Sunshine Metals (ASX: SHN) shares are up 90% on the day as they report the results of their drilling campaign. Actually, these are very preliminary results, really from on;y the one hole. The reasons for rushing out such an incomplete set of results is that they’re rather good. So much so in fact that having them lying around, unannounced, while waiting for the rest would just be too much of a temptation for insider trading. Not that it’s put quite that way but the exchange does tend to insist that you release such results as you have them. On those very grounds.
The results themselves: “A new geological model for Liontown (100%) has identified a potential gold-rich feeder zone (“Main Feeder”) to the 2.3Mt Zn-Au-Cu-Pb-Ag volcanogenic massive sulphide (“VMS”) Resource. • Assays from the first hole (23LTRC002) into this zone are exceptional and validate the new Main Feeder concept:
o 2m @ 8.99 g/t Au from 20m (23LTRC002),
o 1m @ 4.54 g/t Au from 42m, and
o 17m @ 22.14 g/t Au from 67m,
Including 6m @ 58.74 g/t Au from 68m “
Those are good results, no doubt about it. “Sunshine Metals‘ (SHN) share price soared over 70 per cent on Friday following a 17 metre high grade gold hit. The RC rig intersect assayed for 22.14 grams per tonne (g/t) of gold, satisfying high grade qualification by anybody’s yardstick.”
Sunshine Metals share price from Google Finance
Now, if this were a whole mountain at this sort of concentration then we’d be talking about a monster sized gold mine. But that’s not really what is being talked about: “Assays received from the initial 12 reverse circulation (RC) hole zones at Liontown are considered to have intersected gold and copper rich feeder zones overlying the historic project.” Feeder zones - this is not a correct description at all, just a useful mental model for us to use. As we all know deposits like this come from hot magma bubbling up through the overlying rock and then solidifying. We can end up with quite a layer of something interesting as a result. The “feeder” is the bit where the hot magma was actually coming up through. This should be - normally is - much more concentrated than the rest of the ore body. So, the claim is not that there’s a vast mountain at 50 grammes gold per tonne. Rather, that they’ve found the little bit of it that is so concentrated.
That’s why the shares are only up 90%.
Of course, still stages to go - it’s now necessary to prove that there’s enough of these here to be worth mining. Concentration matters in ores, obviously, but so does volumes.