Metal Equivalent Grades: How to Read AuEq and CuEq

Introduction

Many deposits contain more than one valuable metal. A copper deposit may carry gold. A silver deposit may carry lead and zinc. Reporting each metal separately is accurate but hard to compare, so companies often combine them into a single metal equivalent grade, written as AuEq for gold equivalent, CuEq for copper equivalent, AgEq for silver equivalent, and so on.

The idea is sound. The difficulty is that the equivalent grade is not measured. It is calculated, and the calculation rests on choices the company makes. This guide explains how the calculation works and how to take it apart.

The rock has grades. The equivalent grade has assumptions.

The Basic Calculation

The CIM Estimation of Mineral Resources and Mineral Reserves Best Practice Guidelines describe the approach simply: the grades of the various commodities are converted to an equivalent grade of one metal by considering metal prices and recoveries.

In plain terms:

1. Work out the value of each secondary metal in a tonne of rock.
2. Divide that value by the value of one unit of the primary metal.
3. Add the result to the grade of the primary metal.

A simple form of the gold equivalent formula looks like this:

AuEq = gold grade + (copper grade × copper value per unit ÷ gold value per unit)

The "value per unit" can be price alone, or price multiplied by the expected metallurgical recovery. That difference matters, as the example below shows.

A Worked Example

Suppose a drill interval assays 1.0 g/t gold and 0.5% copper. The 0.5% copper is 5 kilograms of copper per tonne. Now suppose, purely for arithmetic, that a company assumes a gold value of $100 per gram and a copper value of $10 per kilogram. These are invented round numbers, not real or current prices.

Using prices only:

• Copper value per tonne: 5 kg × $10 = $50
• Converted to gold: $50 ÷ $100 per gram = 0.5 g
• Gold equivalent: 1.0 + 0.5 = 1.5 g/t AuEq

Adding recoveries. Suppose test work suggests the plant would recover 90% of the gold and 80% of the copper:

• Recovered copper value: $50 × 80% = $40
• Recovered value of one gram of gold: $100 × 90% = $90
• Converted to gold: $40 ÷ $90 = 0.44 g
• Gold equivalent: 1.0 + 0.44 = 1.44 g/t AuEq

Changing the price assumption. Now suppose the company had assumed a copper value of $16 per kilogram instead of $10, with the same recoveries:

• Recovered copper value: 5 kg × $16 × 80% = $64
• Converted to gold: $64 ÷ $90 = 0.71 g
• Gold equivalent: 1.0 + 0.71 = 1.71 g/t AuEq

Same rock, same gold, same copper. The equivalent grade moved from 1.44 to 1.71 because of one assumption. The grade converter can help with unit changes like per cent to kilograms per tonne.

Why Recoveries Matter

Leaving recoveries out assumes every metal is recovered equally well, which is rarely the case. A secondary metal might be recovered poorly, or only into a product that a smelter pays little for. In those cases an equivalent grade built on price alone overstates what the secondary metal contributes.

Early in a project, the company may not have test work yet. Then any recovery figure is an assumption, and a release should say so. Either way, the equivalent grade inherits whatever recovery number goes into it.

What NI 43-101 Requires

Canadian disclosure rules address metal equivalents directly. Form 43-101F1, the technical report form under National Instrument 43-101, says that when the grade of a multiple commodity mineral resource is reported as a metal or mineral equivalent, the report must give the individual grade of each metal or mineral and the metal prices, recoveries and any other relevant conversion factors used to estimate the equivalent grade. The same requirement applies to mineral reserves.

The Canadian Securities Administrators flagged this item in CSA Staff Notice 43-311, published in June 2020 after a review of technical reports, listing the methodology of metal or mineral equivalent grades among the areas where reports needed to meet that requirement.

The CIM guidelines add that where an equivalent is used as a cut-off, the formula and the parameters used to develop it must be clearly stated.

How to Unpick an Equivalent Grade

When a headline leads with an equivalent grade, take these steps:

1. Find the individual grades. Look in the table or the footnotes. If they are missing, that is worth noting.
2. Find the prices. Check whether the assumed prices are stated, and how they compare with the prices used in the company's own resource estimate or study.
3. Find the recoveries. Check whether recoveries are included, and whether they come from test work or are assumptions.
4. See how much the secondary metals contribute. In the example above, copper made up between about 30 and 42 per cent of the headline figure. If most of an equivalent grade comes from a by-product, the result depends heavily on that metal.
5. Recalculate if you can. With the individual grades and the stated assumptions, the arithmetic is simple. Try it with different prices to see how sensitive the number is.

What to Check

• Which metal is the base. AuEq, CuEq and AgEq can describe the same rock very differently.
• Price assumptions. Stated, dated and consistent with the company's other disclosure.
• Recovery assumptions. Included or not, and on what basis.
• The share from by-products. A headline grade built mostly on a secondary metal deserves a closer look.
• Consistency over time. If the company changes its equivalent formula between releases, older and newer results may not be comparable.
• The technical report. For resource estimates, the filed report on SEDAR+ has to set out the individual grades and the conversion factors.

An equivalent grade is a reasonable way to summarize a polymetallic result. It is not a measurement, and it should never be read without the numbers it was built from. For decisions, read the filings and talk to your own adviser.