There are a large number of variables when considering whether a mineral deposit is going to be profitable including:
- depth of the deposit and strip ratio i.e. how much barren dirt must be moved to get to the valuable ore - metallurgy of the deposit - is it easy to treat and extract the desired metal? This is a critical factor and often overlooked. In the gold space there are many significant (>250k ounces gold) deposits around that have not been developed because the metallurgy is problematical. These refractory deposits (gold locked in chemically with other elements and difficult to liberate) are notorious for sending companies broke and hurting shareholders. See MOY, Wiluna, DCN etc. I avoid them like the plague after losing capital numerous times earlier in my investing career. - another key consideration is 'do we have a viable processing option?'. Unless the deposit is large, it may be too costly to build a stand-alone processing plant. The deposit may therefore become stranded i.e. it may be a very attractive deposit but is too small to justify its own processing infrastructure and therefore does not get developed. It is therefore very advantageous if the deposit is close to existing processing infrastructure, and this can be a game changer and make an otherwise worthless (stranded) deposit highly valuable. - grade and location of the deposit - high grade means more payable metal per tonne treated. Location is also important since it impacts costs - if the deposit is close to existing roads etc its cheaper whereas if you need to build roads/power station etc it's obviously going to be more expensive and reduce the commercial value of the deposit.
I hope this helps.
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0.6¢ Sentiment: Hold Disclosure: Held
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