Mining Company research board

[jetpilot1101]

1MB, take a good read of this nonsense. This is coming from a guy who is the "shareholder expert" in geology and mining.

Thoughts?

I just received a call suggesting that there might be a couple of misconceptions floating around as to the role of NI 43-101 in reporting Medinah's adit samples and assay results. In mining, the overall goal is to get the economic ore out of a deposit and into the mill in as economic of a manner as possible in order to collect a check. In the case of most porphyry deposits, however, the vertical level of "emplacement" of the top of the deposit is typically between 1.5 and 3 Km below the surface of the stratovolcano that hosts it.
www.ruf.rice.edu/~ctlee/SillitoeSEG-Porphyry.pdf
Sillitoe did the most work in this field. Fortunately, Medinah's mountain had its top blown off at some period in time.

Before you attempt to mine a porphyry deposit you first want to determine if at the end of the day the deposit is "economic". This involves a sequence of geological examinations that typically results in identifying targets to drill. NI 43-101 defines how corporations trading on the Canadian exchanges are to report these drill results in a uniform manner so that the readers of this data can compare apples to apples.

Typically a very thorough "bankable feasibility study" (BFS) is created and set on the desk of a banker or mining major and the question is asked are you going to lend us the perhaps $500 million to develop this project or not. A "BFS" might cost a couple of million dollars and take a year or two to complete. If you do not need one in order to accomplish the main goal cited above you certainly are not going to perform one. The 43-101 rules create uniformity and allow bankers, miners and investors to all be speaking the same language except for one giant caveat "not all reserve ounces are created equal". This is because some deposits occur in more favorable infrastructures, in more geopolitically safe countries and closer to surface.

Since the skarn and crosscutting gold veins over at the LDM's Los Amigos #1 concession actually made it to surface it is being mined without a "BFS" needing to be done and perhaps without any further drilling to be done unless it is done in order to help design any future open pit or in order to secure any future financings or strategic alliance relationships. For now, Medinah can bypass the time requirements and expenses needed to calculate reserves and resources according to NI 43-101 rules and go straight to the business at hand i.e. get the ore to the mill and get paid. The report card to evaluate will be the cash flow from the income stream instead of a numerical amount of proven reserves in which not all ounces are created equal. Being able to directly measure cash flow bypasses all of the uncertainty associated with reserve ounces that are not created equal. As far as saving time, money and eliminating uncertainty, going directly into production at a near surface deposit is a very good thing.

As far as assay reporting, it is not critical to report whether a channel sample was taken 120 meters from the commencement of an adit or 320 meters. That ore is about to be in a stockpile and then in a cone crusher at the mill. Instead of 43-101 reserves and resources, the amount of the cash receipts now become critical as well as the average "mill grade" of the ore being processed.

The standards and guidelines of the geoscientific profession mandate that all sampling be "representative" of the material being sampled in the environment in which the sampling occurs. In an adit environment this is nearly always done via a "channel sample". When you're actively advancing an adit the channel sample is taken prior to the next round of blasting across the width of the "working face" of the adit. While drifting the LDMC adit Medinah's geoscientists had to meticulously chart the distance of each sample from the commencement of the adit because this information might be critical later for geo-modeling purposes and to aid in the design of any future open pit.

As far as the "Spanish tunnels" being actively mined this sample location information is no doubt being catalogued but as far as reporting it to the public bearing in mind the criss-crossing nature of these tunnels I'm not sure that would be of any value from a "materiality" point of view. The QA/QC (Quality Assurance/Quality Control) protocols would mandate that "controls" would be established to make sure the head grade of the ore in the adit matches the mill grade of the ore.

The last Medinah update cited the sampling results from the (independent) San Pedro Mill geoscientists. A mill needs to execute a robust sampling process so that it does not enter into a long term agreement with a mining firm with marginal ore. They need to evaluate both grade and mine life. With the figures given and based on a 400 tonne per day run rate that LA #1 concession has a mine life of about 84 years. San Pedro's results after "extensive" sampling (I believe the update cited that they were there 3 days) was an average ore grade slightly above 4% copper.