20-Year Gold Veteran Reveals Secret Formula to Picking Stocks

Written by Luke Burgess
Posted November 16, 2022

In the world of junior gold stocks, the most important news comes in the form of drill results.

That’s simply because drill results are generally used to locate and determine the volume of underground mineral resources — and the more mineral resources a company finds, the better.

But unless you’re some kind of geology wizard, you might have a hard time understanding how to interpret those drill results.

So today I’m going to show you a quick and easy way to compare drill results and give you an idea of which junior gold companies might be worth looking into further.

I’ll tell you now, this is not a perfect method for comparing drill results, but it can help give you a general idea of whether drill assay results are positive, negative, or neutral.

First off, let me show you the problem. Here are five random headlines from recent press releases published by junior mining companies:

golddrilling12

I took out their names, but these are real headlines from junior gold companies. If you were looking at this list, which do you think has the best result? And which would you be most likely to investigate further?

The headline from Company 1 says it drilled into 591 meters of rock that graded 1.03 grams per tonne of gold.

Is that a good drill result? Is that a bad one? You have no way of knowing from the headline alone. 

If you were just looking at gold grades, you might be inclined to look more into Company 5. Its headline reports a gold grade over 200 grams per tonne, much higher than any of the others. But Company 5 is not the headline I’d be most likely to click on. In fact, its headline might be the first I’d pass by.

From those five random headlines, two stand out to me as worth looking into more closely. Those are Company 1 and Company 3. And before I tell you why, let me say again that this is not a perfect method for comparing drill results, especially when comparing results from different projects. But there’s a simple math equation I do in my head that gives me a general idea of which headlines I should pay attention to.

That equation is to simply multiply the gold grade by the drill width.

Grade Times Width

Now, this might seem very simple — because it is. I can’t stress enough that multiplying grade by width to compare drill results should only be used as a general guide. However, this simple formula is used by many junior mining insiders and trade professionals, and it does have a logical foundation.

But before I explain the reasoning behind it, let’s go ahead and do the math on the five headline drill results above.

golddrilling1

OK, so based on the grade-times-width value, the two most interesting drill results come from companies 1 and 3. And by just looking at the way I’ve ordered these random headlines, you can probably start to figure out why.

Drill results like these are made of two parts: grade and width.

The grade describes the amount of gold contained within the rock. A gold grade of 87 grams per tonne (g/t) means every tonne of the rock that was drilled contains 87 grams of pure gold. The width describes the thickness of the drill sample that contained the gold.

In the example from Company 4, the mineralized width was 2.11 meters. So the company drilled into 2.11 meters of rock that contained a gold grade of 87 g/t.

golddrilling

Both grade and width are important factors to look for when exploring gold deposits. However, gold grades outshine width data way more often than not. The average retail investor is way more likely to read a news story about a company that just drilled into an area of super-high-grade gold than one that just drilled into a large area of low-grade gold. Nevertheless, both factors are equally important.

In fact, large low-grade gold deposits can often be way more valuable than ultra-high-grade deposits with narrow widths.

Mining.com explains:

Indeed, a drill hole with a wide interval of mineralized material at a lower grade can be very beneficial to the company and often far more valuable than a high-grade drill hole intersection but with narrow width.

Narrow ore bodies are usually mined by expensive, selective mining methods, while massive wide ore bodies can be exploited using effective, lower-cost, and highly productive bulk mining methods.

Truth is, most of the world’s gold today is mined from low-grade gold deposits. High-grade gold gets investors' attention, but for the most part, it’s low-grade mining that gets the lion’s share of the market.

In short, both grade and width are equally important factors in gold (and other minerals) drill results. 

Multiplying grade by width to compare drill results is much better applied when comparing drill results from the same company, project, and specific target. But it’s not a terrible way to identify which gold companies might be worth looking into more deeply.

I recently found one small gold exploration company that keeps publishing incredible grade-times-width values. But because most retail investors are so biased toward high-grade headlines, the company is still only known to the most informed insiders of the gold exploration space.

Let me explain what I mean.

There’s a limit to how deep gold explorers can possibly drill. Technologies to drill deeper do exist, but the drill techniques used by gold explorers generally limit how deep they can drill to about 1,500 meters. They can’t drill any deeper than that.

This gold company is finding minable gold values all the way down! It's reporting drill results with intersections of 1,000 meters… 1,200 meters… 1,300 meters… and it's bottomed out. It simply can’t drill any deeper than that!

And virtually no one in the retail investment space is paying attention. The only investors paying attention to this company right now are the guys who have been around long enough to know how important this project could be to the mining industry. Insiders are already calling it the largest gold discovery in three decades.

I know I've already thrown a lot of information and numbers at you today, but if you want to learn more about this small gold company, I’ve put together a whole report that you can check out here.

Until next time,
Luke Burgess Signature
Luke Burgess

Luke’s analysis and market research reach hundreds of thousands of investors every day. Through his work with the Outsider Club and Junior Mining Trader, Luke helps investors in leveraging the future supply-demand imbalance that he believes could be key to a cyclical upswing in the hard asset markets. For more on Luke, go to his editor’s page.

Banking Crisis Just Kicked into High Gear