Addemup!
Does anyone know where the "f" goes when you try to spell out how NP43-101 makes "sense"? The answer: there is no "f" in sense in some parts! For example: One policy directive prohibits Cassidy from adding two classes of resource together. This pertains even when it references the same mineralized zones!
Disbenefits to shareholders:
Confusion arising from applying this prohibition in a report to shareholders appears to have reduced the market capitalization of Cassidy a cool fifteen million bucks, more or less. The blame should be spread about a little. Blame can be laid at the feet of four parties. Blame the too shortsighted drafters and interpreters of the policy. Blame the myopic headline writer who captioned the press release using the lowest number in sight, totally neglecting the second batch of figures. Blame shareholders like me for not understanding that total ounces of resource are not total ounces when bureaucracy rules. My previous last blog tried to explain about resource categories. I missed the no summing directive. Maybe I read it but assumed that such nonsense must be a typo.
Addemup yourself
Cassidy announced that the summary of RSG Global's 43-101 compliant resource update on Cassidy's 100% owned Kouroussa Gold Project reports as follows : RSG calculates presence of 337,000 ounces of gold it classes as "indicated" together with, and, plus, +, (take your choice): 364,000 ounces of gold classed in the inferred category. That totals 701,000 ounces. Don't like what I say and how I say it? Sue me!
History: RSG calculated, and Cassidy reported, in spring 2006 that the Sanu Filanan, JJ and Sanu Folo Gold Zones contain inferred resources at 433,000 ounces in 4,933,000 tonnes averaging 2.7 g/t gold. A 0.7 g/t gold cut-off grade was used then and now. To me the update report released Sept 2006 indicates that total ounces are increased by 268,000 ounces, or a 62% more than the past reported amounts. Moreover, (and I would like to argue this one with someone) maybe the 337,000 ounces of indicated resource should get a heavier weighting somehow. I think I'll leave it to the National Policy Police to redefine the weight relation between an inferred ounce relative to an indicated ounce. My mind works on old logic and Im not up to making such distinction.
So, what happened?
The summary update attributes resource numbers to new zones. The mineralized areas now drilled at sufficient intensity to now have resources calculated now include Kinekine, Bag Farm, Junction, X-vein and KD-1. A significant portion of the resources previously considered inferred are now recognized as indicated resources. Notable among these are Sanu Filanan with 169,000 ounces now classed indicated. Surprisingly, the recently discovered Kinekine zone has a large indicated resource attributed. Definition of resources of both classifications at Sanu Folo, JJ and KD-1 leaves only the rich X-vein area not listed as containing indicated resources. A table available at Cassidy's website provides details. The critical elements to note are that the average grade shown for all resource combinations is higher than the average grades reported as being profitably mined at the competitors' operations in the region. That's really good news!
Where are my million ounces!!??
They're all still there! Cassidy reports results in sufficient detail that a patient observer can piece together a picture of the shape, extent and content of the mineralized zones. Like all Geologists, I am an optimist. For many years I evaluated after- discovery resources for a living. Most of my experience is in oil and gas resource valuation. I may tend to be too literal a "projector" when I look at precious metals.
My expectations for Cassidy are based on less sophisticated modeling methods than those used by RSG. I guessed that the likely total reported would be a doubling of the 433,000 ounces reported last spring. I was looking for the reported number to be pushing 900,000 ounces. I knew that the discoveries indicated by the aircore exploration would carry little effect. I knew that RSG would employ traditional constraints in their calculations. So I cut my more than 1 million (logically derived, of course!!) ounce figure by more than 20%. Not enough! But I still think my million ounces are already there. Yours too! Tell you why I believe that in a minute.
Why does it matter?
My preoccupation with this is sparked by the lessons contained in the classic value investing analysis textbook The Intelligent Investor, written by the fathers of stock analysis Benjamin Graham and David Dodd. They said that speculating is OK. In fact it can be fun and very rewarding. Their caution is that speculation should be done only when one is in fullest possible possession of the key facts. Two principles are expressed. The first is, that just because a stock is up, doesn't mean it should be sold. One must have an idea of the value underlying the stock and have notion of when the value is fully realized. The second precept is that one must consider value, not momentum. What we saw when only half the resource number was published was decisions by momentum. The value was and still is, in Cassidy. I want to be there when it is finally, more than fully realized!
The Swiss Cheese Model: Excerpts from the summary report contain one clue to the cause for major disparity between my model and the RSG report. The full report will be posted eventually. I can then see what other differences exist between my methods and RSG's. Here's my excuse.
When I look at data I try to see a continuum. That is, when holes are drilled and identified as being along a trend, I assume that (within reasonable between hole distances, say up to 100 meters) the change between sample points along a defined trend is regular and gradual. Notionally then, if one sampled midway between the two points the thickness and grade would be the average of the two reported results. One could probably do a statistical probability of the truth in this considering the large numbers of holes now reported. The line in the report that provides excuse for most difference in result anticipations is: "Table 1 summarizes the Indicated and Inferred resources at Kouroussa estimated using a 0.7 g/t Au cut-off grade and a 3-metre minimum horizontal thickness." Know what that means? It means they are calculating the amount of the resource excluding all zones that are less than 3 meters thick. To me this conjures up the analogy of calculating the volume of a cheese while not measuring the smaller holes in it. I know that's not really a fair analogy! But I loved saying it, because I think one needs to exercise some logic on how numbers are derived. We already know how a resource pyramid looks. The low grade amounts always exceed the high grade! After all, since this is likely to be a pit mining effort, it will take the skinny zones as well as the fat. The dozers and scrapers aren't that discerning! Usually, the full report contains variances in calculations resulting if certain conditions are not applied. So, we the cheery believers, may get another kicker out of this in about two months when the full report is filed.
What next?
Fortunately for shareholders, Cassidy's history of favourable results enabled a healthy treasury. The Company has the funds to carry on at an increased pace. The results to date provide ample justification to get with it! Cassidy outlined an aggressive drilling program to begin in October this year. The first aim will be to fill in the gaps in confirmed mineralized zones. This should result in resource numbers recognition appreciating rapidly. I expect that resource calculation will be done on an "evergreen" basis with two or three reports made public over the next year.
Mineralization discovered toward the end of the last program at Dalaoule, Banjounani, and Kinkine will be extended and defined. Capability to now drill deeper beneath known zones can add dramatic results quickly. RSG Global will once again be managing the exploration program on behalf of Cassidy. The return of RSG's personnel will result in important continuity in the management and aiming of the anticipated combined 35,000 meters of RC and diamond coring. Keep the faith and addemup!
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