I've been cajoled into addressing these comments made on a different forum:
"Coming to a prospect like ADL with limited concrete information is a gamble, but then so is all exploration; it depends on the relevant company and their attitude to risk - obviously positive audited data mitigates against the level of risk and also gives a tentative indication of the minimum potential deposit size (many companies operate a 'cut-off' below which they will not operate depending on their business model).
[RESPONSE: I feel that mineral exploration always represents ultra-high risk offset by ultra-high reward. As far as "cuft off" grades all mining companies utilize them. Typically you want to set your cut off grade at the level that maximizes the deposits NPV. You need to keep in mind that as the cut off grade increases the mine life must decrease but since the NPV calculus is based upon discounted cash flows over the mine life this is automatically factored into the NPV calculation.]
"Historically the area has been subject to artisanal mining for gold and copper in particular which indicates some level of mineralisation; but artisanal miners are able to operate at levels that mechanised mining cannot and to a time scale and work schedule all their own. Artisanal miners in Chile are extremely adept at mining the high-grade 'eyes' out of a manto or breccia or stockwork in often dangerous very confined spaces with a minimum of structural support and mechanised equipment; they are almost always halted by the water table or when their workings are become too structurally unsound. Mechanised miners need to work 24/7, produce bulk tonnages and ensure a consistent feed to the mill, so they need a known resource to base their mine planning on. Coming to something like ADL, which is a pure exploration play isn't something I would expect a mid-tier company to do, rather they would wait for a junior to explore first and firm up a resource before they committed time and money to the project."
[RESPONSE: In regards to: "Coming to something like ADL, which is a pure exploration play isn't something I would expect a mid-tier company to do, rather they would wait for a junior to explore first and firm up a resource before they committed time and money to the project", I couldn't disagree more. Firstly, the goal for most juniors is to get the deposit to whatever stage of development that would attract the interests of a major. Today's mining environment is characterized by the majors digging deeper and deeper while going after lower and lower grades in countries with higher and higher levels of geopolitical risk. In regards to the infrastructure at the ADL/LDM property complex water and power are already there. The elevation is quite favorable in supporting a year round work program. Chile has nearly always been in the top 3 countries when it comes to low geopolitical risk. The potential labor pool from Santiago is enormous.
Secondly, I wouldn't consider it a "pure exploration play". There appear to be several early production opportunities. The ACA Howe report cites "significant" high grade tailings and dumps averaging 5.3 gm/tonne gold. The artisanal miners had trouble processing arsenopyrites and extracting the gold. If the discards are running at 5.3 gpt then what was the head grade? At the Fortuna Mine from 1940 to 1970 production averaged over 64 grams per tonne gold. ACA Howe is on the record as stating that the surface has barely been scratched on the eastern aspects of the plateau. The chosen partner is rumored to be already in production in this area on the north slope of the plateau. Medinah has simply never had the resources nor the intent to further define all of these areas once suitors got to the comfort level needed to make a move. Unfortunately the last 2 suitors, group A and B, were not able to fund their commitments even after spending considerable amounts of capital on due diligence, travel, legal, etc. Getting left at the altar when it's time to cut the check is not exactly an atypical occurrence in the junior mineral sector. The pain involved is bad because the due diligence process takes so long before making financial commitments the size that need to be made. Between this fact and permitting hassles, they help to explain the inordinate amounts of time it takes for the average junior explorer with a discovery to advance from the commencement of exploration efforts to production. It is the inordinate length of this "cycle" and the lack of new discoveries that drives the majors to shut down their own exploration efforts and take out companies with significant discoveries sooner rather than later in the development of the deposit. The reserves on their balance sheets need to be replaced and with gold prices approaching the costs to produce an ounce of gold high grade, near surface deposits in favorable infrastructures i.e. low costs to produce an ounce have never been in higher demand. The Pebble and Pascua Lama deposits have taught us this lesson.]
"The LDM may sound good on paper, but the sampling undertaken there is not fit for purpose and would not stand up to scrutiny. Sampling is a complex method of establishing ore tenor to a high level of confidence based on the structure of the deposit, mineralogy, chemistry and statistical behaviour of the metals involved and works by establishing a sphere of influence for each sample point. Sampling at LDM is very coarse (single samples covering several metres) and carries no geological context or explanation. Carbonate and oxide copper species can carry 60-90% copper. Hit a 20cm pod of cuprite in a 5m sample and you may get an assay grade of around 4% copper back; base your tonnage and grade calculations on this and you will get a very large figure, when in reality almost all the copper was in the little pod and the other 4.8m carries next to nothing. Your tonnage is more like poundage in this case. Refer back to some of my earlier posts regarding gold; correct sampling there is even more critical."
[RESPONSE: The sampling protocol on the LDM involved standard "channel sampling" done across the working face prior to the next round of blasing. Late stage cross-cutting veins were similarly "channel sampled". The formal reports citing UTM and/or GPS coordinates and methodology has not been made public as of yet unless the suitors have demanded such or done their own sampling.]
"With regard to Perez; he was able to identify two porphyry bodies with some attendant alteration and may have felt able (issues with translation?)to infer a connection with the known inca and artisan-worked mineralisation on the plateau; that isn't something that could be done today without firm evidence. Simply having a porphyry, even one with evidence of hydrothermal activity does not mean you have an ore deposit on your hands. The Sillitoe model is just that - a model which illustrates an ideal situation; reality is often far more complex. In any event there are, as yet, no boreholes into these porphyries to quantify any mineralisation if it is present."
[RESPONSE: Formal reserve definition will obviously be done by the strategic alliance partners as per their needs. The 2 main parameters involved in deciding how far the juniuor will continue its development efforts will involve attaining the potential partner's comfort level to make a move and the share price of the junior which would dictate how much dilution would be involved in going to the next level of development. If a management team feels that their share price is woefully undervalued then handing the keys over to a partner sooner rather than later might make sense. There is a new paradigm in the current mining sector and it is centered on exploiting low cost early production opportunities while defining the deposit. In the mining sector, communication efforts seem to slow to a trickle whenever the company is in the process of drafting joint venture contracts. Unfortunately for us, due to past history Medinah has spent most of their corporate life in this mode.]
