NHK - MPC - 08 - Resource and Reserve Thoughts2

Mineral Resources and Ore
Reserves – Thoughts and

Observations
Robert Cameron, Ph.D.

f© 2015 All Rights Reserved
Disclaimer
The following information has been abstracted from various
publications and sources and was originally intended for
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 Ore
Reserves are Not that Hard

USGS/USBM Resource Reserve
System - 1976/1980
Geological Survey Circular 831
A Revision of the Classification System Published as U.S. Geological Survey Bulletin 1450-A, 1450-B (1976)
Identified Mineral Resource/Reserve Undiscovered Resources

Cumulative
Production Demonstrated Probability Range
Inferred
Measured Indicated Hypothetical Speculative
Economic Reserves Inferred Reserves
Marginally Inferred Marginal

Marginal Reserves
Economic 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 Guide 7 / SME
Russia own - A, B, C, P
China Traditional and New (1999)
Framework Classification for Fossil Energy and
United Nation 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
• 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
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
• Measured – Need to be really close ( or
Plan a Mine
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
250
200 Tonnes Waste Tonnes Ore

Mt Material Moved
150
100
50

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 Resources?
What you are
Mining What is left
Total
when you
Mineralization + finished with
the mine plan
Mineral Ore
Resources Reserves
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)
Framework Classification for Fossil Energy and
United Nation 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
A1
A2 Measured
B
C1 Indicated
C2 Inferred
P1 NA
P2 NA
P3 NA
Traditional Chinese
Classification Systems
1959
1977 Chinese JORC
Chinese
A1 A
A2 Measured
B
B
C1 C Indicated
C2 Inferred
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

NHK - MPC - 08 - Resource and Reserve Thoughts2

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

NHK - MPC - 08 - Resource and Reserve Thoughts2

Uploaded by

Copyright:

Available Formats

Mineral Resources and Ore

Reserves – Thoughts and

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

Identified Mineral Resource/Reserve Undiscovered Resources

Economic Reserves Inferred Reserves

Marginally Inferred Marginal

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

• Most global stock exchanges or

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

Universally recognized Classifications include:

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.

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

•Distance plus a minimum number of samples or

•Kriging variance or statistical inference – Need to

Additional Drill hole

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

The term “Ore” or “Orebody” can NOT be

The terms Ore and Orebody only apply to

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

Ore Reserves - subdivided in terms of

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

200 Tonnes Waste Tonnes Ore

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

This is NOT a valid justification of Economic

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

Ore Reserve – ASX and At least a Pre-feasibility

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

• Russian Reserve is between Mineral Resource

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.

Robert Cameron, Ph.D.