For many junior precious metals miners, discovering a mining district can be like striking gold (literally).
It opens the opportunity to maximise margins and move from a junior to a midsized digger with regular gold mining operations as opposed to constant exploration.
Finding one, however, isn’t very easy.
Even mining companies with fully operational mines across several locations rarely discover a district.
So, what exactly makes a district, and what are the benefits of one to a junior miner?
What is a gold mining district?
Simply put, a gold mining district is several deposits across an area of land.
The size of that area of land, according to Ben Davis, a mining analyst at Liberum, is anywhere that is “trucking distance, so roughly 30km-40km”.
Of course, when a company discovers a district, it is usually through testing areas neighbouring an existing mine.
So, an area that has district potential would be a relatively underexplored part of the land within 40km of an existing deposit that has the potential to offer up more gold.
As Davis put it, “the best indicator of gold, is gold,” so companies are likely to test the area near a confirmed deposit to see if more of the resource can be uncovered.
Recently, for example, Shanta Gold PLC confirmed that its Ramula target in Kenya has a gold district potential after its 2021 drill results saw a 37% increase in total resources to 1.6mln ounces.
What are the benefits of a gold mining district?
The obvious benefit is more gold.
More gold to mine means more to sell which means more money.
Aside from that, acquiring permits for the additional deposits in the area is significantly easier and far less time-consuming due to already having an established mine.
Getting off the ground is also much easier, as miners can “leverage the infrastructure already developed”.
Discovering a district therefore can often be much cheaper than operating several deposits across several locations.
Economies of scale generated from the above bring down all-in-sustaining costs, a big part of the economic calculation for project developers.
Are gold mining districts common?
As previously mentioned, Shanta believes it might be on the cusp of a gold mining district which inched the share price up slightly by 35 to 9.48p.
However, according to Ryan Long, a mining analyst at Proactive Investors, “the discovery of gold mining districts isn’t really something that happens very often in the modern day”.
Now, that isn’t to say that the hopes of uncovering a district should be written off.
But, it’s key to point out that junior miners can still enjoy success and mine large amounts of gold even without a district.
In fact, there are several companies that have found large deposits and have increased their value significantly.
A perfect example of a company that did come across a gold district recently is Greatland Gold PLC (AIM:GGP, OTC:GRLGF).
The miner’s share price had remained flat since it had listed in 2006 until an excellent discovery at its Havieron project.
Greatland discovered a deposit, which analysts believed in early 2020 could contain at least five million ounces of gold.
As a result, its share price rocketed from 1.9p all the way to 36p as further tests and drilling confirmed initial findings, with the price has settling since and shares currently trading at 13.3p.
Other more famous examples?
It’s important to note that success for a junior miner is not defined by whether they discover a district scale resource or not.
As mentioned above, there are plenty of examples of junior miners who have grown in size without ever needing a district.
Some of the notable mentions include Kirkland Lake Gold, listed in the US, whose shares have risen from US$5 to over US$40 in five years and Great Bear Resources (TSX-V:GBR), also listed in the US, which has climbed from just over US$2 to US$22 in the space of two years.
So while gold districts are hugely beneficial to junior miners and can open up a world of opportunity, they are extremely rare and should not be viewed as a make or break for junior miners looking to establish themselves.