There has been some great research out in the last few years around grade and quality/profitability. People used to think "Grade is King", but the reality is much more complex. Andy Well is a great example of this.
Turns out geology is more important than the grade because geology influences mining costs and sustaining capital, whereas, grade really only impacts processing costs. I whipped this up this morning, you can see few interesting things here. One, you can see the very positive affect the very high-grade Suzie open pit material had on production and AISC over the 12 months it was mined. Why? Because it was cheap and easy to dig up and dropped processing costs. Two, UG mining grades peaked in Sep 2015 quarter at 8.4g/t and began a gradual decline. At first, this was explained as the Judy lode "width less than modelled/ lower grades available & Wilbur reduced strike length, then as grades dropped further it was explained as reduced strike length at both Wilbur & Judy and poor reconciliation with resource model.
The alarm bells probably should have started ringing after the June 16 report, with three consecutive quarters of lower grades and a big jump in mining, processing and sustaining capital costs. i.e Andy Well UG mining was/is very high cost due to the reduced strike and width, compared to the model.
So in this instance, geology (geometry) trumps MRE grade. AW scores high on grade, but low on quality...
