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Monday, September 12, 2016

A challenge for you.

We've recently read that about several resource calculations that have gone astray, so I decided to give you a little test.

Here is a leapfrog viewer file (link) of the gold assays and veins for Dalradian's Curraghinalt deposit.

Your challenge is to pick which intercept is related to each vein specific vein.

It is an impossible task, but the idea is to show that in many deposits the mineralisation isn't typically in a single vein/manto/disseminated zone but is much more complicated.

We, the public, only get a simplified snapshot of the data. This is, for obvious reasons, presented in the most positive way possible.

I'll show you my interpretation if you show me yours!

Friday, September 9, 2016

Ana Paula - the figures

In my last post on AP I looked at the geology (with some great feedback from Rick Walters (I'm guessing that you aren't the legendary tattoo artist from California).

For the discerning investor it is hard to push beyond the huff and puff in the PRs as every gold project seems to be brilliant. they all have very low costs (cash, AISC), great returns (IRR and NPV), Ana Paula looks to be different, Timmins tell us, AP is:
  • Cheap to Build - $121.7M
  • Great Grades - 2.24 g/t Au over the life of the mine
  • Short payback period
I worked through the figures to see if I could understand a bit better why the figures for AP are so good, after seeing some nice 'tricks' in the Corvus PEA, I wanted to see if anything untoward was happening with AP.

The short answer - No, but the economic model is probably a little over optimistic. AP is a good project, and IF Timmins don't mess it up, they could have a nice long line of suitors looking to acquire them (e.g. Torex, McEwan, maybe even Tahoe?).

I found some minor issues with the economic model:
  • Milling rates - they assume that they will be operating at full capacity for the entire year 
  • No commissioning period - they are operating at 100% from year one.
  • 5% discount rate is fashionable, but 7-8% would be more realistic
  • $0 working capital
One question you have to think about is how will Timmins fund the development of AP? 

It looks like they can do it just from the revenue from San Francisco, which is generating ~$12M/quarter (at current metal prices), and they have ~$82M in equity (only ~$12 as cash), so if they are careful and don;t have any issues at SF, then they won't need to raise money by either  diluting the crap out of their shareholders or borrowing money at crippling interest rates.

Let's run through the AP Economic model.


Timmins have worked hard on reducing the Capex for AP by:

  • Buying the El Sauzal mill from Goldcorp for $8M (cash and shares)
  • Using contract miners so they don't need to spend capital on buying a mining equipment
    • this will lead to slightly higher operating costs
I went through and checked the numbers, and compared them against a couple of other operations and CAPEX values for open pit gold mines in Mexico, and they are inline with other operations.
  • Penoles built Velardena, a 6000 tpd underground mine for US$203M
  • Torex built El Limon, 8000 tpd for $790M
  • In comparison - Ixtaca (Almaden) CAPEX of $100M for a 8000 tpd operation looks to be unrealistic.

Working Capital

The only minor issue I found was the way working capital is handled. They have a small amount ($6.9M in year -1), but that is all returned in year 9 (when the mine closes), so it balances out. However it should mean that AP capex should be $6.9M higher at $128.6M.

I also feel that the working capital should cover 2-3 months operating expenses, around $15M especially to cover that tricky start-up period.

Mining Costs

Lets check the costs that Timmins are using - how do they compare to operating mines?

And visually
Ana Paula - PEA values, other = actual values from MD&As
They look OK, there are some differences because:
  • El Limon has a higher mining cost due to its higher strip ratio
  • Los Filos is an open pit mine and they recover the gold via heap leach (no milling)
  • El Sauzal costs are from 2013 and don't have values for G&A.
Nothing major, these costs are good and inline with current (and recently operating) mines.

Possible Issues

I've worked in some possible issues into an updated Economic Model to see how they could impact the NPV and IRR for AP.

1. Mill throughput

They bought a second-hand mill from El Sauzal, I know that it will be nicely rehabilitated and probably painted a beautiful shade of yellow and blue (or red or utilitarian grey), and they are expecting to:
  • process 2,160,000 tonnes/year at 6000 tpd plant
  • 2,160,000/6000 = 360 days/per the plant is operating at full capacity
  • or the pant will be operating at 5918 tonnes per day, every day.
So they are expecting to use the plant at full capacity for 360 days a year (I'm assuming it will get days off for Christmas, New Year, Easter, Independence day, and either Revolution Day or Benitio Juarez's birthday. That sounds a bit to perfect, was the plant that good when it was at El Sauzal?
not quite, but close
It wasn't bad, it average 350 days of operation per year at peak capacity, so if they maintina the same standard at AP, you would expect them to 2.1 Mt/year.

2. Commissioning

Mines and mills take time to start operating at peak capacity. At El Limon, they still haven't quite reached full capacity (they are up to 83% of design - link), so will you get a similar 6 month commissioning period at AP?

3. Discount rate.
5% is cute, I like to check the discount value against the interest rates that various loan/financing are being arranged at.

  • Premier Gold - loan from Orion mine finance at 6%
  • Lydian - Libor + 6.5%
  • Red Eagle - Libor + 7.5%
So if you are borrowing money at libor (currently at 1.5% for USD) + 6.5%, then a 5% discount rate seems low, a rate of 7-8% looks a bit more realistic.

4. Working Capital
In a nice stroke of excel, AP has no working capital in its advertised CAPEX.

who needs working capital? 
So how are they going to pay for the operating expenses for that tricky start-up period while they are waiting to receive revenue from their first shipment of dore? A study done of gold Australian mines shows that it took on average 47 days to receive payment (link), maybe in Mexico it will be quicker, but it would be nice to see Timmins include ~$10-15M to cover this.

My mistake, they do, they have $6.9M in year -1, but like the deposit you give to the bottle shop/off-license/liquor store, when you buy a beer (or IRN BRU) in a glass bottle. When you return the bottle (or in this case - close the mine), you get that money back, errr, 9 years later. 

So, the real CAPEX is actually $128.6M.

All this data when into an updated Economic Model with the following assumptions:

  • Mill operating at 6000 tpd for 350 day/year or annual throughput if 2,100,000 tonnes
  • 7.5% discount rate
  • 6 month commission period (using El Limon as a guide)
    • mill operating at 75% capacity, increasing to 100% afterwards
  • Working capital of $15M (to cover 3 months operating expenses)
The results are:
  • CAPEX increases to $136.7M
  • Pre-tax
    • NPV decreases to $296.6M
    • IRR decreases to 45.13%
  • After Tax
    • NPV decreases to $180.3M
    • IRR decreases to 21.98%

This isn't my area of strength, but it still shows that Ana Paula is a good project, just not quite a spectacular as advertised, but robust enough to pass the stress test and I do like the fact that Timmins have been conservative with the metal recoveries.

I think this is a good project for Timmins

Wednesday, September 7, 2016

Sandra Escobar - an quick update

You almost want to tell Orex to stop drilling as with each new press release the mineralization is smaller and lower grade!

We got some more news from Sandra Escobar (Orex Minerals), again with some nice juicy intercepts from their 3rd phase of drilling at Sandra Escobar.


  • Results below expectations
    • High grade zones appear to be smaller than expected
    • Silver mineralisation less extensive
      • updated crap resource calculation (TM) is now 37.7 Moz Ag
  • Why would they commit an additional $0.75M to drilling before the met studies have been completed?
    • Consultants needed more data to confidently model the silver distribution?
I was interested to see why Orex committed to drill an additional 3,600m at Sandra before they got the results from the metallurgical studies, that will cost ~$750K and what happens if you get poor recoveries? You've wasted a chunk of money for nothing. Fortunately, there is an answer in the PR
Holes SA-16-041, 042 and 043 are in-fill drill holes in the Main Zone to tighten section spacing to 50 metres. The in-fill drilling was performed at the request of the mining consultants who are preparing the initial resource estimate.

Does this mean that Orex were told to drill more holes as there were some critical questions to answer before a 43-101 complaint resource could be calculated? Maybe it was:
  • With a few more holes the consultants could fiendishly work on their geostats machines and calculate not just inferred, but measured and indicated resources.
  • Couldn't confidently model silver grades between holes
  • Don't quite understand the controls/distribution of the high grade mineralization.
  • More holes = more data = higher confidence.
I actually admire this, how many companies would take the opposite approach and find a consultant to calculate the biggest resource mathematically possible and be done with it (hello First Mexican Gold).

I don't know if these 5 holes are the only in-fill holes planned for the 3rd phase of drilling, and the rest will focus on expanding and exploring areas? A nice summary map would help!
only hole 39 is drilled to extend the silver zone.
Let's look at the results, at first glance they look impressive, but it is important to see how they compare against the results from the adjacent phase 1 and 2 drill holes:

Here is the plan map from the may 31st post

Here is the updated map

They look very similar, but there are some subtle changes (circled in red)
  1. The narrow high grade zones are now smaller and discontinuous
  2. The 50-100 g/t zone has been expanded by ~ 50m to the East
Nothing special, but what were you expecting from 5 holes?

Let's run through them

Drill-hole 039 - drilled ~100m to the west of holes 16,17 and 27.
A very forgettable hole
8m at ~65 g/t Ag, nothing special here, silver grades drop off steeply and the main zone doesn't link up with the mineralization hit by holes 038 and 037.

  • Positive spin - We've got potential for loads of silver zones
  • Negative spin - We have lots of little silver zones

Drill-hole 040, 41 and 42

newly released data with red collars
These hoels were ok, they were inline with the earlier drilling, but look at Hole 41

  • Hole 41 - 45m long (core length) high grade zone
  • Hole 42 - 42m to the SW of hole 41 - just 14m of high grade rock
  • Hole 40 -  110m to the SW of hole 41 - 4m of high grade
Ok, we go from lots of high grade to SFA over 100m. I hope that doesn't mean the high grade zones are localized to a few small areas. It looks like understanding the controls on the high grade mineralization will be key to creating an accurate resource for Sandra.

The other bad news is the mineralization is going deeper as you move to the SW.

Hole 43

Ciao silver 
Oh dear, a poor hole, I was expecting to get similar results to the holes drilled around it, we got SFA, a 12m silver skid mark and not much else.

We can be fancy, lets look in 3D!

The holes around (they are 50m away) are good, and you would expect that a hole in the middle would give you similar results, but hole 43 contained a lot less silver. This could mean that the majority of Sandra is 30-50 g/t Ag with a few discrete zones of high grade. I'm hoping that this hole is an anomaly and that there is a fault nearby and fluids have removed some of the silver.

It will be interesting to see if any of the phase 3 holes are planned to drill around holes 01 and 02, the 'best' holes, or will they be left alone, undisturbed so that you won't risk reducing the big high grade zone into a series of smaller lenses?

My TAG official crap resource calculation (TM) has been updated and we now have:
  • 37.7 Moz Ag (8.2MT @ ~140 g/t Ag
I'm using a 30 g/t Ag cut-off, OREX may use 20 g/t in the official (and hopefully not crap) calculation.

You can get the updated Leapfrog viewer file here (link) and look at the data.

Friday, August 26, 2016

Ana Paula - Cuida su salud... y belleza

Ana Paula, Wow. This is what an exploration geologists is looking for.

This is what a junior exploration company IR representative looks like in the wild
Not the girl, you perverts, the rocks she is sitting on, some nice alteration in the background.....

Great grades and cheap to build, surely the perfect deposit?

I'm going to do 2 posts on Ana Paula, one on the geology and a second on the numbers in the PEA.

We'll gloss over the security issues (you can read them here, here and here - just some friendly kidnapping, robberies and disappearances from the area, nothing to worry about), and just focus on the geology.

  • Ana Paula is small - only 2.25 Moz gold, but:
    • In the PEA, they say they will only mine 0.96 Moz, just 43% of the deposit via an open pit
    • So the remaining 57% will not be mined - unless gold prices go way higher
  • Short mine life - just 8 years - major companies want 15+ year mine lives. 
  • Metallurgical complexities - Gold is associated with arsenopyrite (contains arsenic) and pyrite
    • Great recovery with flotation (94% for Au and 87% for Ag) but produces a crap concentrate with >10% As.
    • However, if you do a leach on the concentrates you can get recoveries of 80% Au and ~50% Ag.
  • Blue sky potential - good property with lots of potential to find more deposits, but there are major security issues in Guerrero at the moment.
The most interesting things about Ana Paula is her enormous grade and IRR (link). It has everything, including underground potential. Here is a section showing the grade blocks in the deposit. 
The dashed lines are proposed pits
Wow, it looks great, but why don't the pits go deeper? There is gold everywhere, with a bigger pit you'll mine more gold and have a nice long mine life? This confused me (which isn't too hard).

So I compiled the data, brought it into 3D tand had a look. You see is that most of the gold is found in a vertical pipe in the middle of the deposit. The rocks surround it look relatively unmineralized.

TAG's official "badly drawn pit" in grey.
At Ana Paula, accoridng to the PEA Timmins will be mining 2.6 tonnes of waste for every tonne of ore (this is the strip ratio). Waste costs money to mine (unless you are Corvus with you magical self-mining ore), and you want to keep this ratio as low as possible.

I've created a few sections below, one long section (basically a N-S slice through the deposit) and 3 cross sections (E-W slices) that are 100m apart to show you how small the Ana Paula deposit is. You'll also see that a common theme is for companies to pick the 'best' section to show off their deposit.

Long section (basically my version of the fancy one above)

We can see this narrow high-grade pipe continuing to depth
Cross section 1 - 8000N - through the core of the deposit - what a stunna - this will stay in the investor presentations forever.
lots of lovely gold - do you like the promo hole going down the guts of the high grade zone.
Cross section 2: 8100N - this is 100m south of the section above - what do you notice?

Not much gold here!
Not very obvious? Where is the pink stuff? All the high grade has gone!

Cross section 3: 7900N - this is 100m to the south of Croiss Section 1 - what do you see?

Some high grade at depth, but not much close to surface.
We have more gold, but the good stuff is deep, and you only have a narrow sliver of low grade near surface.

These 3 cross sections are just 100m apart (1 football field, or 1.5 hockey rinks), and we can see that we go from lots of gold to not much over a very short distance. How many of the 'crap' sections can you find in the IR material? This is the only image that shows the size and shape of the mineralization.

AP circled in red - check out page 9-4 in the 2016 PEA for the original version

Did you notice the black "U" shaped line on the sections? This is the outline of my badly drawn pit (TM), which is a simplified version of Timmins' $1400/oz Au pit limits.

  • Above the line - what Timmins says they will mine in the open pit (if gold prices are $1400/oz)
  • Below the line - what they won't mine - this is the "underground potential"

You can see that there is a lot of gold below this line. How much are the leaving in the ground?

It's a tiddler!
So AP contains 2.25 Moz Au, but if we look at life of Mine (LOM) summary, we see this:
circled in red
So they are only going to mine 957,000 oz Au, but they have 2.25 million ounces, so that is only 43% of the gold in the deposit, the remaining 57% is just going to sit in the ground.

OK, I understand, the property hasn't been fully explored, they focused on the high grade zone to fully understand it blah blah blah.
There must be lots of potential to find more and make the deposit much bigger?

Just a quick guide to help you understand the map above.
The colored blobs are my gold grade shells, and the big blob in the middle is the Ana Paula deposit
The black lines are the drill-hole traces.

You can see that there is 230 holes that have basically drilled everything around the main deposit,and they haven't much more, just some bits and bobs. This has been a well drilled deposit. There probably isn't much more to be found here.

OK, we've established that it is small, there is little potential to expand the known resources, but everything else if fine?

Sorry guys, when you look at the metallurgical results, and read the text, Timmins repeatably state that the gold is found in/with pyrite and arsenopyrite (an iron arsenic sulfide). Here is a photo.
Au = gold; ap = arsenopyrite (an iron-arsenic sulfide)

With flotation you basically recover the sulfide minerals as well as the gold and silver. At AP with flotation they get recoveries of 94% for gold and 87% for silver. This is good. Unfortunately, the concentrates contain >10% arsenic, this is bad. I'm not sure how many smelters would process this, but if they did the penalty charges would be huge. Fortunately, Timmins' have done leaching work on the concentrates - doing flotation followed by leaching on the concentrates they can recover 80% of the gold and 50% of the silver.

So, double processing, and you loose 50% of the silver and 20% of the gold, but you produce dore, which is nice and cheap to refine.


Look at the leapfrog model (here) and spin it around and make your own opinion.

Tuesday, August 23, 2016

Dark Star - Redux

This is just a quick update, I made the last post a bit too technical, and here is a simplified version.

Drill-holes 16-03B shows the zone of good (>1 g/t) gold mineralization has been extended by another 100m to the south of drill-hole 16-08. This zone is now 350m long.

Unfortunately, drill-hole 16-01 may suggest that the gold zone at North Dark Star is very narrow, maybe only 100m wide. This is not good,

Originally I thought that at North Dark Star there is a high grade core grading >1 g/t Au (this is a good open pit grade), and the gold grades gradually decreasing as you move to the south and west. This is similar to what you see at the main Dark Star and Pinion deposits.
Red = high grade; yellow = low grade. Blue = Dark Star Fault
My back of the envelope guesstimate was that we had a gold zone that was:
  • 400m long, 250m wide by 150m vertically.
  • I used a specific gravity of 2.8 tonnes/m
  • 42 Mt @ ~0.75 g/t Au or just over 1M oz Au - this is similar to the other deposits scattered around the project

But, drill-hole 16-01 seems to show this:
red = high grade; yellow = low grade
A very small high grade zone, with a small low grade halo. This reduces my guesstimate potential to be:
  • 350m x 150m x 100m using an SG of 2.8 = 14.7Mt @ 0.75 g/t Au
  • or a potential for ~350,000 oz Au - a 65% reduction. 

So in summary, if hole 16-01 is correct, North Dark Star is very small, and we are getting a repeat of what has happened at the other deposits GSV has drilled - a few good holes and then nothing. Let;s move on the the next target...

They see to have done this time and time again - at North Bullion, Pinion, Central etc etc.

How have they managed to be so lucky and get such great drill-holes from what have turned out to be some very average deposits?

Let us look at their proposed holes for the Main Dark start deposit - drill-holes DS16-17, -18 and 20.

Proposed drill-holes - main Dark Star deposit.
All three are planned to be drilled into the highest grade part of the already defined gold mineralization within the deposit. It guarantees some great assays but all they are doing is duplicating the historic drilling, and when they do a new resource calculation, you'll probably find (unless SRK are involved) that not much will have changed.

A nice little example of Promo exploration.

Monday, August 22, 2016

Dark Star - an Update

Last week Gold Standard Ventures released some new assay results from Dark Star (link), and by some fluke I managed to be correct with my predicted grades for hole 16-03B. Here is a plan map with the new results.

New results highlighted

The Good - Drill-hole 16-03B - intersected 101.2m @ 1.5 g/t Au.

The results from 16-03B came in very close to what was predicted (I was lucky), and extends Au mineralization to the south by ~100 m. We have a high grade core (32.3m @ 2.87 g/t Au) surrounded by low grade mineralization (~0.8 g/t Au). This is OK, and is similar to what we have seen from the drilling at the other deposits.

Nice assays and not too deep.
Here is a long section down the axis of the deposit.

We can see that the gold grades are gradually dropping off from the high grade core (hole 16-08) out into a medium to low grade halo, and some narrow zones of gold occuring along the Dark Star fault.


The Bad - Hole 16-01 was a disaster!

Oh dear, Hole 16-01 was a disaster, all it hit was a few narrow, low grade zones. It was drilled just 60m from hole DS15-10 (149.4m at 1.38 g/t Au (link) and I was hoping that we would see something similar to the main Dark Star deposit, a gradual decrease in grade. In reality we have done from lots of gold to zero, nada, zilch!

This is what I had before:

Yeah, gold going on forever!
and now....

ohh, crap, that wasn't meant to happen!

Where did all the gold go?

It is amazing what a single hole can do! If hole 16-01 is correct, then it appears to show the gold is restricted to a narrow corridor (~150m wide) running from hole 15-10 to 16-03B (and a bit beyond). 

GSV will need to drill some holes to the west of 16-08 and 16-03B to make sure that the results from drill-hole 16-01 were a fluke. If not, it means that North Dark Star is very small, and if DS16-022 and 023 don;t hit anything good, then the party is over!

This is my very generous gold grade shells.

What I would like to see Gold Standard do is:
  • Drill a couple of holes to the west of holes 16-03B and 08 to hopefully show that the results from hole 16-01 was a fluke (see map above).
  • More holes between 03B and DS16-06, 08 and 22 as you have a 200m x 200m zone with a couple of vertical holes that may miss the high grade zone.
  • More angle core holes! Stop with the vertical RC holes. I know they are quick and cheap, but you want as much, high quality data as you can get.
I've put the new results into my model to see what is going on (link). You you can have a look at the results.

It is amazing what a single hole can do!

Wednesday, August 17, 2016

San Diego - a whole lota crap

Wow, San Diego you cured a king, had a US city named after you, what a guy....

Sorry, I apologize, I got confused with my google search. I should have been looking for the silver-base metal project in Mexico owned by Golden Tag resources.

oh, wow, maybe I'm biased, look at all that silver:
115.4 million ounces 

>$2 billion contained silver
must be crap as it doesn't have any chromite....

This project has everything
  • gold, silver, lead and zinc
  • high grade veins
  • bulk tonnage deposit
So Golden Tag now own 100% of a project that has more silver in it than MAG's interest in Juanacipio (115.4 Moz Ag compared to 99.4 Moz Ag).

And if we compare market cap?
  • GOG = ~$10M
  • MAG = ~ $1.8B
Why, well that is easy to answer when we look at the grades of the 2 deposits:
  • San Diego = 61.2 g/t Ag or 112.3 g/t AgEq (all zones)
  • Juanacipio = 574 g/t Ag or 923 g/t AgEq
So Golden Tag has more silver at a much lower grade, but as its market cap is only 0.55% of MAG's, is this the deal of the century?

No, No, NO


  • Not all resources are equal - look beyond the total number of ounces
  • Grade is king - San Diego = very low grade (including the AgEq BS grades)
    • High grade oxide veins are interesting but small, and probably have high As which was a problem in the adjacent Velardena mine.
  • Small (90 Ha) project = low exploration potential. Basically, everything has been drilled
  • Bulk tonnage zone is deep - ask BHP and Rio at Resolution how much it costs to sink a 1000m shaft.
  • No work has been done on the project for several years = low interest, low potential
The share price for Golden Tag will rise and fall with the silver price, but that is all. Looking at the PRs they raised $900K recently - $500K to buy the 50% of the project they did not own and the rest will basically cover costs for a bit of time.

Sometimes I love my job, you get to look at some project that are so obviously awful and some resource calculations (thank you SGS) that are so bad that you have got to have some fun with them.

Lets look at those resources:
oh dear..
Do you like the metal prices they used? I mentioned earlier when looking at Southern Silver's project - Cerro Las Minitas that grade is king. You can have a massive mathematical resource, you can BS people with equivalence grades that use a 100% recovery, but all you are doing is papering over crap.

So lets look at the property:
Wow that's small, basically 1km by 1km
and the drilling
They have pretty much drilled everything, so no real upside, no expansion potential.

So we have a small project, minimal expansion potential and low grades. Not a winner.

But, I hear you yell, they have a bulk tonnage deposit:
oh look, a dingleberry

Oh, it is starts at 450m depth and runs a massive 51 g/t Ag, 0.65% Pb, and 1.17 % Zn. Let's start sinking a shaft and mine that bad boy....

Those grades are about 5 times lower than most underground base metal mines (that work). Lets compare that with Otto's fav - Tinka Resources:

higher grade and close to surface
They get bonus points for this:
I suppose I should look a bit more at the data, just for chuckles to see really how bad it really is, and oh boy, SGS have really done a bad job. I assume that it was done very quickly as it is very shoddy - not as bad as the historical resources done by Micon (I keep these as examples of some of the worse I've ever seen).

These figure come form the SGS Technical report, by highly qualified, professional geologists. I recommend that you download the report (link) and have a look yourself.

Look at the top figure, you see these weird circular features - the bottom drill-hole is the best. Basically, you have a series of circles centered on each drill-hole and they produce these weird shapes where the circles overlap.
Why is this a problem? For me it shows that:
  1. The person doesn't really know what they are doing
  2. They don't know how to use the program they are using to calculate the resource correctly
  3. They are doing a quick and dirty calculation and aren't spending any time on it.
I feel that it is number 3, this is a small project for SGS and they just simply did a quick calculation, which led to this PR - 28th of May 2015. 

A very good indication that there is something not quite right, but lets look at some sections.I've zoomed in to the grade map to point out some 'features' that show the lack of quality in the resource calculation.

Grade on the top, resource categories below
oh so pretty
I've zoomed into the top figure - the Ag grade distribution, I've highlight the drill-holes so you can see them easier. Notice that where there is no drilling SGS have been kindly used a default grade of >125 g/t Ag. This is because in Spanish, the work for vein is "veta" and is female, and we all know that they look better in pink! However, if you look to the left, where there is lots of drilling, the grades are a lot lower. Damn that truth machine....

I've marked out some features for you:

A = we have 2 drill-holes very close together. One hole has no grade and the other a few meters away has good grades. SGS have carefully restricted the low grade zone to just ~25m around the hole filled in the rest with high grades for 200+ meters.
B =  what's that weird red banana below the drill-hole? Again, the holes was slightly lower grade (~100 g/t = red), but we'll ignore that (ok, we'll have a 10m zone around the DH) and use >125 g/t Ag, because it looks prettier
C = Same again, we have an intercept between 80-100 g/t (orange), but look how the high grade mineralisation bows up into that nasty low grade zone.

SGS are repeatedly reducing the importance of the low grade intercepts, and therefore their impact on the overall grade of the resources. You see it on section after section after section. Each drill-hole needs to be treated equally. This is either:
  • A Peter George (TM) - SGS trying to 'create' a big a resource as possible as bigger is always better.
    • Consultants may do this to get a reputation of being 'good' to create business for themselves either:
      • Directly - more resource calculations, overseeing exploration programs etc.
      • Indirectly - We do great resource calculations, why don't you use some of out other great services.
  • Golden Tag putting pressure on SGS to maximize the resources to make their project as good as possible as this is all that they have got and no-one want to have spent a bucket-load of cash on a crap project.
    • often the hardest thing to do in exploration is walk away and write off your expenses, especially when it is the only project you have.

So it is important not just to look at the total contained metal, these are often inflated using a variety of tricks but check:
  • Grade
    • overall average of the deposit - compare it against other deposits and even better - operating mines.
    • How much of the resource is low, medium and high grade (a good resource report should include a summary table).
      • having lots of low grade doesn't mean you have a lot of high grade ore.
    • are they reporting an equivalent grade resource?
  •  Metal price
    • Are they much higher than today's prices - a health discount is nice.
I'll be expanding on the things you need to look for in a 43-101 to make sure that you are being misled.

I haven't brought the San Diego data into 3D as this project obviously isn't very good. If you would like me to do so, send me a message and I'll spend a couple of days on it.