Mineral Resources and Ore

Mineral Resources and O
Reserves – Thoughts a
Observations
Robert Cameron, Ph.D.
Disclaimer
The following information has been
abstracted from various publications and
sources and was originally intended for
f© 2015 All Rights Reserved
verbal presentation purposes only and not
for formal publication. Therefore, not all
material in the following presentation has
been properly credited so please do not
republish.
Mineral Resources and O

Reserves are Not that H

USGS/USBM
Resource
Reserve System
- 1976/1980
Geological Survey Circular 831
A Revision of the Classification System Published as U.S. Geological Survey Bulletin 145
Identified Mineral Resource/Reserve Undiscov

Cumulative
Production Demonstrated Proba
Inferred
Measured Indicated Hypotheti
Economic Reserves Inferred Reserves
Marginally Inferred Marginal

Economic Marginal Reserves Reserves
Inferred
Demonstrated Subeconomic
Sub-Economic Subeconomic
Resources
Resources
Other
Includes nonconventional and low-grade materials
Occurences

2016 - Resource and
Reserves
What is a Resource?
Mineralized material that has the potential
for economic exploitation
What is a Reserve?
Mineralized material that there is a plan for its
economic exploitation requires: mine plan,
production schedule, metallurgical designs,
markets,
social licenses, permits, legal and other modifying
factors to be in place or with reasonable
expectation they can be finalized. Must have
Pre-
feasibility or Feasibility level study

Requirements for
More Specific
Definitions
• Most global stock

exchanges or
governments today require
adherence to a specific or
standardized reporting
code
ASX, NZX, HKSE, SGX - JORC
TSX, BCSC, OSC – CIM/NI 43-101
U.S. SEC - Industry Guide 7

Resource-Reserve
Classification
Systems for Reporting
Australia JORC Code - 2012
Canada CIM 2014 / NI 43-101
Europe PERC
South Africa SAMREC Code
United States SEC Industry Gui
7 / SME
Russia own - A, B, C, P
China Traditional and New (1
United Nation Framework Classification fo
Fossil Energy and
Mineral Reserves and
Resources 2009

SEC and Resources
• SEC does not recognize Mineral
Resources for public
reports/disclosure purposes - only
Reserves
• SEC will however allow you to talk
about “Mineralized Material” and
exploration results/targets/etc. as
long as you avoid representing them
as “Reserves” • SEC does allow
you to talk about “Resources” if you
are required to report them in
another jurisdiction

Simplified Mineral
Resource Definition
Mineralized material
that has the
potential for
economic
exploitation
Resource Categories
Universally recognized
Classifications include:
Inferred

Indicated
Measured
Relationships
between Resource
and Reserves

JORC Code
Principles
• Non Prescriptive
• Transparency - clear, unambiguous,
not misleading
• Materiality - all relevant information to
make a reasoned and balanced
judgment
• Competence - work and judgment of a
named qualified, experienced
Competent Person; enforceable
professional code of ethics
• Code - binding AusIMM and AIG;
adopted ASX and NZX; accepted other
jurisdictions, e.g., AIM, TSX, HK, SGX
JORC Code is reporting Guidelines -
explanatory, guidance, interpretation
(No such thing as a JORC “Compliant”
Resource/Reserve)
JORC Code Principles

(continued)
Competent Person (CP):
• Estimate based on the work and
judgement of a CP
• Suitably qualified and experienced
and subject to an enforceable
professional code of ethics
• Member or Fellow of AusIMM, AIG
or Recognised
Overseas Professional Organisation
(ROPO) – MMSA QP is recognized
• Minimum of five years of experience
relevant to the style of mineralisation
and type of deposit under

consideration and activity
undertaken
(Called Qualified Person QP in some
jurisdictions)
JORC Code
Resource Definitions
Mineral Resource:
• A concentration or occurrence of
solid material of economic interest in
or on the Earth’s crust in such form,
grade (or quality), and quantity that
there are reasonable prospects for
eventual economic extraction. The
location, quantity, grade (or quality),
continuity and other geological
characteristics of a Mineral
Resource are known, estimated or
interpreted from specific geological
evidence and knowledge
JORC Code
Mineral Resource Definition
Mineral Resources - sub-
divided in order of increasing
geological confidence:
• Inferred Resources
• Indicated Resources
• Measured Resources
JORC Code Mineral Resource
Categorization
Tonnage, Grade, Metal
Content:

• Inferred - lower level of
confidence. Geological
evidence, is sufficient to imply
but not verify geological and
grade (or quality) continuity
• Indicated - reasonable level of
confidence, sample locations
close enough for continuity to
be assumed
• Measured - high level of
confidence, detailed and
reliable information, locations
close enough to confirm
geological and grade continuity
JORC Code

Mineral Resources – Other
Factors
• Cut off grade - reasonable economic
basis
• Not precise calculations, estimates
appropriately rounded
• Must report categories separately
• Must report tonnes and grade, not
only contained metal
• Can be adjusted for reconciliation
factors, but must specify
• Should not use the term ore or
orebody when referring to resources
• Specify whether “additional to” or
“inclusive of” reserves
Resources
Thoughts and Observations
(1)
• Over the last 40 years Mineral
Resources has moved from the
concept of grade and tons of
mineralized material to the grade
and tons of potentially economic
mineralization
• The biggest change is the definition
of “potentially economic” due
primarily to abuse in the ambiguity.
− Must be only mineralization within a potentially
economic Pit
Shell for an anticipated open pit
operation
− Must be within a grade shell or stope
area for an underground operation
Resources

Thoughts and Observations
(2)
• The foundation to a good resource
estimates lies in the data and the
geologic modeling
• Secondary is the estimation of the
grade/quality and tonnage of the
mineralization.
• Third is the subjective assessment
on the confidence of the
data/model/estimate; or classification
of the resources/portions of the
resource into Measured, Indicated
and Inferred.

Let us consider a
set of drilling
intersections
Source: Unknown

A very
conservative
geologist’s
interpetation.
Source: Unknown

A conservative
geologist’s
interpetation.
Source: Unknown

An optimistic
geologist’s
interpetation.
Source: Unknown

A very optimistic
geologist’s
interpetation.
Source: Unknown

A geophysicist’s
interpretation.
Source: Unknown

Resources
Thoughts and Observations (3)
Estimation Methods
• Manual Sections
• Nearest neighbor – polygonal
• Minimum Curvature/Spline
• Inverse Distance
• Kriging (personal choice)
Simple Kriging
Ordinary Kriging
Cokirging
Indicator Kriging
Multiple Indicator Kriging (MIK)
Resources
Classification Methods
•Distance to the closet sample or average distance
to all samples used to produce the block grade
estimate;
•Distance plus a minimum number of samples or

drill holes; and

•Kriging variance or statistical inference – Need to
be careful.
Resources
The biggest mistake that people make
is that they think they are at a
Measured or Indicated Mineral
resource because they can predict
tonnage or grade or continuity with
sufficient confidence. However, you
must have all parameters meet the
classification level before you move the
tonnage into a higher classification.
How to Check Resource Classification
According to Bob (1)
Simply evaluate what would happen if you added
another sample point between samples

Additional Drill hole
How to Check Resource Classification

According to Bob

Mine
Plan a
• Measured – Need to be really close ( or
you nailed it) to depth, grade and
thickness (tonnage)
• Indicated – Need to be reasonably close
with reasonable variations
Plan Exploration
• Inferred – Somewhat close to what I
expected
Resource Reports - Caution

The term “Ore” or “Orebody” can NOT be
used in a Resource report!
The terms Ore and Orebody only apply to

Reserves
Ore Reserves
Ore reserves are easy

BUT
It is probably the most
misused/misunderstood term in our
industry!
Simplified
Ore Reserve Definition
Ore Reserve
• The grade and tonnage of material you have
planned to mine and sell (or extract a valuable
commodity) and make a profit.
− It must have a mine plan and production schedule
− It can only be derived from Measure and Indicated
Resources
JORC Code
Ore Reserve
• The economically mineable part of a Measured
and/or Indicated resource and is defined by
studies at Pre-Feasibility or Feasibility level as
appropriate that include application of Modifying
Factors. Such studies demonstrate that, at the

time of reporting, extraction could reasonably be
justified.
JORC Code
• Includes mining dilution and allowances for mining
losses and may include non-economic material
• Appropriate assessments/studies - mining, economic,
metallurgical, marketing (saleable product), legal and
environmental (permits and approvals), social,
government – Must be at least at a Pre-feasibility level
• “Deriving an Ore Reserve without a mine design or mine
plan through a process of factoring of the Mineral
Resource is unacceptable” – JORC 2012 Edition pg. 16.
JORC Code Ore Reserve Definition
(continued)
Ore Reserves - subdivided in terms of

geological confidence:
• Proved (Proven) Reserve - economically
mineable part of Measured Resource
• Probable Reserve - economically mineable part of

Indicated Resource (or Measured under particular
circumstances)
JORC Code
Ore Reserves – Other Considerations
• Cut off grade (economic), minimum width (mineable)
• Specify mining losses and allowance for mining dilution
• Must report Proved, Probable categories separately
• Must report tonnes and grade, not only contained metal
• Not precise calculations, estimates appropriately rounded
• Can be adjusted for reconciliation factors
• In opinion of CP, reserve is potentially the basis of a viable
project; mine plan achievable and economically viable
• No major metallurgical, legal, environmental or government
hurdles
JORC Code
Ore Reserves – Other Considerations
• Specify whether the Ore Reserve is “additional to” or
“inclusive of” the Mineral Resources
• For a JORC report you must have the JORC Table 1 filled out

Mine Plan/Schedule
Ore
Year Waste Mined Mined and Mill Cu Au Ag
000's tonnes 000's tonnes (%) g/t g/t
1 0 0 0.000 0.00 0.00
2 0 0 0.000 0.00 0.00
3 4,400 0 0.000 0.00 0.00
4 8,800 9,200 0.493 0.32 3.18
5 8,600 9,400 0.521 0.28 3.15
6 8,605 9,395 0.502 0.12 2.15
7 8,900 9,100 0.511 0.17 1.62
8 9,000 9,000 0.613 0.18 1.62
Mine Plan/Schedule
Pit Production

Economic Viability
What Constitutes Economic Viability?

•Layman’s Definition – If you can “mine it, sell it
and make a profit” its economically viable
•The “profit” component is not defined except in

the PERC system (10% ROI)
• Reserves are the responsibility of the Company and their
Board (JORC) - Not the consultant or resource engineer.
• Each company has differing concepts of an acceptable
profit.
Economic Viability (2)

• Traditionally the US “Prudent Man” concept has
been applied which means that the profit only
needs to be what a “prudent man” would accept
• That infers that an area of mineralization which
nets a $1 $0.01 profit is sufficient for it to be
considered an “Ore Reserve”
• Newer versions of JORC indicate the use of
cash flows is required to show economic viability
Economic Viability (3)
This is NOT a valid justification of Economic

Viability
“Although ore mining has not commenced at the Baishiquan Mine, the
nearby Xinjiang Shaquan Nickel Mine profitably mines very similar
grade nickel ore in a very similar geological environment and
mineralogy and trucks their ore to a similar plant that Tianmu may
consider to use at a similar distance from the mine”
Ore Reserves – “Part of” or “In

Addition to” Mineral
Total
Resources?
What you are
MiningWhat
is left
Mineralization+
when you
finished with the mine plan

Mineral Ore
ResourcesReserves
JORC or CIM allows either, as long as it is clearly stated
Proper Terms “inclusive of” or “in addition to” Mineral Resources
Inferred is ALWAYS “in addition to” Reserves
Resource-Reserve Classification
Systems for Reporting
Australia JORC Code - 2012
Canada CIM 2014 / NI 43-101
Europe PERC
South Africa SAMREC Code
United States SEC Industry Guide 7 / SME
Russia own - A, B, C, P
China Traditional and New (1999)
United Nation Framework Classification for Fossil Energy and
Mineral Reserves and Resources 2009
Differences Between JORC Code

and CIM Definitions
JORC CIM
Ore Reserve Mineral Reserve Proved Reserve
Proven Reserve

Ore Reserve – ASX and At least a Pre-feasibility
2012 JORC requires Pre- study to define Mineral
feasibility Reserve
CP QP
Inferred can be added to Inferred cannot be added
Measured/Indicated to Measured/Indicated
SEC Definition of Reserves

• A reserve is that portion of a mineral deposit which could
be economically and legally extracted or produced at the
time of the reserve determination

• Similar to industry codes but less specific in terms of
dilution, mining losses, modifying factors, Competent
Person
• No inclusion/allowance/reporting of resources but plenty
of allowance to discuss exploration and mineralized
material
Russian Reserve Classification System
• Russian Reserve is between Mineral Resource

and Ore Reserve in JORC Code, but more of a
Mineral Resource
• In-situ - no mining loss deducted and no mining
dilution added
• Cut off grade - ‘issued’ by authorities; may or
may not be economic
• Traditionally used in Russia, CIS, East Europe,
North Africa, India, China (traditional)
Russian Reserve/Resource Classes
• Geological Confidence
A1 - Production Resource - detailed sampling data
such as grade-control sampling
A2/B/C1 - Design Resource - defined by underground
workings and closely-spaced drill holes
C2 - Potential Resource - defined only by drilling
information with wider spacing
P1/P2/P3 – Prognostic Resource – No JORC or CIM
equivalent and sometimes referred to as exploration
potential (sometimes reported as D and E)
• Project Economics
Economic/Sub-economic

Correlation
Soviet JORC
A
1
A Measured
2
B
C Indicated
1
C Inferred
2
P NA
1
P NA
2
P NA
3

Traditional Chinese
Classification Systems
1959
1977 Chinese JORC
Chinese
A A
1
A Measured
2 B
B
C C Indicated
1
C Inferred
2 D
D Part might be Inferred
E E NA

New Chinese Classification System
• Established by the Ministry of Land and

Resources (MLR) in 1999
• Attempts to recognize economic parameters

as well as parameters related to geological
levels of confidence
• Based on the complex three-dimensional

United Nation Framework Classification
system
International Harmonization
Standard – UN Framework

New Chinese Classification System
(continued)
Three-dimensional code in the form of “123”

• First Digit - Economic Status:
1 - Economic; 2M - Marginal Economic;
2S - Sub-marginal Economic; 3 - Intrinsic Economic
• Second Digit - Level of Technical Study:

1 - Feasibility Study; 2 - Pre-feasibility Study;
3 - Scoping/No Study
• Third Digit - Geological Confidence:

1 - Measured; 2 - Indicated; 3 - Inferred;
4 - Reconnaissance
New Chinese and Western System

Undiscovered
Identified Mineral Resource/Reserve
Economic Mineral Resource?
Status Measured/ Indicated/
Inferred Reconnaissance
Proven Probable
Proved Reserve
(111)
Economic
Proved Reserve Probable Reserve
(121) (122)
Measured Resource
Marginal (2M11)
Economic Measured Resource Indicated Resource
(2M21) (2M22)
(Measured Resource)
Sub-marginal (2S11)
Economic (Measured Resource) (Indicated Resource)
(2S21) (2S22)
Intrinsic (Inferred Resource) Exploration Potential
(331) (332)
Economic (333) (334)

Resources - Summary
• Estimate of grade, tonnage and location of Mineralized
material that has the potential for economic
exploitation
• Western codes are similar with minor variations and

usually acceptable with most financial institutions
• Doesn’t have to be “Kriged” other methods will work

• Measured – Really sure of your estimate
• Indicated – Reasonably sure
• Inferred – Somewhat sure

• More latitude in the SEC filings than most people think
• The term “Ore” or “Orebody" can NOT be used in a
resource report
Ore Reserves - Summary

• The economically mineable part of a Measured and/or
Indicated resource
• Defined by studies at a Pre-Feasibility or Feasibility level

as appropriate that include application of Modifying
Factors.
• Inferred must be treated as “waste” in the cash flows
and mine plan

• If you don’t have a detailed mine plan and mine schedule
you don’t have an Ore Reserve
• You need a cash flow before you have an Ore Reserve •

Rate of return is set by the company/investor/broker but
it is acceptable that it is zero to prove economic viability


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Mineral Resources and O

Mineral Resources and O

Robert Cameron, Ph.D.

Identified Mineral Resource/Reserve Undiscov

Economic Reserves Inferred Reserves

Marginally Inferred Marginal

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

• Most global stock

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

JORC Code Principles

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

•Distance plus a minimum number of samples or

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

How to Check Resource Classification

Robert Cameron, Ph.D.

Resource Reports - Caution

The terms Ore and Orebody only apply to

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

Ore Reserves - subdivided in terms of

• Probable Reserve - economically mineable part of

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

•The “profit” component is not defined except in

Economic Viability (2)

Economic Viability (3)

This is NOT a valid justification of Economic

Ore Reserves – “Part of” or “In

finished with the mine plan

Robert Cameron, Ph.D.

Differences Between JORC Code

Robert Cameron, Ph.D.

SEC Definition of Reserves

Robert Cameron, Ph.D.

• Russian Reserve is between Mineral Resource

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

• Established by the Ministry of Land and

• Attempts to recognize economic parameters

• Based on the complex three-dimensional

Robert Cameron, Ph.D.

Three-dimensional code in the form of “123”

• Second Digit - Level of Technical Study:

• Third Digit - Geological Confidence:

New Chinese and Western System

Robert Cameron, Ph.D.