Stripping ratios aren’t often discussed, but they can be an early and important indicator for mining projects. Here’s what investors should know about them.
A strip ratio, or stripping ratio, is an important measurement related to the open-pit mining process. It represents the amount of waste material, also known as overburden, that must be moved in order to extract a given amount of ore.
That said, stripping ratios are not only about the volume of unwanted material present at a site; they also take into account the types of material that must be removed to reach the ore. After all, moving lightweight material, like sand or dirt, is simpler than moving hard rock.
Ore quality is another consideration in stripping ratios. That’s because if a deposit contains low-quality ore, more of it must be mined in order to achieve a return on investment.
Calculating stripping ratios
At their most basic, strip ratios can be calculated by dividing overburden thickness by ore thickness. For example, an overburden thickness of 100 meters and an ore thickness of 50 meters would yield a strip ratio of 2:1. That means mining 1 cubic meter of ore would require mining 3 cubic meters of overburden.
The stripping ratio of a deposit may be used, in part, to gauge how profitable it may be. “The lower the strip ratio the better, as a low strip ratio translates into a lower mining cost,” said Cormark Securities mining equity research analyst Stefan Ioannou.
For instance, a project with a very high strip ratio likely will not be profitable. That’s because a high strip ratio means that the unwanted material is much greater than the amount of ore that can potentially be extracted, making it too expensive to mine. Conversely, a project with a low strip ratio will probably have good prospects for profitability.
“However, every deposit is different, and one that benefits from another factor [or factors], for example high grade, can potentially support a higher strip ratio. Generally speaking, there is an inverse relationship between reserve grade and strip ratio,” Ioannou added.
As a result, mining companies calculate strip ratios for open-pit projects well before they enter development and production, and seek out projects with relatively low strip ratios. Even so, given all the factors involved in calculating a strip ratio, it’s difficult to determine an overall ideal figure.
“In the case of a ‘typical’ large (low-grade) copper porphyry deposit, a strip ratio below 3:1 is generally considered good,” Ioannou said.
Examples of stripping ratios
Ioannou gave some examples of mines with good strip ratios, including Lundin Mining’s (TSX:LUN) Candelaria copper-gold-silver mine in Chile at 2.8:1, and Copper Mountain Mining’s (TSX:CMMC) copper mine in BC at 2:1. Detour Gold’s (TSX:DGC) Detour Lake gold mine in Ontario has a strip ratio of 3.3:1.
Western Copper and Gold (TSX:WRN,NYSEAMERICAN:WRN) has emphasized that its Casino copper-gold project has a “truly impressive” life-of-mine strip ratio of 0.59:1. Casino is currently in the permitting phase and is located in the Yukon Territory.
For example, Nevsun Resources’ (TSX:NSU,NYSEAMERICAN:NSU) high-grade Bisha copper mine in Eritrea posted a strip ratio of 5.4:1 in 2014. Similarly, Avesoro Resources’ (TSX:ASO,LSE:ASO) high-grade New Liberty gold mine in Liberia has a strip ratio of 15.5:1.
This is an updated version of an article originally published by the Investing News Network in 2014.
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Securities Disclosure: I, Amanda Kay, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: Western Copper and Gold is a client of the Investing News Network. This article is not paid-for content.