The assay is the process of assessment of a substance to determine its composition and quality. The futures market is significantly dependent on assaying because the materials used in the contracts are required to be analyzed to determine if they meet the quality standards defined by the futures exchange. The delivery of the material in the physical form helps to determine the prices that converge in the spot market and futures.
This process of assessment is prominently used in the mining industry to define the strength and quality of the material being used. This is also utilized in the pharmaceutical industry and chemical industries. Assy helps to predetermine the value of mineral ores and hence monitors have an unwavering eye on the mining industry.
Assay Implementation
An assay that shows unfathomable results leads to the rally for the stock of the company that has the holding rights for the mineral. On the other hand, a downward trend in the assay results leads to less interest from the investors in the stock of the company that has been speculated to deliver good results.
As assay is implemented in three ways: Instrumental analysis, fire assay and wet chemistry. The fire assay is the most extensively used method and it requires the samples to be ground into a fine powder mix. The mix is heated in a metal container or one made from ceramic. It further decomposes or breaks down the mixture into simpler parts that comprise the constituents.
For the instrumental analysis technique, a shallow cup is utilized. Titration, distillation and gravimetric analysis which is somewhat similar to precipitation are used in the wet chemistry analysis method. The quality of the metal is needed to be determined for the futures market. For instance, the CME group, whose gold futures are listed on the exchange, requires metals with a fineness of 995 parts per thousand to facilitate delivery in the COMEX gold futures. And for platinum, the fineness is needed to be 99.95%.
Assay example
The assay analysis pushes the prices upward for the manufacturing and exploration industry. The reason is that assay is used as a forecasting element for the demand and growth of earnings in the future. In 2020, stock prices of an Australian company named Thor Mining rose when gold sediments were discovered in Pilbara Goldfield tenements in the western region of the company. The prices also increased when high-grade tungsten was found on another project.
