When the share price is dropping, and TON announces a huge tonnage of graphite, we can't help feeling a little nervous. But should we? Let's look a little deeper.
The major zone defined at Nicanda Hill, the Mutota zone, is about five km long, 200 m deep, averages 30 m thick, and is about 15% graphite (all according to the TON ASX announcement). ÓK, that's a formidable amount of both ore and graphite, worth a lot of money - but only after it has been dug up. There are real, practical limitations on mining, which might make us want to think again. Remember that 30 m thickness, and remember that the grade falls off quite rapidly either side of the Mutota zone (as shown in earlier TON announcements), to levels which would certainly be regarded as waste by SYR at Balama.
Does that matter? You'd better believe it. To find out why, try this. Draw a rough square, about two cm sides. Then draw two more lines from the bottom of the square, upwards and outwards, at about 45 degrees, to the level of the top of the square. Still with me? Fine! Guess what? You've just drawn a cross-section of an open pit mine, where the square is the orebody, and the sides are waste. Now comes the interesting bit. If the bottom of your square 30 m across, the pit is 30 m deep, right? And your little mining plan shows very clearly that, to get only 30 m deep, you have had to dig out as much low-grade rubbish from the sides of the pit as you have dug ore from the central orebody. Uh, oh.
And it gets worse. If you extend your pit to 60 m deep, it becomes obvious that you end up digging out about four tonnes of waste for every tonne of ore from the good stuff. As for going down to 475 m, or even 200 m, well, good luck. In mining speak, the strip ratio looks grim.
The comparison with SYR is that the rich zones at Balama are typically 100 m or more in thickness, (and have higher grade than the Mutota zone) so they do not have the same problem.
Now, the Mutota zone orebody is not strictly vertical, but actually dips at about 55 degrees, and open pit walls are usually at 50 degrees, rather than 45 degrees, but these things do not materially affect the conclusion.
TON may well have thick, high-grade zones in their orebody, but it doesn't look like they have found them yet. So far, I see no reason at all to jump ship. On the contrary, a few more SYR shares, at current prices, will be very welcome.
Cheers, Prime1
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