Gold is at an all time high, silver has crashed through $40. Precious metals producers are coining money. But what about the junior explorers, many years away from production? Obviously high spot prices for the metals they are looking for, and in many cases, have found, make their stories more compelling. What the market may be missing, however, is just how much more compelling these stories are becoming.
National Instrument 43-101 compliant Mineral Resource Estimates make great headlines, “XYZ Co reports 1.3 million gold ounces indicated and 2.0 million inferred” will draw an investor’s attention. But those “ounces” are deeply dependent on the price of the metal used in the calculation. Exactly how is pretty interesting.
MREs always disclose something called a “cutoff grade”. Rock above the cutoff grade is included in the MRE, rock below that grade is not. The easy way to think about this is to imagine a 10,000 ton block of mineralized rock with a cutoff grade of 2 grams per ton of gold. Any rock below that cutoff grade is deemed waste. If 25% of the block grades above 2 gpt then you would have 2500 tons of economic rock with the rest, even though it might grade 1.5 gpt, waste. But the cutoff grade is determined by the price of the material. If the price rises substantially, the lower grade rock can and should be included in a revised MRE and the amount of material in the MRE would increase.
The objective of the MRE exercise is to gain a rough estimate of the size of the deposit in question. But that is very much a moving target depending on the price likely to be obtained for the mined material once it has been processed.
My friend Graeme O’Neill at Bayhorse Silver (BHS.V) had an MRE calculated for the Bayhorse mine in 2018. Using a 7.5 ounce of silver per ton cutoff grade, the Bayhorse mine was estimated to contain an inferred 6.328 million ounces of silver. But the silver price used for that calculation was $15 US per ton. Which meant the value of a ton of rock from the Bayhorse mine was estimated to be $112. Fast forward to $40 silver. First, if the same cutoff grade is used the value of that same ton is $300. But, in fact, what would happen is that the amount of rock which could be profitably mined would increase. In its Technical Report BHS helpfully provides a range of cutoff grades: 2.5 ounces per ton would increase the inferred ounces to 6.404 million ounces. (I note that BHS has done more drilling, found high grades and more silver and should revise its MRE.)
On August 20, 2025, Tara Christie’s Banyan Gold (BYN.V) put out a revised Technical Report on its AurMac property in the Yukon. This report uses a cutoff grade of 0.3 gpt gold and a total of $14.50 in costs per ton. But that cutoff grade is based on a gold price of $2050 per gold ounce. While it is important to be conservative in creating MREs, it is also important to recalculate to reflect changes in the market. Spot gold today is around $3560. It is unsurprising that BYN’s share price touched $0.70 from its $0.42 price before the Report was released.
Cartier Resources (ECR.V) is embarking on a 100,000 meter drill program to try to define a district scale gold resource at its Cadillac project in Quebec. Philippe Cloutier is looking to expand his 720,000 indicated and 1.633 million inferred gold ounces. But that has already happened. The cut off grades in ECR’s April 2023 MRE were 1.5/2 gpt using a gold price of $1612. With gold touching $3500, a lot of the “waste rock” at a 2.0 gpt cutoff would likely be included in a revised MRE.
A polymetallic deposit like Canadian Critical Minerals (CCMI.V) Bull River copper mine, while it is obviously more sensitive to the price of copper, might have gold and silver credits. 49 thousand indicated and inferred gold ounces and 1.7 million indicated and inferred silver ounces go right to the bottom line. But in its 2021 Technical Report gold has an assumed value of $1600 and silver is pegged at $20.
A polymetallic deposit the size of Eloro Silver’s (ELO.T) Iska Iska project in Bolivia is much more difficult to derive an MRE for and the company’s initial MRE was as puzzling to the market as it was enlightening. Its 2023 Technical Report used a silver price of $22.52 per ounce for the Mineral Resource Estimate. Given the very large amounts of silver likely to be recovered from Iska Iska, the price rise of silver to $40.00 radically improve the potential economics of the project. By how much? It is difficult to even estimate and best left to the experts who are working on the ELO Preliminary Economic Assessment due Q4 2025 or Q1 2026. This PEA will reflect the upwards revision of the silver price and will include the rich tin domain which was largely absent from the initial MRE. I am expecting the market to be very pleasantly surprised to the upside.
The point is that as the metal prices rise the value and extent of mineral deposits change. Often by millions of dollars. Going back and reading the MREs is worth the trouble if you are looking for that elusive 10 bagger.
(Disclaimer: I own shares in Bayhorse, Banyan, Cartier, Canadian Critical and Eloro. I may buy or sell at any time. This is not investment advice. Do your own due diligence. Read the MREs, call the CEO.)
thanks for sharing,