complex question, penny p.
mine economics pivots off 4 interacting things primarily
- grade
- depth to orebody - depth of ore body
- metallurgy/recovery rates
- ore continuity
gold investors talk about grade being king but its often not the case. though having grade can enable you to better survive tough times by reducing the scale of mining and mining higher grade material.
but for eg rrl mines 1-1.5g/t and has one the best profit margins right through this 'out' cycle
as for what it low vs high grade - well thats really a function of the gold price. mine plans are developed using gold price assumptions that calculate the most cost efficient volume of material to excavate and process to get an optimal economic return.
so in really low gold price environments 4g/t might only be medium grade.
equally in 2011 - 0.5-1g/t projects were often considered ok if the material was near surface
what you really want is something like say BYR. Material starting from surface - good grade - so you get immediate payback from earth you first process as opposed to having to pre-strip. And then good continuity down to 200m.
It immediately offers prospect for open pit mining (which is more cost efficient than u/g) - assuming there's enough width and strike.
But historically the most profitable mines have tended to be the underground high grades. Porgera in PNG used to run 12g/t head grade and 1Moz pa for years.
So its not like there's only one solution.
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Dusko Ljubojevic, MD
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