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February 19, 2009



Oh, and if you are really serious about investing in mining, hire a real geologist, the info they will tell you is invaluable. at a $150 an hour (probably way less now) a good one can give you all the dirt on these companies and the real personalities behind the CEO titles.
as long as you don't have them write 43-101's and you treat them like woman, buy them stuff, pay on time, and be interested in them you will learn plenty. (they hate writing reports, so just ask for a verbal report, all you want to do is find out yes or no) (geo's are like woman, irrational, moody, temperamental, but like woman they give you an insight that is both emotional and rational)


-Width of ore deposits is important. pinching or narrow veins are never good because it will affect strip ratio. also when looking at drill results, look at the length of the drill results- at least a meter, none of this
85g/t au actual width .01m

also be weary of ppm and ppb- parts per million. when its gold or precious metals, quote grams per ton or oz per ton. You see this BS with alot of little miners who have nothing.

-feasibility studies;
be aware of leased items that don't make it into the final study- Australian Solomons Gold did this in their pre-feasibility or feasibility study.
IRR rates- IRR is basically bogus do not even look at this figure.
get the cost to build the mine, and multiply by 10 if the figure is lower than this, I would move on. a 10X return on a life of mine, all said and done taxes everything is about 20-30% net profit tops per yr for the company. Big projects like the panama petaquilla project where its a 3X return, if you like investing in large companies and not getting huge returns, invest in stuff like that but a billion or more to build a mine, I forget the actual amount but I know it went to 2 or maybe 3 billion to build, its just not for me because it will take a long time and there are always cost over runs, and on a 3x return over a long period of time, there are better ways to invest your money. Also consider commodity prices Copper from 3 bucks plus to a buck fifty, kills this project.

-Recovery- many, many, many BS mining companies just roll on down the line makin' a mine spending cash, ye ha! The guilty include;
silver eagle- shat recovery rate, and they had to hire a geo just to start proven up the land, and they already built the mine.
Buffalo Gold- more shat recovery rates and lets fix up this mill and spend lots of money, oh I forgot there's no gold here. see ya.
halo resources- bought a mine under a lake, the lake is Winnipeg drinking water plus native troubles. oh, and its under a lake. and they havent been able to do anything with it since it was worked on in the 60's.

even the classic SME mining engineers handbook- a classic says that bottle roll test are not in any way to be relied upon for recovery, but they are a cheap way to see if you are in the ball park.

-the old consolidate and then Name change- the putz's over at bell copper know about this. so you cannot check ratios or past performance.

Do your homework do not buy on emotion, or management unless you know something I don't. (insider info is the best way to make moeny) Look at the cold hard facts and all the past PR's and build up a picture of what they are doing, if the picture is'nt right or well communicated, build that in because like it or not these CEO's don't always want or know how to run a public company. Also discount years of experience, just because you do something for 20 years doesn't make you good at it. I am also leary of CEO's with sub CEO level experience from big companies now running small ones.

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Strip Ratio is the ratio of tons of overburden (waste material) to tons of ore in an open pit mine. Since the waste rock needs to be removed in order to expose the orebody, the higher the ratio, the more it costs to move/haul away. Some of the costs are obvious such as man hours to operate the equipment, and fuel to run the equipment, less obvious is that permits need to be approved to dump the waste. This is especially true if the waste material has any issues such as being acid bearing. Google "Acid mine drainage pollution".

A good article by Reginald Ogden covers a lot of considerations with a fair bit of depth. One of those links you want to bookmark in your "toolBox" folder. http://www.kitco.com/ind/ogden/nov072008.html

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