Comparing HEG and BDG is an interesting exercise. From a...

Comparing HEG and BDG is an interesting exercise. From a geological perspective, the deposits are somewhat similar; coarse gold, unevenly distributed in quartz with minor sulphides. Both companies faced similar difficulties in measuring the uneven gold resource. I am firmly of the opinion that HEG's approach to measuring the mineralisation has been more rigorous. Development along their sheeted vein orebodies together with bulk sampling provides a dataset that reliably indicates grade variation. Current drilling is clarifying the geometry of the resource. In combination, knowledge of grade variation and resource structure gives the company a high level of certainty about the mineralisation in defined parts of the reef system.

Bendigo has been mined more extensively than Hill End, down to about three times the depth. The Bendigo field is world famous for saddle reefs but in reality the field hosts a diverse variety of reef types. As is well known, BDG failed with initial mining after attempting to define resource by drilling. Current practice is to use drill core related indicators* together with data from large scale trial mining.

(*I need to declare an interest here. I have conceptually developed a system to more rigorously define resource at Bendigo using these indicators.)

Unquestionably, profits for the last two quarters’ profit for BDG are excellent results. However, the question mark hanging over the company is its ability to maintain that profitability. Going forward, the company has an impressive set of reefs to explore and to develop. What they do not appear to have published are actual bulk mining grades from many of these reefs. The company has had great success with Gill Reef and has mined three blocks from Dale Reef and one block from Garrard Reef. Mining has started on another two reefs.

I am concerned that for the quarterly report, BDG chose not to release specific grade data on each of the reefs they have mined. This means that we are unable to infer high grade resource for any of the reefs besides Gill. I do not know how much of Gill remains to be mined, This excellent reef has already provided substantial production.

Similarly there is a question mark over reserves at BDG’s recent acquisition, Henty. This quote from the BDG quarterly: “Production in 2010 is dependent on post acquisition actions relating to the mine plan and conversion of near mine resources into reserves.”

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My strategy is to maintain my focus on HEG over the shorter term. When/if a significant resource/reserve position emerges for BDG I will be expecting trading opportunities as the market revalues the company. I hold shares in both HEG and BDG.