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Gold/Mining/Energy : Silver Bull Resources, Inc. -- Ignore unavailable to you. Want to Upgrade?

To: roto who wrote (429)	1/29/2007 2:41:44 PM
From: Mr. Aloha	Read Replies (2) \| Respond to of 5637

A cutoff grade for a resource is the breakeven grade level. It's assumed that only mineralization at that grade and higher will be economic to mine. Mineralization below that grade level is considered to be unprofitable and is not counted in the resource estimate. When MMG was defining their zinc deposit, zinc was about .35/lb. Now it's nearly 5 times that. At .35/lb, 5% zinc means that a tonne contains 110 lbs of zinc valued at about $38.50, so MMG chose that level as a cutoff, as they conservatively expected they would break even at that grade. At current prices, 5% zinc means a tonne contains over $175 of zinc. Even though mining costs have gone up, they haven't risen nearly as much as the price of zinc, so MMG is likely to be able to use a far lower cutoff grade. Even 3% zinc means a tonne contains over $105 of zinc today. With their relatively low costs, far lower grades than that will likely be profitable to mine, especially if they'll be able to use open pit mining. Open pit zinc miners use well below a 1% cutoff grade. MMG proved out 5 billion pounds of zinc using a 5% cutoff grade (http://www.metalin.com/03-18-05.pdf ) -- 3.5 billion pounds for the Iron Oxide Manto and 1.5 billion pounds for the Smithsonite Manto. If you use a 3% cutoff grade, because you're including mineralization grading between 3-5%, the Iron Oxide Manto contains 4.4 billion pounds of zinc, 26% more than at the 5% cutoff, with a lower average grade. A lower cutoff grade than that will increase the estimated contained zinc and decrease the average grade. When comparing different projects' resources, you have to keep in mind the assumed cutoff grade. I've seen projects which will likely have far higher costs than MMG assume a much lower cutoff grade, thereby significantly boosting their resource estimate. A number of projects have a lower than 3% average zinc grade, whereas MMG doesn't even count their zinc at that grade in their estimates. If MMG used the same aggressive cutoff assumptions as some other companies, their resource estimates would be much higher. The cutoff grade that ends up being used in a bankable feasibility study and then actual production will depend on the assumed metal prices and production costs. While some companies aggressively assume they'll be able to make a profit on lower grade mineralization, MMG has chosen to be very conservative on their assumptions. This conservativeness makes the likelihood of a disappointment much lower for MMG than for other zinc miners.