When should you stop Resource drilling?

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When should you stop Resource drilling? Good question. Over the years, we have seen both sides of the spectrum:

  1. Those that don’t drill enough
  2. Those that drill too much

Let’s consider some of the issues:

Firstly, make sure that you are not drilling any material that has no potential to be economic (note that these areas won’t be part of the Mineral Resource anyway). We have seen drill hole databases where only 10% of the holes intersect the mineralisation within an economic envelope. This is because they took too long to put the drilling into an economic perspective. Usually, this is driven by the identification of continuous narrow mid-grade mineralisation at depth. The grade is not good enough to support underground mining (except with bulk mining methods) and the thickness is not sufficient to support reasonable open pit strip ratios. In this case, upon identifying this, drilling was re-focused on shallow areas of the Resource, gaining much greater drilling efficiencies (shorter holes, greater chance of being economic). Make sure you do a pit optimisation at the earliest possible time, and any time before you start additional drilling.

Get your spacings right. It is worth doing some closer spaced drilling early on in some areas as this information can be used to provide guidance as to the necessary drill spacings for Measured, Indicated and Inferred Resource classifications. Without this closer drilling, you may end up doing much more drilling than you need (globally) to achieve your desired classification.

Now, think about your mine life of your Measured and Indicated Resources. Typically, if you have 25 years of production in Indicated or better, there is no point to continue, unless;

  1. you believe you can identify superior material (and if so, why did you not drill this earlier?),
  2. you believe you need more inventory to support a higher production rate (in which case think about your ability to finance this increased scale), or
  3. you are improving classification from Indicated to Measured (more on this later). Ore Reserves of more than 25 years do not add to the NPV of the project (due to discounting) and can distract you from focusing on the payback period of the project (which should be much less than 25 years).

On the flip side, for larger project, if you only have five years of Measured and Indicated Resources (that is potentially economic), consider the next point.

Have you spoken to your financier? So commonly our clients will ask “how much Measured Resource do I need?”.  I can give you our answer straight away: “it depends what your financier requires”. There is no hard and fast prescribed answer. Obviously, Measured Resources have increased confidence when compared to Indicated Resources, but there are time and cost trade-offs to be had, often substantial. The right balance can only be found with good communication with those that ultimately decide whether your project will go ahead: the financiers. Some may not care that you do not have Measured Resources, some may want 5+ years of production. It just depends.

Our most successful clients have had early engagement with financiers who have advised them during the study phases, so the right amount of drilling (and time and cost) is used. Don’t do drilling you don’t need to do (or could defer until pre-production).

If you want to make sure you get the amount of drilling you do right, get in contact with our experts at snowden@snowdengroup.com.

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