In the hands of the world’s biggest gold miner, a decent, even pretty big, gold discovery doesn’t make a lot of waves.
When you churn out 6 million ounces gold or so a year you don’t get a lot of recognition for the pre-resource stuff especially.
Firstly, you can’t put a dollar figure or cash flow analysis to it that carries even a faint promise of being accurate given the vagaries of deposit development – including unclear tonnage and grade, metallurgical questions, infrastructure issues, potential people problems, and permitting, and so on. The list goes on. And secondly, for a Barrick, with fairly deep gold reserves already, and yet also a high rate of reserve depletion, absolutely speaking, it’s both hard to impress the market and to keep up with reserve replacement even with new discoveries.
You’re mostly measured by your best existing and operating mines, not potential greenshoots in the field. Fair enough.
But still. Gold discoveries, especially of multi-million ounce deposits, with early indications they may work as a mine, are pretty damn rare. So it’s hard not to at least give kudos when they’re made. Barrick deserves some this week.
A couple days back Barrick reported first drilling results on its Alturas project in Chile. It’s clearly shaping up to be one of the larger gold discoveries in recent years.Let’s take a closer look. Coming out of the gates Barrick reports broad, oxide gold mineralisation over intercepts generally between about 50 to 150 metres long in a 1-kilometre-square area at grades largely in the 1-2 g/t range, but with lots of notable exceptions including an impressive 97 meters @ 4.4 g/t Au. The deposit appears to outcrop on the side of a bluff, or nearly so, and then pass under fairly substantial cover in the 100- to 300-metre thick range. From the sky, with basic results overlain, it looks like this (white line=~1km):
The cross section adds to the sense of size:
Clearly Barrick is on to something pretty substantial. Early guesses suggest there are several million ounces gold in Alturas and that the deposit looks something like Barrick’s heap-leach gold mine Veladero, to the north in Argentina, only at better grades. Hence Barrick’s continued interest.
Over at Haywood Securities analyst Kerry Smith did a back of the envelope guesstimate of potential ounces: between 3 million to 7 million ounces gold in the 1 to 1.5 g/t Au range. This guess seems pretty reasonable to me (for what it’s worth.) Smith also points out that the deposit looks like it could be attacked via open pit with a strip ratio “likely in the 3:1 range.” More conservative types can wait for a resource estimate due out later this year for a more thorough consideration of tonnage and ounces among other considerations like water and infrastructure.
Of course it’s too early to say if Alturas will ever be a mine. Lots or project details beyond resources remain to be fleshed out there. But at least it’s fair to say Barrick’s made a nice start with a good looking gold discovery.
(Images: Barrick Gold)