o3 BLOG | Trends
Mining Terms Every Investor Should Know
Many seasoned investors consider gold a safe haven asset — a hedge against economic uncertainty or stock market volatility. The price of gold reached record highs recently, and experts expect the value of gold to climb even higher toward the end of 2021. Whether you are interested in diversifying your portfolio or want security when your other investments are underperforming, gold is a timeless asset that will hold its value for years to come. Like any other investment sector, gold and precious metals mining have a unique set of terminology. Familiarizing yourself with the language will help you navigate the space and offer a better understanding when adding gold to your portfolio. We’ve compiled a list of some key gold market and mining terms you might encounter when purchasing gold or investing in gold mining stocks.
Allocated gold — When an investor buys physical gold and stores it in a secure bullion vault within a bank.
Alloy — A mixture of chemically active metals present in a metallic material (e.g., brass is an alloy of copper and zinc.)
Assay — A test that determines the amount of precious metal, such as silver or gold, in ore and mineral deposits. Assay results help mining and exploration companies plan targets for future drill operations.
Ask — The “ask price” is the price a gold dealer has set for a specific quantity of gold, such as a 1 oz gold bar. This is also known as the selling price.
Asset allocation — The mix of assets within a portfolio. Your asset allocation can include equities, cash, and commodities within an investment portfolio. Factors such as return objectives, income needs, and risk tolerance determine your asset allocation.
AU — The chemical symbol for gold derived from the Latin term for gold, “aurum.”
Bar — A rectangular shaped block of metal with a stamp that certifies its specific weight and purity.
Bear Market — When the market experiences long periods of losses. Within the gold and precious metals space, a bear market in stocks doesn’t necessarily mean a bear market for gold, as the opposite is often the case. Investors typically sell stocks and focus on safe haven assets like gold in bearish markets.
Brownfield exploration — Mining exploration in previously mined areas known to contain mineral deposits. Brownfield exploration areas are often near operating mines. Brownfield exploration is also known as near-mine exploration.
BU/Brilliant Uncirculated — A term used to describe a coin in mint condition and has not been used as legal tender in cash transactions.
Bull Market — The opposite of a bear market, an upward trending market is known as a bull market.
Bullion — Physical gold or other precious metal in tradable form. Bars and coins are considered bullion.
Buy/Sell Spreads — The difference between a the buying price listed by a gold or precious metals trader and their selling price. Buy/sell spreads are relative to a metal’s spot price — typically, the lower the buy/sell spread, the better.
By-product — A secondary mineral or metal that results from the milling process. An example of a gold mining by-product would be iron ore or zinc.
Capital Gains Tax (CGT) — Capital gains tax, or CGT, is the tax levied on a profit from the sale of assets that were purchased at a lower price. Common capital gains are realized from bonds, stocks, and property sales.
Circulated — Coins that have been distributed to the public as currency for use as legal tender.
Commercial traders — Also known as the US futures market, commercial traders can represent precious metals producers or refining companies. Commercial or futures contracts can act as a hedge if an asset class drops.
Commodity – A commonly traded physical product that holds value based on its commercial or industrial value.
Composite grade — In mining, the grade average is determined by the length intervals of its component grades.
Contained gold — The total amount of gold content within an orebody.
Contained ounces — The number of ounces in the ground without the reduction of ounces that the applicable metallurgical process could not recover.
Core — The sample or cylindrical section obtained by drilling into material such as rock.
Core hole — A hole that is drilled to obtain cores/core samples.
Development — The process of preparing a mining property for orebody analysis. Typically, the area has undergone quality estimates and is ready for mining.
Diversification — Spreading investments across different asset classes and sectors. Diversifying your portfolio with gold helps reduce risk and acts as a hedge in times of financial uncertainty.
Dividend — A sum of money that a company regularly distributes to its shareholders. Shareholders receive dividends according to a set formula that is approved by the board of directors.
Electrum — Naturally occurring silver or gold that also contains trace amounts of other metals such as copper or nickel.
ETFs — Exchange-traded funds or ETFs are other methods of investing in gold without physically purchasing gold bullion. ETFs are managed by fund managers who have a proven track record of success when trading precious metals. Investors buy units in an exchange-traded fund, and as the funds’ performance improves, the units’ value goes up.
Extraction — The process of removing ore from a mine and separating valuable metals and minerals by using solvents specific to those constituents.
Fineness — The purity of a precious metal in ratio to an alloy. Gold bars measure at a minimum of .995 fineness, meaning they contain 995 parts gold and 5 parts of an alloy.
g/t — Grams per tonne, also denoted as gpt, g/t measures the concentration of an element in grams per metric tonne, or 1,000 kg of material.
Gold — The chemical element represented by the symbol Au. Gold is a naturally occurring element with an atomic number of 79. Physical gold in its purest form is a bright yellow metal with a slight red hue. It is dense yet soft and malleable. Gold is a highly ductile metal making it ideal for use in electronic components.
Gold Futures — Gold futures are financial products that allow investors to trade gold at terms determined now but with a future settlement date. When the settlement day arrives, the buyer pays for the gold, and the seller delivers it. Settlement dates usually occur three months after the future is traded. Buyers need to pay sellers a margin, which locks you into the deal and assures the seller that you will have payment ready come settlement day.
Gold Reserves — Reserves of gold held by government banks to protect the local currency and manage payment deficits. The government will typically top up gold reserves during financial uncertainty.
Gold Standard — A system based on the convertibility of paper money into gold (i.e., paper money is interchangeable with gold.)
Grade — The amount (in grams) of precious metal per tonne of ore. Grade also represents the concentration of a specific element in an ore deposit.
Greenfield exploration — Exploration projects in areas where there was no previous exploration or mining.
Hedging — Hedging is the act of reducing the financial risk or offsetting loss by investing in another commodity, such as gold, or through futures contracts. When markets underperform, many investors will buy gold or buy futures contracts using the profits to create a hedge and balance the loss.
Index — A number of stocks or bonds that represent an asset class or market segment. The S&P and the TSX Composite Index comprises roughly of 260 stocks, and investors consider it a proxy for the stock market in Canada.
Index fund — An ETF or mutual fund that holds all the stocks and bonds within an index in an attempt to match the returns of an asset class.
Indicated mineral resource — The part of a mineral resource where its physical characteristics, including quantity, grade/quality, density, and shape are estimated based on detailed exploration and testing data gathered from various locations within a project. The estimation is made with a high level of confidence, as samples from outcrops, pits, and multiple drill holes within proximity of each other suggest grade continuity that supports mine planning and the evaluation of economic viability with modifying factors.
Inferred mineral resource — The part of a mineral resource where quantity and grade/quality is estimated based on geological evidence and limited sampling. Unlike indicated mineral resources, grade continuity is reasonably assumed but not verified.
Infill and step-out drilling — Step-out drilling starts at a fixed point with the intention to expand to the mineralization zone. Infill drilling confirms the presence of mineralization between step-out drills.
Intercept — The section between two points in a borehole where the hole encounters a specific mineral body and begins to enter a different underlying rock formation.
Karat (kt) — A measurement that indicates the proportion of pure gold relative to other substances within a metallic material. 24-karat gold is 99.5% pure. Gold jewellery ranges from 10-karats to 24-karats. 14-karat is usually the standard as it is pure enough to have gold’s antioxidation characteristics and lustre, but the other metals make the jewellery more durable and suitable for day-to-day wear.
Large-cap stock — A public company that typically has a substantial market capitalization/multi-billion valuation.
Legal Tender — Coins that can be used in cash transactions as a national currency
Liquidity — Liquidity determines how easily you can convert or sell a product or asset for cash. Gold has high liquidity as there is a constant demand for it and has an active market of buyers and sellers.
Market capitalization — The stock price of a company multiplied by the number of outstanding shares.
Market Value — In gold investment terms, the price at which physical gold trades.
Measured Mineral Resource — Measured mineral resources have higher levels of confidence to support mine planning economic viability than Indicated Mineral Resource or an Inferred Mineral Resource.
Mineral deposit — A mineralized body that has been tested to support an average grade/amount of a metal. Mineral deposits have not undergone comprehensive evaluation and therefore does not qualify as a reserve, as it has yet to demonstrate economic feasibility. Further, there is no guarantee that the deposit will become an ore reserve.
Mineral reserve — The mineable part of an indicated mineral resource that demonstrates economic feasibility based on adequate testing and accurate data.
Mineral resource — The concentration of a mineral or metal of interest where the quantity, grade, and other physical characteristics of a mineral resource are known based on geological evidence or preliminary testing. Mineral resources offer realistic prospects for economic extraction and fall into inferred, indicated, and measured categories.
Mineralization — The process where a mineral or minerals are introduced into a rock, resulting in a potentially valuable deposit.
Mint — The refining/production company that produces coins or bullion.
Ore — Rock that typically contains metal or minerals that can be mined and processed for profit.
Orebody — A substantial amount of ore that can be mined economically.
Ounce (troy ounce) — A measure of weight equivalent to 31.1035 grams that is typically used in the sale of precious metals.
Oz — The symbol for ounce.
Oz/ton — Also known as ounce per short ton, it measures the concentration of a mineral or element within 2,000 lbs of material.
Paper Precious Metals — Precious metal investments that don’t involve the physical handling of the metal itself. Examples include gold ETS, precious metal certificates, etc.
Physical gold — A form of gold that can be handled or touched such as a bar or coin.
Probable mineral reserve — The economically mineable section of an indicated and, in some circumstances, a measured mineral resource that is supported by feasibility studies. The feasibility study must include extensive mining and metallurgical data that justify economic extraction.
Proven mineral reserve — The economically mineable part of a measured mineral resource that is supported by feasibility studies. The feasibility study must include extensive mining and metallurgical data and other factors that justify economic extraction.
Purity — The content of a precious metal, such as gold, within bullion. (e.g. gold bars have a purity of >99.5%
Premium — In the physical gold market, a premium is an additional price charged over bullion’s spot price. Premiums generally rise when the demand for gold increases.
Qualified Person — As defined by the NI 43-101, a qualified person is an engineer or geoscientist with a minimum of five (5) years of experience in mineral exploration, mineral project assessment, and mining development. Qualified persons should have extensive experience relevant to the subject matter in the mineral project and be in good standing with a professional association.
Rally — When an asset such as a stock, currency, or commodity goes through a period of sustained price gains.
Raw Gold — Bullion that has not been certified or minted.
Recovered grade — The actual metal content of ore that is determined after the mining process.
Recovery — Indicates the proportion of valuable material that is obtained during ore processing. It is usually stated as a percentage of valuable metal obtained through processing compared to the total valuable metal present in ore.
Reserve — The quantity of a mineral within a specific set of boundaries. Reserves are categorized as gross/total, workable, or probable working, depending on factors such as deposit thickness, depth, quality, and economic factors. Proved, probable and possible reserves are also terms that are commonly used in mining practice.
Reserves — The portion of an economically feasible mineral deposit that can be extracted or produced at the time of reserve determination.
Resource — A concentration of naturally occurring organic material on or in the Earth’s crust that is of economic interest.
S&P 500 — The S&P 500 is one of the main stock market indexes and tracks the performance of the 500 largest publicly-traded companies in the US. It serves as a reflection of market business activity and is one of the most followed equity indices.
Safe-Haven Asset — Assets that are considered safe and less volatile during times of financial or political uncertainty. Investors consider gold to be the ultimate safe-haven asset.
Securities — Tradable financial products such as stocks, bonds, or options
Small-cap stock — Stocks of public companies with a small market capitalization. Small-cap companies typically range between $150m – $1.5bn
Stock — a security that grants an investor partial ownership of a company. Stockholders typically have voting rights and are privy to the firm’s assets and earnings. Some companies also pay dividends (a percentage of the company’s revenues) to their shareholders.
Stock purchase plan — A program that allows investors to purchase a company’s shares directly, without a brokerage, and often at a lower price.
Tangible Assets — Assets that can be physically touched or held such as real estate, equipment, cash, or gold bullion.
Technical analysis — In investment terms, technical analysis is the method of forecasting the market’s future performance based on historical data such as price changes and trade volume.
Thickness/True width (TW) — Thickness or true width is the distance across a packet of rock and is measured at right angles to the surface of the rock seam or bed.
Vein — A mineral-filled crack or fault in a rock that stems from a deeper mineral source.
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