The garimpeiro miners in Brazil can't spell either. All they know how to do is to mine at a profit. Unlike professionally run mining companies, they mine until they fail to make a profit. Then they stop. All garimpeiros mine at a profit. It's a lesson the professionals should learn.
Over the past 16 years of traveling and looking at mining projects, I invented my own definition of mining. I like it; it's simple and covers everything you need to know:
Mining is the art and science of extracting minerals from the ground at a profit.
What I have observed in visiting hundreds of properties is that (1) the level of formal education is far higher than in any other field I am familiar and (2) most geos think that mining is the art and science of spending money. Rarely does the word profit get mentioned or exist and finally (3) most of the people in the mining business should have taken a semester off during their studies to work at a 7-11. It would do wonders for their overall education if they actually understood how to sell a quart of milk at a profit.
If the garimpeiro miners from Brazil or any other third world country were working at Purdy's Reward in Western Australia run by Artemis Resources Ltd. (ARV:ASX) and Novo Resources Corp. (NVO:TSX.V; NSRPF:OTCQX), there would be a bunch of big holes in the ground.
You see, the vast majority of the "experts" and highly educated professionals in the mining business believe you must measure gold before you mine it. Sometimes this leads to some giant gaffs such as that from Strathcona Mineral Services when they said of the Blackjack project owned by Pretium Resources Inc. (PVG:TSX; PVG:NYSE) "There are no valid gold mineral resources for the [Valley of the Kings] zone, and without mineral resources there can be no mineral reserves, and without mineral reserves there can be no basis for a feasibility study."
Oops.
It's four years later. Pretium has put the mine into production. They are producing a lot of gold. In short Pretium was right and while technically correct, Strathcona was both highly professional and had their head up their ass.
Novo and Artemis in Aussieland demonstrate the fundamental issue perfectly. Their solution or lack of a solution will dictate the future of what might be one of the richest gold fields in history.
Novo released assay results from their first trench sample in early August. We have no idea if this is the highest-grade sample that will ever be released or the lowest. We just don't know. There have been no other results released yet. None will be released before January of 2018.
Here's the rub. The sample showed a grade of gold of just over 67 g/t. It was nearly pure and I'm going to pretend it has a specific gravity of gold, 19.3. Most of it was in nuggets and that's a problem. As Pretium discovered, the more nugget effect, the harder it is to measure in any professional way.
If you can visualize a cubic meter of rock, it contains about 2.5 tons. If you have 67-g/t material, therefore you have about 167.5 grams of gold. If it were in one cubic nugget, it would be about 15 mm or about 0.6 of an inch. That's small enough to hide in your ear if you don't mind your ear lobes dragging the ground.
So if you have a cube of pure gold weighing 167.5 grams buried somewhere in a cubic meter of rock, just how do you measure it in a professional and duplicable way?
You can't. It's just not possible. So if you are a professional, you pack up your gear and go on to some other bullshit project that you can measure in a professional way.
Now on the other hand, if you are in the business of mining for a profit, you just smash the rock up and figure out an effective way to mill it. When you run out of ore, you stop. If you really must know what the grade is, ask the accountant. He is in charge of keeping all those numbers.
Keith Barron just released an excellent article talking about the Purdy's Reward project. Like David Lenigas, Chairman of Artemis, before him, Keith gets it. The issue shouldn't be how do you measure the gold, the issue should be, how do you make a profit? Barron and Lenigas agree, the road to riches is to mine and mill the material and extract the gold, at a profit.
Keith and I talk a lot. I encouraged him to visit the project. Before his trip, he was the king of skeptics. I maintained that it was quite real, quite different and well worth his time to visit. He did and for most of his article, the skeptical in Keith came out just as it should and as it did with Brent Cook. But the visit did convince him that Novo/Artemis have 8 km of high-grade gold marked by the paw prints of the guys with the metal detectors. If you can't measure it, you can mine it. And in an act of brilliance, Lenigas had applied for and just received permission for a 20,000-ton bulk sample.
Keith Barron also happens to be a founder and director of a uranium company named U3O8 Corp. (UWE:TSX; UWEFF:OTCQX). And he puts his money where his mouth is. He owns a placer mining operation in Montana with the largest sapphire mine in the U.S. so he knows what he is talking about. U3O8 has deposits of uranium and vanadium in both Colombia and Argentina.
U3O8's Laguna Salada project in Argentina contains just over ten million pounds of U3O8 and an additional eighty-four million pounds of vanadium. Recent shut downs of production capacity by two major uranium companies has lit a fire under the price of uranium shares with U3O8 going from $0.25 to $0.58 in the last five weeks.
After a lot of thinking, Keith realized that the figure generated in the PEA for the Laguna Salada property of $126 million for capex was absurd. The minerals are attached to gravel in a basin. There is about three meters of non-mineralized gravel overburden covering about a meter of mineralized gravel. Keith did some testing and found that if the gravel were turned in a trommel it would loosen the fine material on the exterior of the gravel. That fine material, about 8% of the total mass, contains 88% of the mineralization.
Moving gravel is pretty cheap. And Keith uses a trommel with his sapphire operation in Montana. It came to him that he could run a very simple and cheap test to determine just how viable a low cost fast production plan would work. He believes in it to the point that he has loaned a million dollars to U3O8 to do testing.
The tests anticipate taking the top three meters of overburden off, mining the one meter of mineralized gravel, feeding it through a trommel to wash off and break the surface covering. The fine material will be processed with baking soda and washing soda to extract the U3O8 and Vanadium.
Thirty years ago geologists rarely had access to a computer of their own. The use of GPS for navigation was rare and cell phones were only a concept out of the Sunday funny papers. Geologists have far more access to technology today than ever in history. But in the transition, has the industry forgotten why they are in business in the first place?
There are probably 1000 "life style" companies in Vancouver and Toronto today who have no ability or intention to ever put anything into production. They exist to fleece shareholders in order to provide a nice life style for management. We all know that. We are in an industry that is probably 80% fraud at heart. And we wonder just why ordinary people don't see any reason to invest in resource companies.
I've seen management groups piss away hundreds of millions of dollars, the hard-earned savings of people who actually work for a living, squandered chasing a wisp of the willow. After all, in exploration you can never fail. All you need is another few million to pour down a hole and you might somehow succeed. It's only when you actually man up and go into production that you face the real challenge of either putting up or shutting up.
Artemis/Novo have a unique form of nuggety gold in Karratha that cannot be measured, only mined. U3O8 has an interesting and different form of mineralization in Argentina that can be mined in the professional manner for $126 million. Or simply mined for a fraction of that amount.
Keith Barron is in Argentina as I write. We chatted back and forth on Skype a couple of days ago before his journey. Given his recent advice to Novo and his intention to put his money where his mouth is with U3O8 I told him that he and Quinton Hennigh are about to stand the mining industry on its head with the greatest change in the last fifty years.
Imagine the concept of going into production for pennies in order to make a profit. What will they think of next?
U3O8 Corporation
UWE-T $.56 (Dec 11, 2017)
UWEFF OTCQX 19.7million shares
U3O8 Corp website
Bob and Barb Moriarty brought 321gold.com to the Internet almost 16 years ago. They later added 321energy.com to cover oil, natural gas, gasoline, coal, solar, wind and nuclear energy. Both sites feature articles, editorial opinions, pricing figures and updates on current events affecting both sectors. Previously, Moriarty was a Marine F-4B and O-1 pilot with more than 832 missions in Vietnam. He holds 14 international aviation records.
Want to read more Gold Report articles like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent articles and interviews with industry analysts and commentators, visit our Streetwise Interviews page.
Disclosure:
1) Bob Moriarty: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: Novo Resources and U3O8. Novo Resources and U3O8 are advertisers on 321 Gold. I determined which companies would be included in this article based on my research and understanding of the sector.
2) The following companies mentioned are billboard sponsors of Streetwise Reports: Pretium Resources. Streetwise Reports does not accept stock in exchange for its services. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article/interview, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Pretium Resources, a company mentioned in this article.
