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Cubing the hole is not a tool by which to place a dollar value on an ore body. Anyone who does so is a fool. It’s merely a calculation that allows the reduction of information from multiple input variables down to a single number. Seeing headlines on news releases such as: “8% copper from drilling at Project X” is meaningless until you read into the story to learn that this grade is applied to just 0.5 metres. I’ve actually seen such misleading headlines, on multiple occasions.
When all you have is one isolated drill hole, it’s difficult to understand the significance of results. This said, as you consider across holes, and across companies, every bit of comparison information you can muster has the potential to add value to your understanding. The challenge is in comparing, from hole to hole, and project to project, results with a multiple of variables. Grades and intercept length work to confuse in this comparison, and they’re only two of many considerations for the geologists to take into account.
Recognizing this cubing technique as preliminary and rough (again, it’s not something you can take to the bank), I am confident in its usefulness on a comparative level across companies. I’ve used it to successfully identify a number of exit opportunities on investments just in time to beat the market to the door. My suspicion is that some people are skeptical of ‘cubing’ because they paint all ore bodies with the same broad brush. Epithermal veins, for example are not at all conducive to the cubing method, given their sporadic, streaky manifestation. Porphyries, however, when not interrupted by post-mineralization events, are essentially blobs… and what’s more, blobs that often reside near other such blobs. More predictable in formation, porphyries lend themselves much better to early this comparison technique than do veins. I’m not saying that cubing replaces mine modeling software or infill drilling… it doesn’t… not by a long stretch. At the same time, even novices can use this tool to make comparisons in aid of better understanding relative results.
Be careful to exercise caution in the interpretation of this technique for multiple holes on a site. If the cubes of different holes overlap, the overlap must be reduced from the sum of the estimates across holes. In other words, in the event of overlap, results are not additive. As soon as multiple holes are in play, you should look (elsewhere in our Toolbox) for the Valuation of a 3D Ore Body tool.
Be careful also not to jump to conclusions as to the ‘cube’ when the Company has already found shorter intercepts running across the angle of the hole in question. They may be doing no more than ‘threading the needle’. Don’t fall victim to this scam.
This method carries the grade/intercept length interplay through to a per share comparison, based on the number of outstanding shares. Stressing again that this does NOT give a valuation for the ore body, the variable reduction to a per share basis allows comparison of rudimentary single-hole results across companies.
To use this tool, just key the respective grades and lengths of intercepts in the pale blue cells, and whatever metal prices you would like to use. For example, you can use current metal prices, available via the Kitco links at the bottom of the page, or you can imagine what will happen to the share value with gold at $2,500. This will provide a ‘cubed’ valuation of the ore body. Add the fully diluted number of shares, total depth from the surface of mineralized ore, along with the current share price and exchange rate for the USD/CAD, and the hypothetical values will calculate automatically. Please remember that this is a tool for comparative purposes on single holes only. It is not to be used to assign a credible value to an ore body.
Click here for a tutorial. |
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