When a preliminary feasibility study for a mineral project is not yet complete, but you want to **estimate the mineral deposit value**, you can use the *back-of-the-envelope calculation* described in this article.

Before calculating the potential mineral deposit value, gather __specific data__ about the *ore body and individual drill results*. This data can be found in the mining company’s press releases announcing their drill results. Ensure the data is announced according to the guidelines of National Instrument 43-101 (approved by a Qualified Person) or a similar **international reporting standard** to minimize the risk of fraudulent reporting.

## Example for Calculating the Potential Mineral Deposit Value

In a company’s news release in which their drill are announced, you can find the following information:

**Average Grade**: the concentration of a mineral in the ore body (in % or g/t) – 2% copper and 1.5 grams per tonne gold**Strike Length**: the length in which the mineralization is found in the ore body (horizontally) – 500 meters**Depth**: the depth in which the mineralization is found in the ore body (vertically) – 200 meters**Width**: the width in which the mineralization is found in a drill hole – 100 meters**Specific Gravity**: the density of the ore body (i.e., the rock) – 2.5

Whenever I conclude that (a part of) the required data is missing or incomplete, I always contact the mining company’s management directly to kindly ask them to provide me with the missing data. I also contact the management directly whenever I need some of the data provided in the mining company’s press release to be verified.

## 4 Steps in Calculating the Mineral Deposit Value

### 1. Calculate the Tonnage of the Mineral Deposit

Formula |
Example |

Strike Length x Depth x Width x Specific Gravity = “X” (in tonnes) |
500 x 200 x 100 x 2.5 = 25,000,000 tonnes |

### 2. Multiply the Tonnage by the Grade

Calculations |
Result |

25,000,000 x 2% copper = | 500,000 tonnes of copper |

25,000,000 x 1.5 grams per tonne gold = | 37,500,000 grams per tonne of gold |

### 3. Convert Copper to Pounds and Gold to Ounces

Calculations |
Result |

500,000 tonnes x 2,204.62262 = | 1,102,311,310 pounds of copper |

37,500,000 gram per tonne divided by 34.2857 = | 1,093,750.4 ounces of gold |

To find out how I come up with the numbers 2,204.62262 and 34.2857, I recommend you to read the break even analysis page, on which I explained **How to Calculate the Cut Off Grade**.

### 4. Convert the Pounds and Ounces to the Corresponding Metal Value

Calculations |
Result |

1,102,311,310 x $3.90* per pound of copper = | $4,299,014,1094 |

1,093,750.4 x $1,989 per ounce of gold = | $2,175,469,546 |

**: prices as of March 17, 2023*

As shown in the example, **the deposit doesn’t have to be enormous in size** (*only 500 meters long, 100 meters wide and 200 meters deep*) __to contain a valuable deposit__ (*approximately $6 billion worth of minerals*).

However, it’s important to be __realistic__ about this valuation. You cannot assume the entire ore body contains the same grade (i.e., 2% copper and 1.5 grams per tonne gold). Additionally, **a typical ore body doesn’t fit into a right-angled box of three dimensions** (strike length, depth, and width), as the shape and continuity of the minerals will vary in every deposit. It’s crucial to *deduct a certain percentage* of the calculated mineral deposit value to account for these variations. This percentage should ideally be your best estimate of the overburden and tailings combined from the right-angled three-dimensional box calculated in the example above. The result is the **adjusted mineral deposit value**.

**You also can not expect that this adjusted mineral deposit value, is the price the mining company will receive from a buyer when this property is sold**, as for instance, the costs of extracting the metal from the ore and other operating expenses are not deducted from the mineral deposit value. Therefore you could see a major or mid-tier mining company that wants to replace their mined reserves *just pay a small percentage of this metal value for the deposit* (i.e. 5% to 10%).

It’s important to note that the adjusted mineral deposit value is __not__ the price the mining company will receive from a buyer when the property is sold. The *costs of extracting the metal from the ore and other operating expenses* are not deducted from the mineral deposit value. As a result, a major or mid-tier mining company that wants to replace their mined reserves might **pay only a small percentage of this metal value for the deposit** (e.g., 5% to 10%).