Our independent Qualified Persons community has identified significant deficiencies in the public disclosure of the Silver Queen mineral project. It is misleading to investors to quote tonnage and grade with four or five significant figures since it does not represent the level of accuracyand precision of the mineral resource estimate.
According to CIM’s guidance on Mineral Resource Statement: tonnage and grade should be quoted only to the level of accuracy and precision of the estimate. More than three significant figures is considered to be potentially misleading to investors.
Metal equivalents: AgEq and AuEq
Without considering metallurgical recoveries, an equivalent grade overstates the amount of metal that may eventually be obtained. The issuer has disclosed equivalents grades calculated entirely by price-weighting. Price-weighting without taking the differential metallurgical recovery of each element into account is considered potentially misleading to investors. In presenting both AgEq and AuEq and providing the footnote below the mineral resource statement.
The lack of metallurgical recovery is a significant omission. It is important to note that not all metals will be present in the same concentrate, such as Cu, Pb, or Zn concentrates. Furthermore, the statement that the comparison is for gross in situ metal value is limited by s. 2.3(1)(c) of NI 43-101. Both the Silver and Gold Equivalents calculations assume 100% metallurgical recovery rates for metals, which is a misleading assumption for investors.
The reasonable prospects and base case cut-off value are not highlighted. Furthermore, listing estimates resulting from a cut-off grade at 50 CAD NSR that does not meet the test of reasonable prospects are potentially misleading to investors.
Section 14 Mineral Resource Estimates
The 2020 CIM Guidance on Commodity Pricing states that since the property is not likely to be placed into production within five years, it may be reasonable for the QP to consider a “long term” commodity price or average commodity price. Long term historical prices could be used for estimates of Mineral Resources. The QP used the same commodity pricing assumptions from the following three methods:
The CIM guidance on selecting appropriate commodity prices is clear: use one of the following three methods (Section 13).
Long term historical averages
The use of long-term historical prices (5 years or more) removes year-to-year price volatility from a company’s mineral resource estimates and reporting.
Three-year moving average
Long-term historical prices (5 years or more) remove year-to-year price volatility from a company’s mineral resource estimates and reporting. The QP used a trailing two-year trend in commodity pricing. The recommended method to select an appropriate commodity price is the three-year trailing average method. Using a two-year average method is potentially misleading for investors.
Pricing assumptions have a significant impact on the tonnage of the mineral resources reported. It is crucial that the price assumption aligns with the market rate at the time. The previous mineral resource estimate in 2019 used a price of 1,300 USD/oz Au, while the updated mineral resource estimate in 2022 used a price of 1,700 USD/oz Au. This discrepancy raises concerns that the mineral resources might be misleading to investors.
Furthermore, the report lacked specific information about constraining surfaces applied to demonstrate reasonable prospects. This includes mineable shapes for underground, pillars limitations, geotechnical considerations, and other factors that might constrain the potential underground mining method. The lack of mineable underground shapes in all figures presented in this section of the report is potentially misleading to investors.
Furthermore, listing estimates resulting from a cut-off grade below 100 CAD NSR does not meet the test of Reasonable Prospects and may be misleading to investors. It is crucial to highlight both tables that Reasonable Prospects and the base case cut-off values are not met
Section 23 Adjacent Properties
As per Part 3 section 3.3 of the companion policy 43-101CP, the qualified persons must disclose if they have been able to verify the estimate. Furthermore, the qualified persons must caution investors that there is no assurance similar results will be achieved on the property that is the subject of the technical report.
Section 26 Recommendations
The proposed exploration has not been assigned a phase number for the issuer. Item 26 of Form 43-101F1 is based on the mineral properties progression for the public issuer.
