"Last time a checked the recent discovery cost per oz was more than competitive. Although now i am struggling to recall what that number was or where I was able to source the information. If we were to reference more historical numbers, in the 2019 drill program the discovery cost per oz at WGH was US$7/oz. That is truly amazing but also some years ago I understand."... I wasn;t aware of this but
rightly quotes MZZ's Jan 2019 Mineral Resource Estimate (MRE) here to support that exploration is not expensive per Oz added and that this hopefully can be reflected into future gold Oz growth.
." My first thought was wow, MZZ bought CRP with 560 historical holes for 85,000m of drilling used in a shiny new 2017 MRE already done by the vendors, yet added an extra 272ktOz (56% extra Oz's than the Vendor in fact) for only 34 more holes and~3500m drilled... that is truly amazing! I'm already seeing more red flags than a May Day parade, where and how were these new Oz's magicked up?
Comparing iterations of ASX junior resource releases are generally difficult (on purpose I suspect) as prospects, cut-off, and reporting standards chop and change. I have scraped and ordered CRP's MRE history into spreadsheet form for clarity to easily compare where these extra Oz's have come from. Looks a bit busy (didn't bother formatting cells to sig figures) but the important changes are easy enough to follow.
MZZ basically just added new resource estimates for the BP and IAM prospects, turning them into deposits and adding ~100k Au Oz to the project. No exploration drilling or data at this stage, fair enough and the cheapest Oz's you can ever add.
Aug 2018 to Jan 2019 MZZ UpdateZone 51 and WGH were again left the same, BP and IAM were tweaked for a net 15k Oz reduction, H and PW prospects were added for extra 36k Oz and overall net 21k Au Oz addition before considering Zones 04 and 41. This is where the 'magic' happened, 34 new holes from late 2018 increased these two deposits by 252.5K Oz from 361kOz to 613.5kOz... a full 70% increase in gold content
. Even more astounding, the total tonnage for these two combined deposits dropped from 7.13Mt to 7.06Mt at the same time... it's all about the grade baby and grade is king as they say. Those big red flags are really snapping in the breeze now.
In one quick swoop our Aussie geo's have shown up 40 years of Canadian geo's as conservative muppets and added 250k Oz even cheaper than MZZ claims in reality. Those Oz's are so cheap even Rumpelstiltskin would be blushing in his grave, he at least had to buy straw and slave away at a loom for his cheap Oz's lol. MZZ described this epiphany as
"Drilling at the Central Zone in particular, allowed for an expansion of the mineralised envelope and enabled a revised geological interpretation that has significantly and positively impacted the resource volumes and grade." I'm not in a position to argue data and interpretation I've not reviewed, but neither do I have to accept these Oz's are real or without some degree of risk. There's a few tricks to tickle up resources and it seems MZZ's geo used them all the way I see it.
Quick discussion on mineral resources first. MRE are very specifically called "estimates" for a reason. Based on not enough geological or assay data, MRE's rely hugely on the subjective interpretation and estimation parameters of the Resource Geologist. If there was ever enough information then we wouldn't need geologists, mining people could just 'calculate' what was there. There are rules, accepted process and validation of course, but ultimately so much wriggle room you can drive a truck through different 'Inferred Resources' (and some Indicated also). What JORC is strong on, and a resource geo's reputation hangs on, is that estimated resources are applied the correct 'Confidence Level' (Inferred, Indicated or Measured). Inferred by definition conveys a high degree of uncertainty of interpretation and grade interpolation etc, one geo's judgement may end up being shown correct with enough future results, or may be shown as outrageously optimistic. Time may tell. or not, depending on how much more work is done.
Hopefully I have explained well why gold Oz's are not all the same, how they can appear or disappear, and why Inferred Oz's especially should be carefully considered. The two obvious ways to increase the grade and gold content of a resource are; not top-cut high assays (or have a very high top-cut) and constrain grade interpolation inside a wireframe between higher grade drill hole assays to force only higher grades into interpreted ore lodes. This is what I think happened in the 2019 MRE as essentially the same data (the 34 new holes were no better on average from my review) generated such a large increase in grade and contained gold. Below is the Top-Cut values used for 2018 and 2019 MREs, the large increase would explain perhaps 10-30% of grade increase reported is my guess??
It's impossible to know exactly what the new geological interpretation was which almost certainly added extra grade/ounces but a Zone 41 cross-section in the 2020 scoping study shows how hard wireframing and grade constraints work. The interpolation process only allows model cells in the Ore Lodes to look up/down dip and along strike for other assays to average with. Inverse Distance Squared (ID2) stops high grades from averaging far away, such that a few high grade samples can influence a large part of the Resource Model. The details of how it works, minimum composites averaged per pass, maximum distance per pass etc are beyond this post but they are all variables that combine to provide a large range of possible outcomes.
Below another example from the Feb 2020 resource model interpretation at WGH taken from the scoping study...
Do these drill hole intersections really join up as the geo is forced to guess? Are the high grades 'nuggety' (ie wide spread of results from multiple assays conducted in the same spot due to relatively coarse and uneven gold distribution) ? Should they be cut lower or averaged with closer low-grades in a slightly different direction? Are the mineralised lodes and/or grade as continuous as the geo and resource model would like to think? You get the picture, some deposit styles have simple and confidently defined geometries and grade distributions some do not.
Below is a Zone 04 cross-section where I have highlighted two infill holes from MZZ (CR-04-12A and CR035) that intersected the thick high grade part of Zone 04 at depth. Over just 30m the repeatability continuity and/or of Lode A (my label) is an example of the concerns I'm taking about. Not to say the gold isn;t there 'on average' at the grade/tonnes the MZZ geo says it is... just I'm risk adverse and prefer my gold Oz's a little more consistent and confident.
That's probably more than enough for this post to make my point. Gold Oz's are not all made or worth the same imo, buyer (investor) beware, there is a lot of uncertainty that can go into some Inferred and even Indicated MRE's. I have reviewed Marathon's project and MRE's briefly for comparison purposes and might post my thoughts on that later. Obviously Marathon is the headline market cap comp MZZ is pointing at, and it matters a lot how good Marathon really is obviously.
Of all the MZZ drilling that's gone into Zone 04 and 41 I don;t think the assay results/location have changed much even if the interpretation and MRE modelling assumptions have. Other than interpretation has MZZ really added much exploration success and extra gold Oz's from the drill bit these last 4 years? The question most experienced investors investors ask themselves with exploration/development juniors is where about are they on the Lassonde curve, has peak exploration success passed, have early exploration expectations been met, under or over delivered? Short term the price can go anywhere, especially when a significant holder is getting in or out. Longer term the Lassonde Curve can be brutal years in feasibility study and CR purgatory unless material new exploration success is delivered...
Good luck