Why That ‘Screaming Gold Hit’ Probably Won’t Make You Rich

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.

In our last edition, I explained the importance of focusing on junior miners finding strong grades… That’s because higher-grade deposits are typically more profitable to mine.

But I also detailed why there are other factors to consider… Especially the SIZE or width of the mineralised zone.

In fact, scale is often the key feature that gets projects over the line.

Here’s why it matters

Ever wondered what the typical price tag is for a new mine?

The minimum CAPEX for most new mine developments typically starts at a whopping $1 billion.

Of course, that varies depending on the type of commodity… Gold is one of the few metals where smaller operations can still be profitable.

However, for the most part, a deposit needs to be substantial to justify the massive investment in infrastructure and transportation routes.

As an investor in junior mining stocks, it pays to put yourself into the shoes of a future mining engineer, which will give you a more realistic view when interpreting a company’s drill hole results.

Will a few centimetres of high-grade gold make it into production? Not likely!

Even at the very early exploration stage, you can start to scratch a lot of junior mining options from your list.

Another factor why your focus should be on WIDE drill hits:

And this, again, comes down to the FUTURE economics… Mining equipment is typically oversized today.

As I explained last week, using large equipment to mine a narrow high-grade zone means diluting the mineralised portion.

What do I mean?

Mining excavators typically scoop up to 30-50 tonnes of rock at a time.

The Caterpillar 6090, known as one of the world’s largest excavators, can scoop up to 103 tons in one load!

So, given that most modern mining equipment tends to be ‘oversized’, extracting narrow high-grade zones is not usually feasible.

So, to hammer the point…

While a screaming gold hit over just a few centimetres might make an impressive headline, it probably won’t be viable in terms of future mining.

But that’s not to say that the project is dead… Far from it!

One vein rarely makes a deposit, but it can flag the area as prospective for discovery.

That’s because mineralised veins tend to ‘feed off’ a primary source.

Think of it like this…

Mineralised fluids containing elements like gold, copper, and silver once flowed through the rocks that lie beneath us, millions of years ago.

And the vein is like the mineralised fluid FROZEN in time.

But these fluids had a beginning and an endpoint… And it’s up to geologists to find the source!

You can think of it like a giant lake that once fed all these mineralised veins or tributaries through the rock.

The source of mineralisation is what most geologists are trying to uncover.

The minor high-grade hits are just the clues that help geologists eventually discover the motherlode!

Digging into the weeds…

Okay, we’ve established that narrow high-grade hits (by themselves) are difficult to mine.

So interpret them for what they are… Essential clues that could point to something much bigger below the surface.

But there are occasions where veins can be profitable to mine… Like when they’re found as a cluster or as a dense group.

Geologists refer to this as ‘stockwork veining’. Here’s an example of what that looks like:

Source: Research Gate

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A chaotic tangle of mineralised veins, densely packed together, can host rich deposits by adding to the overall mineralised tonnage.

And as a geologist, this is precisely what you want to see…

Rocks that have been torn apart, altered, fractured… a mess!

That indicates the area is active, having experienced significant tectonic movement and fluid flow.

Stay tuned for the next edition in this series.

Until then.