Nexus Minerals (ASX: NXM) shares are down 20% today on the release of the findings from the exploration work at Wallbrook. The lesson from this being that sure, there is gold in them that hills but not as much - nor as certainly - as was previously believed. Of course NXM puts a brave face on matters but there is a certain art to reading corporate releases like this. It's in the caveats, the wells and the so ons, that the art starts to apply.
The actual finding is that we're not even at the stage of a mineral resource here. Yes, there is gold there, at something like extractable concentrations (these days, anything above 1g per tonne rock is useful). But this isn't enough, we need to also know that there's enough there for it to be worth mining. There are certain capital costs associated with doing anything, so there must be enough there to cover those. We need to cover the hurdle of those capital costs from the operating margin that is. This is the part that isn't, as yet, proven.
Nexus Minerals share price from ASX
The proof of this is in this line from the report: ”Note: The potential quantity and grade of the Exploration Target is conceptual in nature and as such there has been insufficient exploration drilling conducted to estimate a mineral resource. At this stage it is uncertain if
further exploration drilling will result in the estimation of a mineral resource. The Exploration Target has been prepared in accordance with the JORC Code (2012).”
There are certain rules about what you're allowed to claim - those JORC ones. A mineral reserve is something where we have proven that we can extract, using current technology, at current prices, make a profit and we've the licences to do so. A mineral resource is where we're reasonably sure about all of those things but have not proven it yet. If it's not a mineral resource by JORC standards then, really, we've got some interesting rock that we've got to do more work upon. And that's why the drop in NXM. The general opinion, before this report, was that the results would be better. They're not - Ah, well.
That, sadly, is how mining does go. Someone's got to go and look at those interesting hills over there. And sometimes they turn out to be not so interesting.
