watch_the_sky asked this forum an important question. As it went unanswered, I suggested that he ask Dave Webb. Here's what was asked and Dr. Webb’s paraphrased answer:

Question:

SPA.V: 126 million market cap

http://www.spanishmountaingold.com/s/Spanish_Mountain.asp

vs.

TDC.V: 40 million market cap

http://tyhee.com/properties/yellowknife_resources.php

Am I reading this wrong or why are other gold microcaps allowed to use a lower gold cut-off and be valued higher than TDC?

Dave’s response:

Cut off’s are determined by the QP “qualified person”, usually a geologist for resources, and an engineer in the case of reserves.

For resources, the cut-off represents the estimated break-even case should reasonable costs be assumed.Whereas, for reserves, the cut-off represents the estimated break-even cost should demonstrated calculated costs be assumed.

0.3 grams per tonne of gold at US$950 represents $9.16 of contained gold per tonne of rock.Mining and processing costs may vary as they depend on where a deposit is located, the nature of the deposit, and the size of the resource.

Big operations that heap leach can make money with $10 worth of RECOVERABLE gold.As greater amounts of processing are needed (multi-stage crushing for example) costs increase and maybe $15 of recoverable gold is needed.As milling (grinding) and flotation and cyanidation recovery techniques are included, costs continue increase (however recoveries also may go up).

As an example, Spanish Mountain reports 88 to 90% recoveries, so their 0.3 grams per tonne cut-off assumes 0.26 to 0.27 grams per tonne RECOVERED.In sections of their website you can see a relatively flat lying deposit with a minimal strip for about half of their mineralization; however the zones appear to dip shallowly to the east and may need additional stripping to follow these zones.Stripping can be expensive, and may add $1 to $4 per tonne to extract the mineralization. They apparently need to crush grind and float their ores, so we can assume a cost to process greater than $5 per tonne, and probably less than $10 per tonne.Tailings containment typically costs around $1 per tonne to store.

There may be other costs. However, if they can strip ($3) to mine a tonne of mineralization ($1.5) to process ($7) and dispose of the waste ($1) and have low G&A ($1) we might expect to see total costs for a very low cost operation around $13.50 per tonneat 0.27 grams per tonne cut-off for recovered gold, we need gold prices in the range of $50 per gram (13.50/0.27) or $1,555 per troy ounce to break even.

As some feel this is reasonably possible, then 0.3 grams per tonne is a good number to use.Their consultant is a very capable and well respected in the industry.I accept what he says.