GOLD MINING 101 

In its simplest form, placer mining is about taking the gold out of the river and putting it in your pocket.  At first glance this might appear to be a simplistic view of mining, but in essence that is what the gold mining is trying to do.  Of course there are a few additional steps between point ‘A’, the river, and point ‘B’ your pocket.  Like the old saying goes …keep it Simple Simon… or the principal of kiss.  Placer mining is all about reduction, reduction, reduction.  If you consider that for any given amount of gold bearing material you mine only 1% is gold.  In other words 99% is debris.  The quickest and most economical means of reducing that material down to 1% the richer you will be. 
                                                    

But first, let’s take into consideration some basis.  Mining is all about yardage, or how many yards of gold bearing material can you process in a given amount of time.  This is where it starts to get a little complicated.  If for arguments sake you have one cent worth of gold in every cubic yard of material you process, you can see that you would have to move a lot of yardage to make any money.  So, the higher the ‘in ground’ value of the gold the less cubic yardage you would have to process.  If say each cubic yard contained $100 dollars worth of gold, you would only have to process 10 cubic yards to extract $1000.00 dollars.  Of course you would then have to deduct the amount you spend extracting the gold in the first place.  Things such as equipment cost, fuel, food, lodging, fees, travel expenses and any other cost associated with the extraction process.  What remains, if anything is your profit.

For the average weekend gold miner this is probably not something he or she would worry about.  Simply having some gold in a vial would be sufficient reward for a good weekend gold mining.  For the professional and semi-professional miner it is a different story.  All, or a good portion of his or her income is derived from gold mining, so the ‘Cost of Mining’ is very important.

When dealing with placer mining the miner has one of two options.  One, to use some form of floating dredge or two, a land based processing unit.  All too often I see miners using too much equipment and very little in the way of organization and planning.  Having mine for gold in the Amazon jungle, far from the nearest Home Depot or supermarket, carefull planning and organization was very important.   In either case knowing what to expect when you start dredging or Highbanking is important to the success of your mining venture.  Below is a calculation of how to determine what you can expect.

In the end the golden rule is to keep is simple.

Good luck and good hunting.

MINING COST CALCULATION

1)    First sample the proposed area to determine the ‘in-ground value’ this will give you value ‘A’

·               ‘In ground value’.  By this I mean sample the area to determine the average amount of gold you could reasonably expect to extract per cubic yard of material processed. This will give you what I call the ‘in-ground’ value.  Be realistic and don’t over project.  If need be use the lower end of your sampling results for the rest of the calculation.

2)    Now calculate the average number of cubic feet or cubic yard  of    material you  expect to process in an hour with the equipment you will use. This will give you value 'B'

·               By ‘average’ I mean the actual number of cubic feet or cubic yards processed under working conditions in a given area, not the dredge manufacturer’s ‘bank run’ rating.

·              This could differ by a surprising amount. (A 6" dredge rated at 20 cubic yards an hour by the manufacturer could actually only be processing 1 to 5 cubic yards under actual working conditions).

          A X B = C (or the total amount of gold in troy ounces per hour.)

3)    Calculate the value of gold you recovered by the current market value of gold. This will give you value ‘D’

·               If you know the fineness of your gold, use this number.

·               If you don’t know the fineness of your gold, reduce the current market value by 20%)

·               At this time gold is running at $1,600 dollar a troy ounce for .999 fine. (i.e. $1,600 – 20% = $1,280 an ounce)

·                      

            A X B x C = D

 As in:-

        (A) .125 troy ounces per cubic yard mined multiplied by (B) 6 cubic yard mined in one hour = .75 oz  (B) .75 ounces multiplied by (C) $1,280 (or current market value of gold – 20%) = (D) $960 per hour

This is the basic equation works for cubic yards mined in an hour, day, week, or month. Value ‘D’ is the base line hourly rate number you can use for the rest of the calculation.

4)    Next, calculate the ‘average’ number of hours you will work in a ‘working day’, week and month. This will give you value ‘E’

·               Be conservative here. Use 4 or 5 hours maximum per day.  Four days for an average week. Twenty days for an average month. (This is the actual working time excluding breaks for coffee, food, re-filling the gas tank, blockages, maintenance, clean up, weather or other interruptions to your ‘working’ day).

                                                       D X E = F

           i.e.:- 

        (D)  $960 multiplied by the number of hours worked (E) 5 hour = $4,800 (F) (Total value of the gold extracted in a given time)

5)     Calculate your expected expenses for the length of time you will be mining. This will give you value ‘G’

·               This should include all your gasoline usage (travel to the site), lodging, food, supplies, permit fees, DMV fees, incidentals, travel cost and the cost for oil and gas to run the equipment for the length of time you will be working and any incidental expenses you expect to encounter.

6)     Add up the total cost of all of your mining equipment, and amortize the cost over a one or two year period. (Depending on when you will need to replace a major part such as an engine or pump). This will give you value 'H'

·               This should include your dredge, dredge trailer, diving gear, ropes, hoses, gold pans, and accessory equipment, maintenance cost.

        There are a number of ways to calculate the cost, either by the number of troy ounces extracted per hour, day, week, or month.  Or by the current market value of your gold (minus any discount gold less than .999 fine) or by the dollar amount you calculated.

            To recap:

      A.   Is the in ground value or the amount of gold per cubic yard.
      B.   the number of cubic yard you can mine in an hour. Or
       C.   The total amount of gold in troy ounces per hour
       D.   The current market value of gold – 20%       
       E.   The total number of hours worked
       F.   Total value of the gold extracted in a given time
       G.   The total dollar value of your expenses
       H.   Total after deducting expenses
       I.    The total amortized value of all your mining

                     equipment
       J.    Remaining amount or the + - of mining a given

                     area.

                               A x B = C X D X E = F – G – H – I = J

            Such as:-

            (A) .125 ounces per cubic yard multiplied by

            (B) 6 cubic yard an hour = (C) 0.75 oz. per hour.

    (C) 0.75 oz per hour by $1,280 an ounce (current

                 market value) = (D)

     (D) $960 an hour multiplied by (E)

             (E) 20 hour in a ‘working’ week = (F) $19,200 per

                  ‘working’ week.

      (F) $19,200 a week – expenses = (G)

              (G) $3,500 = (H) 15,700 (Expenses @ $500.00 a day

                    for a 7   days = $3,500)

      (H) 15,700 – Cost of equipment = (I) $ 5,000

               (I) $15,700 - $ 5,000 = (J)

               (J) $10,700.00 a week.

There is several ways to work this equation, either by the dollar amount of the gold extracted, or by troy weight. The most important point is, be conservative in your estimates of what you can extract.  Under estimate how much material you can process and how long you can work.  Over estimate your incidental costs, and that of the equipment you purchased and will replace in a given amount of time.

Good hunting.

IGR Gold Mining Systems