"Gold Is Where You Find It" (But, Be Sure You Really Found It)

by Paul J. Lechler, Ph.D, Chief Geochemist
Nevada Bureau of Mines and Geology

Published in the May 1997 issue of International California Mining Journal, who kindly provided permission to reprint it on the Mineral Business Appraisal web site.

 $30,000,000 scammed from duped investors in a phony mining promotion! Perhaps the largest case on record, but only one of many incidents of miners and investors falling victim to scams, lousy advice, and/or shoddy analytical workmanship. During my long tenure as an analytical geochemist, I have come across many scams along with many confused prospectors and investors.

Analytical geochemists are professionals who, after many years of college, two or three degrees in chemistry, geology, or the hybrid-geochemistry, are skilled at determining the concentrations of elements (such as gold, silver, platinum, copper, etc.) in rocks, minerals, soils, sediments, water and vegetation.

Natural Earth materials are very complex, containing at least trace amounts of all of the naturally-occurring 92 elements on the periodic chart from hydrogen (atomic number 1) through uranium (atomic number 92), except for technetium (number 43, which has not been found to occur naturally) and promethium (number 61, also missing from Earth's crust). The complexity of these natural materials makes their analysis a difficult task, requiring extensive knowledge, experience, and expensive instrumentation.

I have tried to help people whose, often times, very limited knowledge of minerals has gotten them in over their heads in one situation or another. Some people simply suffer from the misconception that, with a little financial investment and/or a very basic knowledge of prospecting and mining, one can successfully find a valuable mineral deposit just waiting for discovery. This is akin to a pot of gold at the end of the rainbow or finding buried or sunken treasure. The problem, I have found, is that when exploring a new field of knowledge we don't recognize just how ignorant we are on this subject.

We find several types of people involved in mining imbroglios or promotions: (1) the classic con-artist who intentionally tries to sell worthless mining property, ineffective equipment or technology. (2) the prospector with marginal knowledge who inadvertently promotes a worthless property or process because he knows no better, (3) the devious laboratory owner, who intentionally reports high concentrations of valuable metals to encourage customers to continue prospecting, sampling, and bringing in analytical business, and (4) the incompetent assayer or self-taught, but incompetent, extractive metallurgist who inadvertently causes others to develop a worthless property or process through erroneous analytical results. It is often very difficult to convince people who fall victim to scams or erroneous analytical conclusions that what they are being told is wrong. But this, however, I have come to understand, is because the victim wants to believe that there are riches to be had.

There are frequent claims that certain ores cannot be assayed by conventional methods. The story generally goes that the materials contain fabulous, ore-grade concentrations of precious metals but, because of some peculiarity, conventional assaying methods won't record their presence and "special" protocols or treatments are needed. Many of these claims and scams are recurring and one must have patience to deal with them over and over again.

This problem of promoting worthless properties and procedures is a very old one. Mark Twain, in his book Roughing It, tells an interesting and not uncommon vignette: "Assaying was a good business, and so some men engaged in it, occasionally, who were not strictly scientific and capable. One assayer got such rich results out of all specimens brought to him that in time he acquired almost a monopoly of the business. But like all men who achieve success, he became an object of envy and suspicion. The other assayers entered into a conspiracy against him, and let some prominent citizens into the secret in order to show that they meant fairly. Then they broke a little fragment off a carpenter's grindstone and got a stranger to take it to the popular scientist and get it assayed. In the course of an hour the result came - whereby it appeared that a ton of that rock would yield $1,284.40 in silver and $366.36 in gold! ... Due publication of the whole matter was made in the paper, and the popular assayer left town 'between two days'."

Ore Vs Mineralization, a Fundamentally Critical Concept
Mineralization does not an orebody make. Water, for instance, contains at least trace amounts of all the elements, including gold. The critical point, however, is that given current technology, one cannot profitably extract gold from seawater or most other waters because the concentration of gold is too small. It has been tried repeatedly, notably by the Germans during WW1 to help fund their war machine. The problem is, it has always cost more to process the water than the value of the gold extracted.

Let's analyze this critical concept further. Natural processes recurring over the history of the earth have caused some minerals to become concentrated in extraordinary amounts in rocks in certain places. These areas of concentration of minerals are where we go to extract minerals at a profit. Finding areas of exceptional mineral concentration is the realm of prospecting or mineral exploration.

In order for the extraction of minerals to be profitable, they must generally be: (1) highly concentrated (2) located near the earth's surface, (3) in an environmentally insensitive location (4) with accessible water, power, hospitable climate and transportation. This type of mineralization is referred to as an orebody because it can be processed and the minerals sold for a profit.

The discrimination between mere mineralization and an orebody also requires three dimensional information about the volume of mineral-rich rock available for extraction. This requires drilling, tunneling, or trenching, combined with sampling and assaying the material. This is the only way to determine how many tons of mineralized rock are present and at what concentrations (and hence, value) the metals are present. The costs to extract the minerals from the ore must be determined. The value of the minerals in the ground, minus the costs to extract the minerals, minus the up-front costs of prospecting and permitting the mine, minus the end costs to decommission the mine and reclaim the area, tells us how much net profit might be available over the life of the mine. Only at this point can we rationally make a decision whether or not to pursue the project or investment.

Some Recurring Assaying Scams
Assaying scams are essentially limited to the precious metals, largely gold, platinum, and rhodium. There are reasons for this. Many elements are mined from the earth, but only the very valuable (precious metals) can be profitably mined at very low concentrations. At these low concentrations, the precious metals or minerals are generally very finely and widely dispersed throughout the rock. They are so finely dispersed that they are often difficult or impossible to see visually with microscopes, even when their concentrations are high enough to be mined profitably. This forces us to rely totally on the results of chemical assays to determine whether or not economic concentrations of these precious metals are present. This is where the incompetent and the unscrupulous find fruitful ground to err, to misconstrue, and to deceive. These problems and scams do not arise with other metals because the erroneous or fraudulent assay results could quickly be verified or dismissed through microscopic examination of the ore by a competent mineralogist, either professional or amateur.

Prospectors who are on really tight budgets (and there are many) will often try to perform assays at home because they cannot afford the ten dollars or so that it costs to get a commercial assay done. When prospecting for precious metals, assays are necessary or one is limited to looking only for very high grade deposits in which the metals are visible. With home assays people often run astray.

Assaying scams often involve convincing the clients that the "ore" in question is complex or, for some other reason, cannot be assayed by normal methods. Often some special pretreatment is required (such as adding a roasting step and then treating the ore with water, leaching first with sulfuric acid, subjecting the ore first to an arc similar to an electric welder, pretreating with sugar or salt, etc.) before fire assaying the sample. Sometimes it is said that the ore cannot be fire assayed at all because the gold is in a volatile form which will be burned off from the sample and lost during fire assaying. While this is largely untrue, such samples can always be analyzed by standard wet-chemical methods which do not involve heating the samples in high-temperature (1,050°C) furnaces.

Good wet-chemical methods of determining the quantity of gold in a sample are used routinely by competent laboratories. The incompetent or unscrupulous, however, do not use the standard, scientifically-established methodology, but modify methods until they get results they want - however inaccurate they may be.

Laboratory-Specific Ore-Grade Assays
Certain laboratories repeatedly produce unreasonable data. Professionals in the mining industry have come to be leery of, if not simply to dismiss, assays from certain laboratories.

Several years ago, the Nevada Securities and Exchange Commission (SEC) asked this writer to help determine how one laboratory was apparently salting samples from a cinder-cone property that they were promoting. After being unable to duplicate the results produced by the laboratory in question through umpire assays at other laboratories, the SEC visited the lab and videotaped their procedure for assaying samples. They then obtained a sample of all chemicals that were added to samples during the course of the assay so that I could check them for gold contamination. Had I detected contamination of gold in one of the chemicals (which I did not), it could have been argued that the "salting" was inadvertent and that we were dealing with mere incompetents. Results of my contamination check lead to the conclusion that gold was being added covertly and intentionally and that a scam was being perpetrated on investors.

Some Recurring Property Scams
Property promoters are not stupid people. They often conceive their scams so as to be at least partially believable, even to knowledgeable professionals. The difference between the typical victims of these scams and the knowledgeable professional is that the professional knows how to quickly evaluate and verify or discredit the claims. He does this by calling on extensive knowledge about geology and ore deposits and through the use of the scientific method to avoid being confused and duped by the promoter.

A couple of examples which attempted to promote platinum-bearing properties in southern Nevada and a silver property in Texas, will illustrate the nature of these endeavors to deceive and extract money from investors.

Playa Deposits/Moapa Lake Bed Deposits
Southern Nevada is one of the few areas in the United States where platinum mineralization is known to occur. The mineralization occurs in the lower elevations of a couple of mountain ranges both southwest and northeast of Las Vegas. Recurring property promotions occur in the valleys below these known occurrences, with the promoters trying to convince investors that platinum has washed out of the exposed occurrences in the ranges and has built up to ore grades in the adjacent, closed, basins in the valleys. In the semi-desert West, these normally-dry lake beds in closed basins are called playas, and playa scams concerning gold and the platinum-group elements (platinum, palladium, rhodium, ruthenium, osmium, and iridium) recur on a regular basis.

The Moapa lake bed deposits, regionally adjacent to the platinum-bearing Bunkerville mining district northeast of Las Vegas is a favorite area in which to attempt to promote platinum properties. Although it is at least possible that such enrichment processes occur, there is no reliable evidence that they have. Colleagues and I have assessed and discredited these scams more than once.

The Grand-Daddy of Them All
In 1976 there occurred perhaps the boldest and richest mining scam ever recorded. The amount extorted from eager investors was estimated to have exceeded $30,000,000! Three con artists, McCord, Deaton, and Wolstencroft, enticed investors with a phony, proprietary extraction technology which was to extract substantial silver from vast reserves of ore near Llano, Texas (never mind that there was actually no silver in the rocks to be extracted).

Up-front money was needed from the investors to secure the mining property in Texas and attract a $10,000,000 loan with which to build the needed refinery. Investors were told that they would double their money in one week and some were enticed to invest substantially. A widow from the South invested $450,000 and a former Chrysler Corporation president invested $150,000. Needless to say, investors never realized any profit from their investments and, in fact, lost essentially everything that they had invested. Was it the con artists' skill and charisma or the investor's eagerness to see unbelievable returns, or both, that resulted in this debacle?

The money was funneled into a bank In the Bahamas where it was essentially out of reach of American officials who eventually were brought into the scam to investigate the broken promises.

Other favorite areas in which to try to deceive investors have been basaltic cinder cones, lavas in general, Mancos Shale, Humboldt Sink, Nevada platiniferous brines, high-gold content water from any area, etc.

The Problem of Quartz Veins
I have probably seen more prospectors confused by quartz veins than any other type of mineralization. There are many examples in the western United States where prospectors found outcropping quartz veins containing gold. Many times, however, while the quartz vein continued underground its gold content did not. Prospectors happening upon these prospects will grab residual high-grade samples left in the wall of the hole. Thinking they have found a valuable vein they will begin mining the quartz at depth only to find it contains no gold.

The problem is that geologic processes that have deposited quartz in the fracture in the rock are different than the processes that normally cause gold to be deposited along with the quartz. Because of the difference in depositional mechanisms for quartz and for gold, the fracture may be filled with quartz to great depths but the gold may only have been deposited in the shallow portions of the vein. Prospectors can waste a lot of time and money unjustifiably pursuing gold in barren quartz veins below productive horizons. Devious promoters can likewise make a worthless vein appear to be exceptionally valuable by guiding you to sample remnants of the gold-rich, shallow vein material and indicating that the quartz vein continues with depth.

The Scientific Method and Reliable, Unambiguous Data: How to Avoid Being Duped!
Scams generally involve attempts to convince someone that a rock is enriched in gold and/or other precious metals. Using principles of the scientific method, we can confirm or discount this assertion in an unambiguous, accurate, and reliable way. Let's look at a probably familiar analogy to review how the scientific method works and why we have come to trust its results.

We are probably all familiar with medical studies which make use of the scientific method. We have probably all heard (more than once) about blind studies in which one experimental group is administered a new medicine while another group is not. The researchers are looking for differences between the two groups which are unambiguously attributable to the treatment. So the scientists have gone through the mental exercise of hypothesizing that a medicine will cause a particular effect in patients and then designing an experiment to demonstrate conclusively that the medicine does or does not cause the anticipated effect. These scientists go to great lengths to be certain that the effects that they see or measure between the two groups are the result of the treatment alone.

In a similar way, in establishing whether or not a rock contains gold, we must take steps to ensure that the results of our assay accurately reflect only the presence or absence of gold. We generally do three things during the analysis. First, we carry a blank through the entire analysis, treating it as though it were a sample by adding to it all the chemicals that we add to the real sample in the course of the assay. In this way, we would measure any small amount of gold that we might inadvertently add to the sample because we would also add it to the blank as we add the chemicals to them both.

Secondly, we carry a standard along through the analysis. This is a natural sample, similar to the unknown, in which we already know the gold content with high confidence. At the end of our analysis, after treating the standard just like another unknown sample, we expect to find the certified amount of gold in the standard, indicating that our assaying method was an accurate one.

Finally, we analyze more than one replicate of each sample, carefully assessing the variation in results between the duplicate or triplicate determinations of gold in a given sample to ensure that we can repeat our results time after time.

After having taken these precautions during the conduct of our analysis we have high confidence that we know the concentration of gold in the unknown sample. We have monitored the analysis for inadvertent contamination by including a blank, we have verified the accuracy of the analysis by including a standard (or even several different standards), and we have demonstrated the reproducibility of our method. We can further assure ourselves that we have the proper answer by conducting the analysis with two entirely different methods. All methods should give similar results.

Final Advice
Before investing money in any mining-related endeavor, seek advice from a knowledgeable friend or hire a consultant to help you assess the risks inherent in the venture. Spending a little money on a consultant in the beginning may save a lot of money in the long run.

If you are having material assayed, take it to a reputable laboratory (make some telephone calls to mining companies, state geological surveys, the Better Business Bureau, etc.). If you think that you have found samples that have ore grade concentrations of precious metals in them, have them re-assayed at a second commercial laboratory to confirm the results. If the two laboratories do not agree within some reasonable margin of error, after you have provided them with identical , carefully split samples, seek a third or fourth assay, until you are satisfied that you know what the concentrations are with a high degree of confidence.

While many are attracted to mining because of the potential to obtain riches from rocks, prospecting or investing in mining is an expensive and risky venture. It is often said that if it sounds too good to be true, it probably is. But in this business, it might not be either because there are indeed some valuable ore deposits left to be discovered. Proceed with great care, and seek assistance if necessary. Be systematic, redundant, and apply liberal doses of common sense.

Discuss your mineral property appraisal, mining business valuation, or other mineral industry related concerns with Mineral Business Appraisal:
Michael R. Cartwright  michael@minval.com
Five Claret Court, Reno, NV  89512-4744
Tel/Fax: 775-322-9028

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