows the junior mining company DD exploration companies. Bre-X is at the top of the list. New believers were born. Assay difficulties reported, no one listens, great masses of ore, the biggest discovery in a century. Due diligence, conservative institutional investors came in as did the masses. Yeh, everything was there except for production. And the whole thing was a fraud. In all of these enterprises there is no substitute for honesty. That was not there in BRE-X. Down came the Bre-X clan and down came the juniors with them. While the finance frenzy was on and if it had lasted long enough, I believe one or two Juniors might be seniors and producing right now. But instead we see mega-bucks going into due diligence. Due diligence never filled an ore box at the mill either. Bu due diligence has lined a lot of peoples pockets at investors expense. The investment community needs and deserves more. They know a gamble when they see one. But the wasting of their precious money is more of a gamble than they should be willing to take. Forget the past. The future is now. The custom mills are gone and producing companies are needed as are refineries specializing in variable quality products.
So lets use my view and opinion to dispel some myths.
Proving up the assay will make the deposit marketable to a major. Not so, You can probably tell me about the companies that have recently proved up their assays. Are major mining companies seriously looking at them? The answer is no. The reason is that even the major mining companies can no longer finance anything less than standard models through the normal banking channels. So lets send the ore to a custom plant, sell some. That will convince the skeptics. Than we will show our new proven assays and we can sell the deposit or get bank financing That worked in 1880, 1900 and even 1960. Oops, no custom plants. Well, lets get Wayne Hazen to put his respected custom methods approval to the methodology. Nope, he is gone too.
I had better continue, because if I quit here we are all through. Another myth is that there are numerous procedures that will produce commercial production from DD resources. Well, that is probably true. But most will never be engineered to commercial production. You see, the methods of scaling up have to address to many issues that most metallurgical types don't even understand. So my fellow colleagues play around in batch plants and pilot plants with massive engineering problems due to technical difficulties they do not understand. So here is another reason no major mining companies join the Junior and why the bankers run when DDs are coming in for loans. Mountains or Precious metals resources don't matter anymore. The investment community has spoken loud and clear. Listen up. I do not doubt that most if not all of the DD companies have natural resources that can at times and by some method show the analysis of precious metals. Some have gone through due diligence of their respective assays to good labs and have some kind of a certificate in hand. Others have just not gone that far, maybe for no other reason but the lack of the millions in time and money it may take. So there you have it. Which company has the best assay procedure, I do not care. Which company is in pursuit of production and is the closest to making the prospect work. Yes we all should pay attention to this one; especially if their geology indicates a reasonably predictable reserve subject to processing. Times have changed. When we had custom plants, junior mining companies could start mines and exploit reserves. Today, the base of the exploration industry or should I say professional prospectors business is gone. We must adjust accordingly if new mining is going to continue in North America. Speak out investor community. It's your money and you should make the rules.
The solution is to identify the geological reserve. The deposits that show the precious metals by any method are worth taking a closer look at. Now get a professional geologist to estimate the size and magnitude of the reserve as a geological mapped unit of prospective resource. Remember, most DD deposits will be mined at less than 5,000 tons per day, so a billion tons is not important. 10, million profitable tons after project pay out is an important worthy target. No one looks beyond a projected mine life of ten years today. And with out process methodology, the deposit will last forever no matter how small it turns out to be. Are available resources that might help improve the potential of the prospect near the prospect. Assume 2 tons of new water or more per ton of ore capacity and available land that is not too environmentally restrictive. Is high voltage power near the site. Can local power generation be reasonable developed. This is what we have to start with. In this geological resource there may be targets that are more favorable than others that are less favorable. This is determined with preliminary extractive metallurgical work. Assays that work, even inconsistently might help in determining this criteria also. And do not over look some of the processes that are practiced by backyard bucket and bathtub chemists. Some of these might take some work before being commercial. I realize that most will be too awkward to be commercial. But pay attention to some of these bucket bubble scientists. And with a mixture of good people working together, moving in a production oriented direction and with prudent management (common sense management), the mine will develop.
The development funds will have to come from private or equity funds. Companies that have followed other courses have not done so out of error. They did what has been done using standard exploration practices for more than 100 years. Before that there were no custom processors and like today, the rules were different. Before the custom processors, the miner came out and mined without support custom industries. Today there are no custom processors and I believe the rules are again different. It is not the mountain of gold that has a dimes worth of value. It's is the ability to produce a dimes worth of gold profit from the mountain. And financing dependent on selling futures will be dependent on track histories and reserves at that time. And the big mining companies will come after the better mines to get the attractive productive reserves, but also to get at the technology that has come the hard way. The other way has been with us for a hundred years. It worked for 60 or 70 of those years. The last 30 years it has failed the investor community miserably. I am no ready to give up. But to follow the history of the last thirty years is the work of a fool. At least that is my opinion. mike
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