Why So Slow, Labs?
There are few things explorers like better than getting results back from the laboratory. It's like Christmas! After months or even years of work – securing land access, permission to drill, deciding where to position the hole, possible drilling issues or delays, sending core samples to the lab for analysis* – finally, the results arrive!
Assay results are crucial for keeping junior explorers afloat. Releasing news of a strong drill intercept can attract new investment dollars for more exploration work. (Poor results, on the other hand, are filed away as lessons learned and exploration quietly continues.) For better for worse, it's all part of the rollercoaster of investing in explorers.
But right now, Christmas is not coming fast enough, or at all, for many explorers. Geochemistry labs are seriously backed up and explorers are experiencing delays between submitting samples and receiving results (know in the business as TAT or turn around time) that are much longer than usual – like three months instead of six weeks.
It’s Not Working – For Anyone
Normally, labs can turn samples around in about six weeks. The time span from finishing the drill hole to releasing results is a bit more complicated than that, let me note, because the core has to be logged (described by a geologist on record), split (cut in half lengthwise), and then transported to the lab. Depending on the logistics of transport, a company may wait until several holes are ready before making the trip.
Then it’s up to the lab to work its magic, which I’ll describe below.
But even once the numbers are in hand, companies have to figure out how to announce them with clarity and impact. One hole at a time or wait until several holes testing a particular target are available? What if the labs given them partial results from a few holes? What about one results from each of three zones, with the other holes from each zone still pending?
There are no right answers to these questions beucase it depends entirely on the project and the results. I just want to point out that it’s not as straightforward as: Get results, Release results.
For example, the CEO of a junior gold explorer in Yukon I spoke to this week said: "We have been waiting two months. And we have partial assays from a few holes, but I can't release that. I need at least full holes, and ideally a good number of them, so I can put together a news release with a real story. But I have no idea when I'll be able to do that."
Another CEO of a junior exploring in Alaska told me in an email: "It is as bad as you have heard. Our first samples were filed on July 10. They told us to expect those results on August 23 but we’re still waiting!!! Crazy. It's affecting many companies. Even Coeur Mining was telling me today they are very frustrated."
Waiting for months is really hard for many reasons. For starters, assay results inform the next round of drilling. Good results mean continuing to chase a target, ideally right away while the weather window is open (for seasonal projects) and to be able to follow up one good hit with another in short order. The ‘right away’ angle is just as important for bad results, as they tell a team that it’s time to move on.
But what if results take months?! It’s hard to stress just how much challenge this adds to exploration. The exploration window at northern or high elevation projects is often only 5 months long, so these delays mean teams are left in limbo through the heart of their exploration season. That is one of the reasons I need an explorer to have multiple drill-ready targets – so they can keep moving even if labs are terribly slow. (The other reason is, of course, that exploration is a low-odds game and so one target is not a strong enough bet for this investor!)
It’s also clearly hard on the market side. Investors buy explorers for results. When those results are super slow, investors get impatient or even anxious (is the delay because the hole was actually a dud?). The market also knows that the longer it takes to get results from a hole in Yukon or Alaska or northern BC, the less time the company will have to drill follow up holes into a discovery. One hole does not a deposit make; no matter how good the numbers from a first hole, a discovery can’t establish credibility without multiple phases of follow-up holes. If further drilling is also good the stock is off to the races; if not, the gains it made on the initial hit evaporate quickly. If investors have to wait through another whole winter for follow-up holes, many are likely to sell, taking their discovery-hole gains elsewhere for the winter and in case follow-up is a dud.
Bottom line: long delays are really hard for geologists, management, and investors. So what’s the holdup?
Why The Delays?
The labs I reached out to this week were reluctant to comment. Admittedly, they are a cautious and secretive bunch at the best of times! One lab manager did offer: "our business strongly reflects the resource industry life cycle and our current economic environment is no different." Others simply refused to comment.
COVID-19 must be playing a role with staffing and additional protocols in the lab to keep everyone safe, and we can't fault them for that. But gold began its bull run back in April/May and it quickly became clear that explorers were raising money and had found ways to drill with COVID safety measures in place, so it should have been clear to labs that sample volumes were going to be as strong if not stronger than in previous years.
The biggest labs for geochemical analysis in North America are: Bureau Veritas, SGS, ActLabs, ALS, American Assay Laboratories, McClelland Laboratories, AGATLabs, Metsolve Analytical Lab, Skyline Labs and TSL Laboratories. Most have several laboratories in various towns close to mining and exploration centres.
But while there are almost a dozen labs to choose from, explorers do not actually have much choice! For transport simplicity and cost they have to use a lab fairly close to the project. If there are several to choose from – it doesn’t help because this year they are all backed up. And if a long delay makes a company want to switch labs…switching labs mid-season is like changing lawyers in the middle of a divorce. It might seem like a good idea but it’s super complicated.
Another factor is consistency. Sending samples to the same lab for the same analysis on the same machines is the most reliable way to compare results between holes and drill campaigns. For that reason companies tend to be loyal to a particular lab…but the kind of delays we’re experiencing today means that loyalty is being tested.
The CEO from Alaska added: "BTW that mid-tier operator has actually changed labs now due to being told to expect 2-3 month turnarounds. Crazy. "
*At the lab
Explorers send drill cores to commercial laboratories to determine the quantities of certain elements in sections of rock. As you have seen in news releases, this is presented as: "5 metres of 13.90 grams per tonne (g/t) gold and 105.55 g/t silver". A lot goes into generating these numbers.
First, the drill core is recovered on site and logged by the geologists, then sawed in half lengthways. The company keeps one half in the core box and selects intervals to send off for analysis.
Laboratories offer packages for detecting particular suites of elements, using different methods. The more elements they analyse for, the more expensive the package!
At a minimum, a gold exploration company will request the precious metals, gold and silver, and a few trace elements measured in parts per million (ppm) or parts per billion (ppb). Gold, for example, likes to hang out with arsenic and bismuth and seeing elevated amounts of these trace elements in analysis results can be useful in gold exploration. They are called "pathfinder" elements.
When the sample arrives at the lab, it is dried, crushed, sieved, spilt, and pulverised. A portion of the crushed and well-mixed (homogenous) sample is set aside for possible reanalysis in the future. This is called a pulp and is either stored at the lab or returned to the company. Portions of the sample are then pulverised further and selectively sieved, depending what grain size is needed for the analysis.
A few hundred grams of the sample is then either dissolved in acid or burnt at very high temperatures and sent for spectral analysis, wherein the way particular wavelengths of light pass through the sample is used to infer the elements that are present. A common spectral method is inductively coupled plasma mass spectrometry (ICP-MS).
Extra samples are thrown into the mix to maintain quality assurance and quality control (QA-QC) of the process. Blanks are a clean sample of known composition that go through the process alongside the company samples to check for contamination. Duplicates and replicates are two or more of the same material, tested to ensure the machine is giving consistent results.
During analysis for gold, samples might give misleading results due to the “nugget effect”. This occurs when a part of the sample (such as a mineral grain) contains a disproportionate amount of a key element of interest. If an unusually high or unusually low gold measurement occurs, it should always be checked by the geologist against other evidence, such as core logs and other elements you would expect to find with a high or low measurement.
Drill hole results are vital on every level. They determine where a company should or should not be exploring and they deliver answers to a market that bet on a question: does Company ABC have a discovery on its hands at project XYZ? A positive hit usually means big share price gains, which let ABC raise more money to explore, but it take more holes to find out if the hit could be a deposit.
Within all of this, timing is everything. The market is ever impatient. Geologists need answers to figure out what to do next. Summer exploration windows are short.
It all means that the current backlog at labs is putting everyone on edge. With so much uncertainty elsewhere, explorers need to be able to rely on their labs…and right now they cannot. And there’s no answer in sight. My only takeaway is: be patient with companies in asking for results because – believe me – they are even more frustrated that you!
I'm one of your new subscribers (by way of investing.com) and just want to belatedly thank you for the recent sell recommendation that saved me quite a bit of money. (I also follow a few other mining newsletters, and, like so many other financial analysts, they were too hesitant and biased against putting out sell alerts.) And I find your newsletters very nicely done in general.
BTW - I really enjoy reading your newsletter - very comprehensive and you do an excellent job of integrating a macro perspective into your analysis.