Geology for Investors: A Focus on the BIG THREE, Grade, Depth, and Width

Over the coming weeks, I thought we’d spend some time upskilling our geological knowledge.

I’ll keep these updates brief and concise, distilling the key aspects of geology that matter for investors.

Our focus is zeroing in on the ‘practical side’ of geology and how it can bolster our investment decision-making.

So, let’s start with this…

Are there fixed rules for investors to follow?

Well, geology is a very inexact science, so no, not exactly!

Ask two seasoned field geologists to give their opinion on a deposit, and they’ll likely give you two very different answers!

Here are some questions they might debate…

Is mineralisation ‘structurally’ controlled, in other words, is the target metal bound up inside features like faults or shears?

Is there a primary source for the background grades encountered in some early exploration drilling? The motherlode?

What minerals are associated with the gold in a particular district, and does encountering them give us direct evidence that gold could also be found?

For example, a mineral known as arsenopyrite is a key indicator for gold across much of the Eastern Goldfields of Western Australia.

It’s the next best thing to actually FINDING gold, because its occurrence relates strongly with this precious metal.

These are all great topics for a couple of sunstroke geologists who have spent days out in the field to chat around the campfire at night with beers in hand and imaginations running wild.

But…

Details like these are probably digging too far into the weeds for the everyday investor.

And probably not offering much in terms of whether an explorer is worth their time or investment!

So, here’s where most junior mining investors should be directing the bulk of their effort when trying to unearth high conviction plays in this sector:

The BIG THREE: Grade, Depth, Width

As an investor in early-stage exploration companies, you want to find stocks that can deliver on the ‘Big Three.’

First up is the GRADE.

This refers to the concentration of metal in a particular rock. It’s usually the core focus for investors.

Higher-grade deposits are typically more profitable to mine. And that’s why ‘grade’ often takes centre stage in exploration announcements.

But as an investor, it’s essential to understand that grade is only one piece of the puzzle in understanding drill hole announcements.

Why?

Think about it like this…

When it comes to mining, EVERYTHING is oversized.

Dump truck tyres larger than the size of a car…

Excavator buckets big enough to scoop up an entire caravan in one bite!

So, with that in mind, you need to put grades into context.

Exploration companies often declare ‘blockbuster’ grades to get investors excited, even if it’s just a few centimetres wide.

But what’s the probability of actually mining such a narrow high-grade zone with modern mining methods?

You see, large open-pit excavators can scoop over 70 tonnes of rock at a time!

Any attempt to mine a narrow high-grade vein with this type of modern machinery would dilute the ore.

That’s because the bulk of the extracted rock would consist of barren rock.

These high grade veins were keenly sought after by 19th-century miners who used picks and shovels, and chased them by digging shafts and adits.

But under most circumstances narrow high grade intercepts aren’t useful for modern day mining.

That’s why SCALE tends to win out in today’s era of profitable mining, even if that comes with lower grades.

But that’s not to say that a NARROW high grade drill hit isn’t useful, far from it!

In our next edition, I’ll detail the real reason why you should watch companies hitting narrow but high grade zones.

Until then, have a great weekend.