Mining companies often make for good investments, but with Great Value comes Impenetrable Jargon, which is going to take some explaining.Like it or not, mining is Big Business in Australia, largely because there is a lot of Australia, and very large chunks of it are made up of stuff that can be turned into other stuff, or sold to China for vast sums of cash.Gold, coal, iron ore and lithium are the sorts of things that can make you rich if you’re brave enough to battle extreme heat in the outback, or you’re happy spending your life several hundred metres closer to the centre of the Earth than is normally considered “ideal”.In the event that you’re unlucky enough to find coal, you face the almost insurmountable dangers posed by angry community groups, who will have zero hesitation in mobilising an army of local geriatrics to hold very witty signs and aggressively drink tea at you.Or, rather inconveniently, chain themselves to other stuff that you own.However, beyond those dangers lie almost untold riches for the companies prepared to go looking for them – but that sorta thing is hellishly expensive, mostly because all the gold that was just lying around for bazillions of years on the surface of Australia has pretty much been picked up and spent already.A lot of the stuff that mining companies can sell is, therefore, underground. And that means exploring for it is a monstrous ball ache, requiring expertise in difficult stuff like geology, geochemistry, flying helicopters and buying up land next door to places where other mining companies have already found similar stuff.Huge hassle, very expensive, and no guarantee it’s going to pay off. You’d have to be mad, right?You could probably argue, then, that you’d need to be even more unhinged to want to throw money at a little mining company, especially if you don’t have the foggiest idea what goes into a company like, for example, De Grey Mining (ASXEG). A very quick story time.Waaaaaay, way back in 2015, De Grey was a shadow of its former self – and, let me be clear, that’s being very polite. In 2004, the company was trading at a peak of around $11 a share, but by 2015 things had changed “a little bit”, and the company was changing hands at just $0.02 a slice.But in late 2019, the company found what looked like a decent sized gold deposit, and told the market about it… and then went poking around for hard evidence that it was on the money.Fast forward to 6 February, 2020, and De Grey announced to the ASX that it had evidence that it had literally struck gold.“Hemi confirms potential for major discovery”, the headline said, with details including that two patches of gold-bearing ground had been found at a site called Hemi.Alongside area A, De Grey listed the following numbers:24m @ 7.5g/t Au from 126m in BWAC315, including 18m @ 8.6g/t (EOH)49m @ 3.7g/t Au from 65m in BWAC309, including 18m @ 6.6g/t36m @ 4.0g/t from 39m in BWAC245, including 11m @ 8.9g/tAlongside the second patch of ground, where these ones:24m @ 4.2g/t Au from 36m in BWAC312, including 10m @ 7.4g/t (EOH)15m @ 2.5g/t Au from 33m in BWAC313 (EOH)21m @ 2.5g/t from 36m in BWAC258 (EOH)Utter gibberish, of course – but to the right people with the understanding of what that all meant, it said simply this: “There is probably a lot of gold at Hemi.”And they were right. Hemi, as it turns out, is stupidly massive. One of those very rare occasions where it’s actually justified to use words like “eyewatering” and “game-changer”.For publicly listed companies, there’s a requirement for them to let everyone know what’s happening while they’ve been out looking for precious things to mine – and that’s when investors get to find out which of The Little Mining Companies that Could are looking likely to morph into The Cash Cow that Laid… uh, the… Golden Goose?Or something like that. You know what I mean. Ahuh… but the gibberish! Explain it. Quickly.The first time I tried to make sense of a mining company’s ASX announcement about a gold discovery in some far-flung part of the country, it reminded me of high school, and discovering to my abject horror that Year 10 maths appeared to have given up on using numbers completely.So when faced with a document that said the company was reporting the following, my head exploded and I nearly died. But I got better.The announcement looked a little like this:“The Company” is pleased to announce assay results from “Some Random Gold Project Somewhere”, including results from hole “Gibberish Hole ID Number” showing more than 45m of mineralisation:10m @ 6.09 g/t Au from 8 to 18m –including 2.6m @ 20.81 g/t Au from 15.1m to 17.7m;2m @ 9.23 g/t Au from 40m to 42m;13m @ 21.91 g/t Au from 58m to 71m –including 0.5m @ 209 g/t Au from 60.5m to 61.0m,including 1.0m @ 64.0 g/t Au from 61.0m to 62.0m,including 1.0m @ 31.8 g/t Au from 63.0m to 64.0m, andincluding 1.0m @ 22.3 g/t Au from 64.0m to 65.0m.So, as you can see, it’s a bunch of random nonsense to an outsider, but once you unpack what it all means, you’ll get a sense of why those particular numbers are actually a phenomenal result.Let’s start at the beginning and break it all down, starting with understanding that these intercepts are from samples collected from a single hole drilled in the ground.For visual reference, go to 7-11, and buy yourself a Slurpee. Stick the straw in all the way to the bottom, put your finger over the hole at the top of the straw, and pull the straw out – then, carefully, release your finger and drag the bottom of the straw along a plate.What will come out is a tube of icy, sugary goodness – a core sample of your headache-inducing beverage – and that’s precisely how exploratory drilling for a mine works, except it’s vastly more expensive and dangerous, and there’s no guarantee there’s even any Slurpee in the cup.Let’s say, for example, that the hole is an arbitrary 100 metres deep – and of that 100 metres, “45m of mineralisation” means there’s gold in 45 of those metres, in varying amounts.The next step is to look at the next bit of the info, which is usually presented in the following format:“Core sample length” @ “resource grade” of “mineral name” from “sample depth start” to “sample depth end”.Using our Random Gold Project numbers in it, that looks like this: 10m @ 6.09 g/t Au from 8 to 18m.That means that there is a 10m intersection (segment) of the core sample that contains 6.09 grams per tonne (g/t) of gold (Au), between the depths of 8m and 18m.So, as a quick cheater’s guide, you basically want all of the numbers in that line of miner’s jargon to be as large as possible, with the exception of the last ones (because the deeper under the ground it is, the more it’s going to cost to bring to the surface).Beneath that first line, there’s a second which says: including 2.6m @ 20.81 g/t Au from 15.1m to 17.7m.The units and numbers mean the same, but they’re highlights from within the original 10 metre section (between 8m and 18m) – in this case, a 2.6m segment where the gold concentration is 20.81 grams per tonne, between the depths of 15.1m and 17.7m.* resources legend Reuben Adams explains that investors “need to be careful when there is a super high-grade chunk within a larger intercept”.“It’s called ‘grade smearing’, companies can sometimes intentionally mislead punters by making a potentially economic intercept look larger than it actually is.”You can do the maths yourself online.The above intercept would look something like this:
DEG Price at posting:
$1.40 Sentiment: Buy Disclosure: Held
EG). A very quick story time.Waaaaaay, way back in 2015, De Grey was a shadow of its former self – and, let me be clear, that’s being very polite. In 2004, the company was trading at a peak of around $11 a share, but by 2015 things had changed “a little bit”, and the company was changing hands at just $0.02 a slice.But in late 2019, the company found what looked like a decent sized gold deposit, and told the market about it… and then went poking around for hard evidence that it was on the money.Fast forward to 6 February, 2020, and De Grey announced to the ASX that it had evidence that it had literally struck gold.“Hemi confirms potential for major discovery”, the headline said, with details including that two patches of gold-bearing ground had been found at a site called Hemi.Alongside area A, De Grey listed the following numbers:24m @ 7.5g/t Au from 126m in BWAC315, including 18m @ 8.6g/t (EOH)49m @ 3.7g/t Au from 65m in BWAC309, including 18m @ 6.6g/t36m @ 4.0g/t from 39m in BWAC245, including 11m @ 8.9g/tAlongside the second patch of ground, where these ones:24m @ 4.2g/t Au from 36m in BWAC312, including 10m @ 7.4g/t (EOH)15m @ 2.5g/t Au from 33m in BWAC313 (EOH)21m @ 2.5g/t from 36m in BWAC258 (EOH)Utter gibberish, of course – but to the right people with the understanding of what that all meant, it said simply this: “There is probably a lot of gold at Hemi.”And they were right. Hemi, as it turns out, is stupidly massive. One of those very rare occasions where it’s actually justified to use words like “eyewatering” and “game-changer”.For publicly listed companies, there’s a requirement for them to let everyone know what’s happening while they’ve been out looking for precious things to mine – and that’s when investors get to find out which of The Little Mining Companies that Could are looking likely to morph into The Cash Cow that Laid… uh, the… Golden Goose?Or something like that. You know what I mean. Ahuh… but the gibberish! Explain it. Quickly.The first time I tried to make sense of a mining company’s ASX announcement about a gold discovery in some far-flung part of the country, it reminded me of high school, and discovering to my abject horror that Year 10 maths appeared to have given up on using numbers completely.So when faced with a document that said the company was reporting the following, my head exploded and I nearly died. But I got better.The announcement looked a little like this:“The Company” is pleased to announce assay results from “Some Random Gold Project Somewhere”, including results from hole “Gibberish Hole ID Number” showing more than 45m of mineralisation:10m @ 6.09 g/t Au from 8 to 18m –including 2.6m @ 20.81 g/t Au from 15.1m to 17.7m;2m @ 9.23 g/t Au from 40m to 42m;13m @ 21.91 g/t Au from 58m to 71m –including 0.5m @ 209 g/t Au from 60.5m to 61.0m,including 1.0m @ 64.0 g/t Au from 61.0m to 62.0m,including 1.0m @ 31.8 g/t Au from 63.0m to 64.0m, andincluding 1.0m @ 22.3 g/t Au from 64.0m to 65.0m.So, as you can see, it’s a bunch of random nonsense to an outsider, but once you unpack what it all means, you’ll get a sense of why those particular numbers are actually a phenomenal result.Let’s start at the beginning and break it all down, starting with understanding that these intercepts are from samples collected from a single hole drilled in the ground.For visual reference, go to 7-11, and buy yourself a Slurpee. Stick the straw in all the way to the bottom, put your finger over the hole at the top of the straw, and pull the straw out – then, carefully, release your finger and drag the bottom of the straw along a plate.What will come out is a tube of icy, sugary goodness – a core sample of your headache-inducing beverage – and that’s precisely how exploratory drilling for a mine works, except it’s vastly more expensive and dangerous, and there’s no guarantee there’s even any Slurpee in the cup.Let’s say, for example, that the hole is an arbitrary 100 metres deep – and of that 100 metres, “45m of mineralisation” means there’s gold in 45 of those metres, in varying amounts.The next step is to look at the next bit of the info, which is usually presented in the following format:“Core sample length” @ “resource grade” of “mineral name” from “sample depth start” to “sample depth end”.Using our Random Gold Project numbers in it, that looks like this: 10m @ 6.09 g/t Au from 8 to 18m.That means that there is a 10m intersection (segment) of the core sample that contains 6.09 grams per tonne (g/t) of gold (Au), between the depths of 8m and 18m.So, as a quick cheater’s guide, you basically want all of the numbers in that line of miner’s jargon to be as large as possible, with the exception of the last ones (because the deeper under the ground it is, the more it’s going to cost to bring to the surface).Beneath that first line, there’s a second which says: including 2.6m @ 20.81 g/t Au from 15.1m to 17.7m.The units and numbers mean the same, but they’re highlights from within the original 10 metre section (between 8m and 18m) – in this case, a 2.6m segment where the gold concentration is 20.81 grams per tonne, between the depths of 15.1m and 17.7m.* resources legend Reuben Adams explains that investors “need to be careful when there is a super high-grade chunk within a larger intercept”.“It’s called ‘grade smearing’, companies can sometimes intentionally mislead punters by making a potentially economic intercept look larger than it actually is.”You can do the maths yourself online.The above intercept would look something like this:
(20min delay)