Grade is not king.10 Mar 2022 10:33
When it comes to gold deposits grade is not king.
In mineral exploration and development, especially gold, there aren’t many sayings more ubiquitous than ‘grade is king’.
This well-worn proverb infers that higher grades are important above all else to the economics of a potential mining operation.
Of course, all else being equal higher grades are king. But things are never equal between mining operations.
Factors like orebody depth, metallurgy, size, and mineralisation style differ wildly and play a massive part in measuring all in sustaining costs (AISC) – that’s the amount it costs an operation to produce one ounce of gold.
Sam Ulrich, director at Perth-based Aurum Analytics, says gold grades “are not the be-all and end-all”.
“At the individual deposit level grade is king, but when comparing two or more deposits it is not,” he told Stockhead.
“When you start comparing different mines – that’s when the idea can fall down.
“One deposit/mine’s 7g/t might be equivalent to another’s 4g/t.”
Let’s look at Australia’s lowest cost mining operations.
In the June quarter this year, Evolution Mining’s (ASX:EVN) share of the Ernest Henry operations was the lowest cost producer, reporting an AISC of $-644/oz followed by Newcrest Mining’s (ASX:NCM) Cadia Valley operations with an AISC of $174/oz.
Both these operations boast average gold grades of less than 1g/t.
And yes, you read that right — negative $644/oz. That’s because both these operations benefit from significant base metal by-products.
And even if you take these base metals credits out of the equation, the lowest cost “gold only” operations were Kirkland Lake Gold’s (ASX:KLA) Fosterville mine with an AISC of $454/oz (39.9g/t), then Alkane Resources’ (ASX:ALK) Tomingley mine at $807/oz (1.2g/t) and Saracen’s (ASX:SAR) Thunderbox mine at $897/oz (2g/t).
Those grades vary wildly. The #2 highest grade producer at 9.9g/t was St Barbara’s (ASX:SBM) Gwalia mine – which came in at position 22 on the AISC rankings for the June quarter.
Clearly there’s other factors involved here besides grade. What should punters keep an eye out for?
Ulrich says you can almost simplify it down to grade, geology, geometry and even geography if you are looking globally.
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