Wardley Report - WOW, page-36

As mentioned by others - might be a time for a refresher as to what face sampling RC hammers and conventional hammer drilling with crossover subs are. Need to see the documentation as to what exact drilling technique was used by whom and when as Chalco pointed out - face sampling RC hammers only came into common usage in the early to mid 1990s, and even then - depending on the contractor and booster etc you could still get wet samples that clog up the inner tubes and/or cyclone and splitter so any deep wet and older conventional percussion or RC holes may have dubious QAQC sample quality. Its not all about sample quality though, consider at what point were stainless steel rods routinely used for down hole surveys in RC/percussion drilling, and given that some of the ore zones contained magnetic minerals how reliable were some of the older downhole surveys ?

As you say - DMR mined ore that was a reported higher grade oxide ore that was richer in gold and easier to treat, than the small narrow and discontinuous sulphide lenses and veins. But then the question is what happens as your ore becomes sulphides, your open pits are at depth, you hit the water table and dewatering starts in earnest and need either high strip ratio cutbacks or looking at going underground?

The 1989 Wardley report came back at around 600K Tonnes at with an arithmetic mean of 5.65g/T so that comes out at near enough to 110,000 Ounces of gold. Note how that Wardley document does not specify a few things about what the source of the grades that are using for these blocks actually are, I'm not arguing the dimensions and volumes but I am starting to wonder if some anomalous high grade results were skewing their average gold grades within the blocks and if they used weighted averages to come up with their headline figures?

People can see the effects of different cut-offs in a resource block model in the more recent QMN 2011 JORC compliant Table 2, and I suspect similar to the the 2019 AMG one as well, you don't have to take my word for it - the resource block model in 2011 gives us an answer....

QMN 2011 Resource Estimate by Cut-off Grade


Pretty simple theory that everyone understands - if the cut-off grades go up then it follows that tonnes, volume and gold ounces goes down as the block model reclassifies blocks of rock as waste and not ore.

Have a look at what happens when you go underground and have to raise the cutoff from a 0.5g/T Au or 1g/T Au typical of shallow open pits to narrow high grade underground mining? Want to do a DMR and have your mining cutoff to be 3g/T Au? That's fine if you don't mind dropping your tonnes from 1.6 million tonnes to 220 thousand tonnes of ore, and instead of open pit mining and getting the entire 75K to 89K Oz of gold (admittedly you have to mine all the waste as well) by going underground and high-grading it you are only getting 31K Oz of gold, but wait, its underground mining and the Mines Dept says you need to have crown pillars and safety, and minimum mining widths with other limitations of underground mining such as stope dilution and ground control you can't extract all that underground ore, so there will be even less tonnes than that. Welcome to the concept of "high grading", but in reality as in mining, engineering, nature and grade distributions of ore bodies, there is no such thing as a free lunch.

Compare that to the AMG 2019 estimation - an inferred Open Pit estimation at a 0.5g/T Au cutoff (fairly realistic in today's mining costs and gold price regime provided they have somewhere to treat it or truck it to):





As for the comments about the market never being wrong, when did DMR have a market cap of $270M, was it wrong then? Did it happen to be before the price of gold crashed around 1990 and mining ceased at Mt Freda ? Is it possible that there is a 1 million ounce deposit has sat there unloved at Mt Freda for 30 years during several gold booms and bust cycles? Is it possible that the two more recent JORC compliant resource estimations have underestimated the amount of gold at Mt Freda by a large margin? That seems to be stretching credulity a little bit far for me. We shall see.

Right now AMG has a market cap of only $16M or so, in the short term the market can be wrong, and its probably better to use long term valuations or actual recent transaction takeover and M&A $/per Oz metrics. As we know market cap does not equal gold in the ground - its a mixture of sentiment, management, assets, project economics, commodity prices and many other things