Hi all,

It is much easier to understand drill results when there is only one metal in the core, but even then understanding drill results is not an easy task for the non-geologist. So if it is hard to understand drill results that only has one type of metal to look at, what about drills results that have many metals??? **Sounds confusing, but maybe not so much. Lets take a look at the simple 3 step process I have outlined.**

Sometimes you will see grades reported in gold equivalents or other metal equivalents. Typically you find this in a polymetallic deposit (meaning a deposit of many metals) like the example used below. Often it occurs when the company has difficulty reporting a resource or grades, because the metals are not distributed evenly throughout the deposit or for ease of comparsion for investors at quick glance.

In the example below we will assume that the reason for the company to use gold equivalents is because the high grade gold and the high grade zinc are not necessarily in the same locations (unevenly distributed).**Step 1: Assume Metal Prices and Recovery Rates**

For our hypothetical example we will use the following:

Gold Assumed Price US$ 675.00 / ounce Assumed Recovery 90%

**Silver Assumed Price US$ 10.00 / ounce Assumed Recovery 80%**

**Zinc Assumed Price US$ 0.75 / pound Assumed Recovery 70%**

**Lead Assumed Price US$ 0.50 / pound Assumed Recovery 70%**

_____________________________________________________________________________________

Step 2: Grams, Ounces, Pounds and Percentage Conversions

Because are price assumptions above are in ounces and pounds we need to conduct a few minor caclulations before start caculating a gold equivalent value.**Au $/g/t **= 675/31.10348 = 21.70 ( There is 31.10348 grams in an ounce)

**Ag $/g/t** = 10.00/31.10348 = 0.32 (Same for Silver 31.10348 grams in an ounce)

**Zn $/%/t** = 0.75*20*1.1023 = 16.53 ( There is roughly 22 lbs in a Tonne or 20 x 1.1023)

**Pb $/%/t** = 0.50*20*1.1023 = 11.02 (Same as Zinc 22.046 lbs in a Tonne)

______________________________________________________________________________________**Step 3: Plug Them In **

Now that we have our Metal Prices in grams per tonne (g/t) for Silver and Gold and percentage per tonne (%) for Lead and Zinc we simply plug them into the gold equivalent equation below:

**What we need:**

- Assumed or actual recovery percentages (Look at similar deposits for assumed and call company for actual)

- Metal prices in grams per tonne and percentage per tonne (as we calculated above in

**step 2**)

- Average grade of drill results or individual drill results.

For our example we will use the average grades of drill results:

**0.52 g/t Au, 8.6 g/t Ag, 0.34% Pb and 1.02% Zn**

Given these assumptions and our calculation already done we can come up with a value for Au Equivalent (AuEQ) using the following formula:

Gold Equivalent Equation:

Gold Equivalent Equation:

**AuEQ (g/t)** = Au (g/t) + (Ag (g/t) * 80/90 * 0.32/21.70) + (Pb% * 70/90 * 11.02/21.70) + (Zn% * 70/90 * 16.53/21.70)

It looks confusing, but it is really simple math. The 80/90 and the 70/90 are the recovery rates, the other numbers are what we calculated above over the gold value we calculated. All we need to do now is plug in the drill results to come up with a value.**Using the hypothetical drill results and the forumula we get:**

0.52 + (8.6 * 80/90*0.32/21.70) + (0.34*70/90*11.02/21.70) + (1.02*70/90*16.53/21.70) = **1.37 g/t AuEq (g/t)______________________________________________________________________________________There you have it!**

Now the next time you get drill results with many metals (i.e. polymetallic deposit) you can conduct this simple three step process to come up with a gold equivalent value that is easier to use for comparison purposes.

It is important to note that if a company has not completed metallurgy work that you must assume metal recovery rates of a similar deposit or ask management what their best estimate is. As we all know assumptions aren't always reality.

Hope this helps with your drill results of many metals and keep watching for my future blog posts on understanding the mining industry and mining stocks.

If anyone has any questions or comments I would love to hear them.

Cheers,

cvac01

P.S. Join the group I recently created here on StockHouse called "A New Investor's Guide to the Mining Industry" There is not much posted in the group yet, but that will change shortly and it can be a place where we can all share information like the 3 step process above to understand this confusing sector and mining stocks.

Here is the link: http://www.stockhouse.com/Groups/GroupInfo.aspx?g=50392

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