Caracal Gold (LON: GCAT) is up 23% this morning on their announcement to the London Stock Exchange that they've found further high grade mineralisations at their mine in East Africa. The mineralisation is high grade too - 3 and 4 grammes of gold might not sound like all that much but by modern standards for gold ore that is rich material. On the other hand it's worth recalling that Caracal is a small, small, company with limited output of gold. This increases the corporate valuation, certainly, but this also isn't the discovery of some vast new deposit which catapults the company to the heights,
Caracal share price from London Stock Exchange
While announcements of more gold in a gold mine are always of value it's necessary to remind ourselves of what is happening here. Caracal is not out exploring for some new Tier 1 deposit, nor is it even claiming to be doing so. Instead the aim is to exploit, thoroughly, already known to be extant but rather small scale workings.
This announcement today is not of some vast expanse of material that can be mined. Rather, it's that at the scale of the operations - the aim is to be producing 1,000 oz Au a month (around, roughly, $2 million of material a month) - being undertaken they've confirmed the presence of high grade material that can lead to that sort of level of production.
In other words, we can take this as useful evidence of decent margins to come rather than of some vast increase in production. Do note that this is by way of analogy rather than a perfect and detailed description. But the impact of this announcement is really that there's a find of nice material to mine within current volume production expectations. Not some vast expansion of output expectations. It's therefore margins that are likely to increase - along with revenue a bit - rather than some multiple of current revenues.
This is a high grade zone announcement at Caracal, not some company changing find of a much greater deposit.