Grade Control Drilling Will transform our ReservesThose who followed my posts here...many for simple educational purposes...will now understand that the 43-101 Resource categories are based on statistical drilling density ( ie number of holes per square area ).
When no drill hole is present within a specified distance from an existing successful hole, that grade is " stretched "( interpolated ) by the distance of the defined for that category.
Measured constrains stretching to 15 m , Indicated to 50 m and inferred up to 100 m ...outside 100 m ius unclassified .
So, 30 grams per ton would be interpolated up to 2 grams ( 30 / 15 ) within Measured , to as low as 0.6 grams in Indicated ( 30 /50 ) and to just 0.3 gram ( 30/100 ) for Inferrer.
Note that Reserves are chosen only from the best of only Measured and indicated
Now, our GC drilling has been at world class drilling density of just 10 meters.......every hole now within the best of Measured category.
The simple interpretation of this is that all of our M + Id + If gold resources = 343,000 ounces will become Proven Reserves when the 43-101 is updated versus 272,000 ounces in the 2022 FS.
This is a 26 % increase...very significant .
However, this does not account for the grade " stretching effect " used in the Leafrog interpolation algorithms .
A very simple way to estimate this is from the ration of grades in the 2022 FS 43-101 categories relative to Proven ..the highest category.
So we have ..
43-101 Cat Grade oz P Ratio Adjust P Oz
Measured 5.47 grams 123 ounces 1.1 135
Indicated 3.61 grams 207 ounces 1.7 350
Inferred 1.31 grams 13 ounces 4.5 60
Total adjusted Reserves 545,000 ounces
2022 FS Reserves 272,000 ounces
That is, GC drilling will likely double our Reserves and hence our projected production and more than double our after tax NPV5.
But, there is more.
Our GC has shown significant gains in grades and new resources within the HD 2022 open pit .
What might these grade increases be ?
A quick and dirty estimate can be calculated from Richmonts historical HD Reserve and mining grades.
RIC's 2000 Reserves had a grade of 21.2 grams per ton with a 8.6 gram cutoff.
Hence the underlying ( true ) grade was 21.2 less 8.6 = 12.6 grams.
That exactly conforms to the 2.84 SG used by RIC and the 2022 FS .
RIC average mined grade ( mostly UG ) was 15.5 grams which means that the underlying grade was 15.5 less 8.6 = 6.9 grams
Within the starter opn pit ( OP ) , RIC mined grade was 14.5 grams which means that the OP underlying grade was 14.5 less 8.6 = 5.9 grams per ton.
On average, the remaining HD resource grade subsequent to RIC mininfg was about 6.5 grams per ton versus 4.5 grams in the 2022 FS with a 0.74 gram cutoff which is a 60 % increase.
We are now seeing up to 3 ounces per ton in that starter pit .
We must also remenber that the 2022 FS assumed zero grades for the backfilled stopes and also zero for the high grade pillars missed by RICs widely spaced drilling .
IMO, considring all the available evidence, the new GC based grade will exceed 6.5 gms per ton and updated FS Reserves will approach if not significaantly exceed 600.000 ounces.
These new drilling discoveries, with another 40,000 meters now underway at HD , have and will continue to trasnform our 2022 FS projected economic outcomes of the HD open pit productivity to say nothing as to what the outcomes will be when Orion , Wisteria, Golden Anchor , Orion North, AREA 22 are added
A realistic fair value above $5 is not unreasonable
AIMHO
GLTA