Why Good Grades are Important

I am not going to lie, I am conflicted posting this research here.

I want a lot more shares, in fact, I am going to liquidate my other holdings to try and get many shares as I can get in the next 3 months.

I don't consider this ramping, I am stating what my intention is. And that is 1m+ shares, and to hold until I am making significant income from dividends.

I always say "nothing anything anyone here posts could impact the share price in a sustainable or meaningful way", and that is why I have decided to post this.

If you are on the fence about holding, selling or buying, please consider and verify the information in this post.

THIS IS NOT ADVICE, consider it the ramblings of a mad man.

FYI, these long posts I create are more for me than they are for you. I try to make sure I am as accurate as possible when it comes to working these things out, so I explain them to myself to validate and make sure I understand.

I post them here because I appreciate when people point out errors in my work, as it helps me learn and helps makes me a better investor.

PLEASE PLEASE PLEASE crunch these numbers and my assumptions, and try and pick holes in them.
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Be Careful

I think an important thing to understand is how to calculate the grade and how that translates to the number of ounces mined and dollars made.

Knowing what numbers you need to use (because they are not what they seem), and understanding that what you likely Google for will give you the incorrect inputs / calculations and results.

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An Ounce is not an Ounce (when it comes to gold anyway).

We sell gold in ounces (imperial), but we measure it in grams (metric), so you may Google:

Now the problem is, your first Google search should probably be:

Regular ounce = 28.3495
Troy ounce = 31.1035

This means you need to produce 2.754g (or 9.7%) more gold to create a Troy ounce of gold.


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Not all gold is created equal
If you read the image above, next you will see it is about the quality or "fineness" of the gold we produce, which in turn influences the price we get.

As a miner, our job is to find the gold and get it out of the ground.

There are existing processes and supply chains in the industry that add value to the quality of gold, and the further up the supply chain, the higher the price of gold you charge.

Being at the bottom of that value chain means, by default, miners produce the lowest quality bars of gold - which are known as "Doré" gold bars.

Wiki says - https://en.wikipedia.org/wiki/Dor%C3%A9_bar"A doré bar is a semi-pure alloy of gold and silver. It is usually created at the site of a mine and then transported to a refinery for further purification."

A very easy to understand article is https://www.bullionbypost.co.uk/index/gold/gold-dore/

Doré bars are usually rougher looking and not as brilliant yellow, like this
Now we have no idea what quality "Doré" gold bars we will produce, but many old miner are producing at a 10% discount to the spot price - the price you get when you Google "what is the price of gold"

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It's Good to get Good Grades

If you recall from the recent announcement and interview videos explaining the delay in the Scoping Study, we have found that the gold we will be mining is of a higher grade than what we initially thought.

To understand what this means we need to bust out my Maths in Society knowledge. This means I am not very good at math. But, here goes.

The first calculation is to figure out how many tonnes of dirt we need to mine to get to a Troy ounce of gold.

We know a Troy ounce is ~31g of gold.

We also know that our initial grade was 0.3g per tonne.

If we divide 31g / 0.3g = 103 tonnes of dirt that needs to be dug up to produce 1 Troy oz of gold.

Now let's have a look when we increase the grade by 0.05g per tonne.

31g / 0.35g = 88.5 tonnes of dirt that needs to be dug up to produce 1 Troy oz of gold.

That means we need to dig 14% less ore at JUST a 0.05g per tonne improvement on 0.3g per tonne.



Now, let's look at the announcement from 19th July

"(KBDH-072 returned an overall average grade of 0.7 g/t Au over 308m from surface within the Korbel mineralized intrusive containing multiple high-grade zones"

31g / 0.7g = 44.2

This means a whopping 57% material to be mined to produce 1 Troy ounce of gold - AKA, we are more than 200% (twice) as profitable.

And

"KBDH-080 returned an overall average grade of 0.4 g/t Au over 323m from 5m within the Korbel mineralized intrusive containing multiple high-grade zones"

31g / 0.4g = 77.7

This means a significant 24.5% material to be mined to produce 1 Troy ounce of gold - AKA, we are 50% more profitable.

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What does all this mean?

I THINK it means we have a monster.

500,000,000 (500 million) TONNES OF DIRT JUST AT KORBEL.

And that is currently being expanded on.

Step out drilling is happening at a distance of 500m from each of the South East and North West ends of the strike.

Korbel Main is 1.8kms in strike, so this could potentially make the strike 2.8kms. This is a potential increase of ~55%


And a grade increase of say 25% means where we thought we had

500,000,000 / 103 tonnes that needed to be mined to produce one Troy ounce of gold = ~4.854 million Troy ounces of gold

We may infact have

500,000,000 / 77.7 tonnes that need to be mined to produce one Troy ounce of gold = 6.435 million Troy ounces of gold.

So increase 550,000,000 million tonnes of dirt by 55% = 852,500,000 million tonnes of dirt.

Heaven forbid we use 0.4g per tonne (or 77.7 tonnes that needs to be mined to produce 1 Troy ounce of gold), this gives us a resource that is potentially

852,500,000 / 77.7 = 10.971 million Troy ounces of gold - JUST AT KORBEL.