How important are the pending assay results and what expectations need to be met to impress the market? Everyone has a view, people buying in expectation of an upside surprise obviously, those selling this week probably have a different view. The first released aircore drilling assays were a positive surprise, as proved by the run up in the share price from 1.2c on release to eventually hitting 3c. It shouldn't have been that much of a surprise in hindsight, the auger drilling assays had already shown that the top 10.5m was ~5% THM over the middle to the drill section released, and that THM logging was a big undercall. Still, well played, promise gravel and deliver diamonds right.
The market obviously now expects a similar logging under-call for subsequent assays when they come. The first auger assays were released on the 19th of August and revealed that logging was significantly under-calling the THM. Judging the THM from a pan sample is not perfect and it takes experience to get it right, especially in new deposits even if you are experienced at min sand logging. The colour changes with assemblage for example making one HM tail look fatter or thinner to that of another deposit. Anyway, point is that after the 19th Aug lab assay feedback meant that loggers could calibrate there judgement and would get their estimations closer to reality. An example from one section i plotted (yes, I am working with facts to resolve the picture) shows an example of what I am seeing over the aircore drilling over time. Auger assays also start to correlate better with visual THM in the later drilling. Note later infill holes logged with much higher THM than earlier holes, similar to the corresponding auger assays.
I don't know at what aircore hole ID loggers really took on board the auger assay feedback but it would be a big mistake to assume all future assays released have the same lift on visual THM grades as the last release. What the first drill section of lab assays showed was a higher grade strand (holes 114, 115 & 116) accumulation averaging ~7% THM between 19-55m elevation, under an average 40m of ~5%THM more typical dunal sands.
HM strand accumulations developed at the same time share a similar elevation representing the sea-level at time of deposition. At the same elevation on the next section west visual logging has identified the same high grade strand at the same elevation along strike. I have to stress these are only visual THM grades below but the logging has clearly picked up the same strand body 1km along strike to the west. This higher grade strand looks to have a width of bit 1-1.5km and an average thickness of approx 20m.
In plan this higher grade strand sits in between the the highway and Malehice to the east, and the town along strike to the west on the escarpment edge. Visual THM logging looks to have picked up the strand on the section 1km East of the hole 114-116 line, in hole 107, but otherwise visual results did not see elevated THM in holes 108 0r 109. Of course lab assays may reveal the strand is continuous eastwards but to date even early visual logging was good at identifying higher grades strands from the lower grade background. Gaps in the drilling further the west where the town is create some doubt as to if and how far the higher grade strand continues. Otherside of the town are drilling has logged more higher grade material but generally deeper at lower elevations. This higher grade sand may be either a seaward extension of the 20-55mRL strand or separate new strands.
We know visuals can be significantly different from the lab, but the fact loggers have noted the increase in THM across sections at similar elevation is strong evidence that the higher grade strand continues south-west towards the edge of the escarpment. Good news because grade is so important to economics obviously. However, the facts at this stage is that is that lab assays average ~20m thickness at 7% THM across the 3 holes 114,115 and 116 which define the central-western part of the higher grand strand in question. Sitting above that higher grade strand is an average of 40m of ~5% THM sand. It's my strong opinion that 7% THm with Corridor's high trash and low value assemblage cannot carry a 1.5:1 strip ratio of that magnitude. The only economic way to mine the higher grade strand is as part of a large pit with ore from surface, blending in the higher and lower grades as the pit moves through the orebody. In short, the economically mined resource is likely to report as an average of the hole to base of the high grade strand, 20m @ 7% and 40m @ 5% for an average of 5.7% THM.
Back to the topic of assay expectations. Yes the logging gets more accurate and there is some undercall but will the assays pending match the 7% THM average of holes 114,115 & 116 or jump higher? Geologically it is more likely that the the same strand, formed at the same time has consistent grades along strike than highly variable. That said, drilling is still wide spaced and strands do have high grade variation across strike, the 3 reported holes may be understating the average grade of this strand. If the average grade of this higher grade strand doesn't lift much above 7% then it looks like a final resource could reach 1Bt @ approx 6% THM excluding under the towns (a global lower-cut resource would be larger but lower grade). We will know soon enough how much higher grade material sits under how much lower grade sand but already we can guess where the final figure is heading unless some stunning higher grade and thick drilling changes the picture.
Serious investors will begin to consider how economic the Koko Massava deposit might be well in advance of the scoping study. Lots of different variables are involved, but some consistent make peer comparisons relevant. Value of in ground ore per tonne, overburden, slimes content which effects mining throughput costs, capital requirements, product quality and demand, to name the big ones. The list of projects below are all dry mining of large resources requiring significant infrastructure but with variable capex and opex of course.
MRQ's Corridor deposits will have a low value insitu ore if the same sort of HM assemblage as previously reported and as Corridor 1 reports if the final mined resource is 6% if that is what the assays prove. The spreadsheet below is my current best guess using available information or peer analogy on like-for-like deposit styles, assemblages and recoveries. For reference the first 'Corridor MRQ Release' table uses data released by MRQ where $8/t of in situ ore value was quoted to prove it's validity, pretty close. Otherwise, all tables use updated, current and long term pricing deck (Thunderbird adjusted for haematite entrainment in the Ilm). 'Corridor MRQ Updated' has an upside grade of 6% as discussed above.
In Ground Ore Recoverable Value of Peer Min Sand Deposits
The reality is that it's difficult to outrun the value of insitu ore for somehow lowering costs and hitting higher margins than competing deposits with similar scale projects and capex. Mutamba for example has a higher value ore at 6% THM but also has an average slimes content of 7% compared to approx 15% for Corridor 1 and possibly MRQ. Tolliara for example has a clean ilmenite product that doesn't require any expensive Low Temperature Roasting (~750 degrees C) to remove chromite contamination before it can be sold to slag producers. Corridor 1 has a large higher grade resource of 9% THM, although that may be diluted with lower grade sand on top as discussed earlier. MRQ's Corridor will certainly report a positive scoping study imo, but with a lower revenue-cost ratio than many competing developers (or exploration stage projects like RIO-Savannah Chilubane project). Talk of paying to relocated entire towns looks premature regardless of local objections because with already back of the pack margins there must be considerable doubt that margins can also handle such relocation expense.
Will RIO make a move on MRQ or stick with Mutamba where population pressure is much less and margins higher? Will the Chinese want to buy a lower grade project with population pressure or just expand Corridor 1 which has 100 years of higher margin resources? I'm sure most readers will understand my concerns that looking past the excitement of drilling results and new 'discoveries' is the shadow of 'will this make the grade and get developed'. Assay results due over the next four weeks, and other exploration yet to be done, will be fascinating as to whether it changes the economic outlook as the current inferred variables indicate.
Disclosure.
These figures and tables are not to be relied upon as accurate although they are to the best of my knowledge from reported data.. Grade, assemblage and recoveries may vary in the future. I do not hold, have never held, and have no plans on holding an interest in MRQ. I have an interest in SFX which is not a competitor given the many years difference in development status. I have an interest in mineral sands projects and the industry generally. My experience following many mineral sands projects over a long time is that monetising 'economic' deposits is difficult. Laugh at it or learn from it... your choice. DYOR and do not rely upon this post, which I have not proof read, or any of my posts for advice (obviously lol).
Good luck
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