RESERVE ESTIMATION
8.4 MINERAL RESOURCE AND ORE RESERVE CLASSIFICATION
Mineral resources and ore reserves are estimations of tonnage and grade of the deposit as outlined three dimen- sionally with variation in density of sampling and even with limited mine openings. The estimate stands on certain in- terpretations and assumptions of continuity, shape, and grade. Therefore it is always approximate and not certain until the entire ore is taken out by mining. The different types of sampling techniques are adopted at different den- sities or intervals with associated uncertainties during exploration. One part of the deposit may have been so thoroughly sampled that we can be fairly accurate of the orebody interpretation with respect to tonnages and grades.
In another part of the same deposit, sampling may not be intensely detailed, but we have enough geologic
information to be reasonably secure in making a statement of the estimate of tonnage and grade. The knowledge may be based on a very few scattered samples on the fringes of the orebody. However, we have enough information from other parts of the orebody supported by geologic evidence and our understanding of similar deposits else- where to say that a certain amount of ore with a certain grade may exist. The increase in sampling in the lower category region will certainly enhance the status as min- ing proceeds.
The mineral resource and ore reserves classification system and reporting code have evolved over the years by different countries exclusively based on geological confi- dence, convenience to use, and investment need in the mineral sector. The conventional or traditional classifica- tion system was in use during the 20th century. The new development took place from the third and fourth quarters of the same century, satisfying statutes, regulations, eco- nomic functions, industry best practices, competitiveness, and international acceptability. There are several classifi- cation schemes and reporting codes worldwide: US Geological Survey (USGS)/US Bureau of Mines (USBM) reserve classification scheme, USA, United Nations Framework Classification (UNFC) system, Joint Ore Reserve Committee (JORC) Code, Australia and New Zealand, Canadian Institute of Mining classification, South African Code for the Reporting of Mineral Resources and Mineral Reserves (SAMREC), The Reporting Code, UK, and global hydrocarbon classifications.
FIGURE 8.13 Computation of small block reserve on cross-section employing the inverse squared distance methoddvery significant information for production scheduling and grade control.
The basic material and information for mineral re- sources and ore reserves classification schemes and reporting codes must be prepared by or under the super- vision of aqualified person(QP) (refer toBox 8.2).
8.4.1 Conventional Classification
The degree of assurance in estimates of tonnage and grade can subjectively be classified by using convenient termi- nology. Increasing geological exploration creates high
confidence levels and technoeconomic viability. Categori- zation has broadly been grouped aseconomic reservesand subeconomic conditional resources. The economic ore reserves and subeconomic resources are further subdivided as Developed, Proved, Probable, and Possible (Fig. 8.14).
The classification system helps the investor in decision- making for project formulation and activities required at different stages. These terms are supported by experience, and have been time tested and well accepted over the years.
The terminology is comparable with equivalent interna- tional jargon that is used by USGS or Russian systems such as Measured, Indicated, and Inferred. The conventional or traditional reserve/resource classification scheme includes five components based on decreasing geological/explora- tion information: Developed, Proved, Probable, Other ore, and Possible.
8.4.1.1 Developed
Developed or Positive or Blocked reserves attain the highest category and are parts of the orebody that have been exposed from all four directions, i.e., top, bottom, and both sides. Top surface exposure can be unearthed by trenches or trial pits on the surface for open pit mines or bounded on all sides by levels above and below, and raises and winzes on the sides of the block for under- ground mines. With definition or delineation drilling be- tween 30 and 15 m intervals completed, all sides are sampled. The block is ready for stope preparation, blast hole drilling, blasting, and ore draw. Draw point sampling is initiated to assign stope production grade, blending ratio for the stock pile, reconciliation with respect to additional dilution, and estimation of errors. The risk of error in tonnage and grade is minimum with confidence of estimate at around 90%.
FIGURE 8.14 Conventional reserve classification systems showing various categories of reserve and resources based on enriched geological experienceda good option for small players in the mining industry.
BOX 8.2 Qualified Person
A qualified person (QP) is a reputed professional with a graduate or postgraduate degree in geosciences or mining engineering. The QP must possess sufficient experience (more than 5 years) in mineral exploration, mineral project assessment, mine development, mine operation, or any combination of these. The QP should preferably be in good standing or affiliated with national and international pro- fessional associations or institutions. The QP is well informed with technical reports, including exploration, sampling adequacy, quality assurance, quality control and analytical verification, discrepancy and limitations, estima- tion procedure, quantity, grade, level of confidence, cate- gorization, and economic status (order of magnitude, prefeasibility, feasibility study) of the deposit concerned. The QP is in a position to make the statements and vouches for the accuracy and completeness of the contained technical report, including information and the manner in which it is presented, even if he/she is not the author of the report. This is a matter of professional integrity and carries legal risk.
Misleading statements can result in legal sanctions in the country and other jurisdictions.
8.4.1.2 Proved
Proved or Measured reserves are estimated based on samples from outcrops, trenches, development levels, and diamond drilling. The drilling interval is 200 m or even 400 m for simple sedimentary bedded deposits (coal seam, lignite, bauxite, and iron ore) with expected con- tinuity along the strike and dip, other than structural dislocation. The sample interval is 50 m by 50 m for base metal deposits. The deposit is either exposed by trenches or trial pit for open pit mines, and by development of one or two levels for underground drilling. Stope delineation drilling and sampling will continue to upgrade the cate- gory to developed reserves. The confidence of estimate is about 80%.
8.4.1.3 Probable
The Probableor Indicatedore reserve estimate is essen- tially based on wide-spaced sampling and surface and un- derground drilling between 100 and 400 m intervals depending on the complexity of the mineralization. The opening of the deposits by trial pit or underground levels is not mandatory to arrive at this category. The confidence of estimate is about 70%.
The sum total of Developed, Proved, and Probable ore reserves is termed theDemonstratedcategory. The reserve of a project under investment decision should contain about 60% in the Demonstrated category.
8.4.1.4 Other Ore
A part of the ore reserve is blocked in sill, crown, and rib pillars for stability of the ground during mining operation and related impacts (Fig. 8.1). This blocked reserve is designated as other ore, and monitored as the Proved category. The reserve is elevated to Developed category as and when the other ore is likely to be recovered after completion of the nearby stoping blocks.
8.4.1.5 Possible
PossibleorInferredmineral resources are based on a few scattered samples of information in the strike and dip extension of the mineral deposit. There is sufficient evidence of mineralized environment within a broad
geological framework having a confidence of about 50%.
The possible resource will act as a sustainable replacement of mined-out ore reserves.
8.4.2 USGS/USBM Resource Classification
USGS collects and updates nationwide information about mineral resources and reserves over the years. Dr. V.E.
McKelvey, a former director of USGS,first conceptualized a set of resource classification systems in 1972 (Fig. 8.15) to make a standard classification system.
USGS and USBM developed a common classification system in 1976 (USGS, 1976). Additional modifications were incorporated to make it more workable in practice and more useful in long-term public and commercial planning. The success of the future plan/program will rely entirely on: (1) precise knowledge of available re- serves and resources for fixing priorities, (2) developing existing unworkable deposits to economic proposition by cost cutting and technological breakthrough, and (3) the probability of new discoveries on a regular basis. The resource base must be continuously reassessed in the light of new exploration input, advancement in mining and process technology, and change in commodity price. The collaboration continued to revise Bulletin 1450-A. Thefinal document was published in 1980 (USGS, 1980) as USGS Circular No. 831d“Principles of a Resource/Reserve Classification for Minerals.”
The concept of classification and block diagram was developed as a 2D representation (Fig. 8.16). The X- and Y-axis represent the geological degree of assurance and increasing economic feasibility. The geological axis is divided into two broad divisions of Identified and Undiscovered resources, and further subdivisions based on increasing exploration support. The economic feasi- bility axis is divided into two major divisions of Eco- nomic and Subeconomic, and further subdivisions based on the technoeconomic viability of the present market price.
The definition and specification of various identified resources have been described. The classification scheme elasticities give emphasis to Identified Subeconomic re- sources for future new exploration targets. It also initiates the concept of probability of existence of undiscovered resources simply on hypothetical and speculative grounds.
FIGURE 8.15 The initial concept of the resource classification system conceived as the McKelvey Box in 1972.
8.4.2.1 Paramarginal
Paramarginal is the portion of Sub-economic resources that exists at the margin of the economic/uneconomic com- mercial border, being a nonrenewable asset, and can be exploited at marginal profit with innovative mining and metallurgical techniques. The other type of Paramarginal resource is not commercially available solely because of safety, legal, or political circumstances. Examples are from Gorubathan multimetal deposit, West Bengal, India, having high-grade metals of >10% ZnþPb on account of mis- balancing the Himalayan ecosystem, and extension of orebody below the railway line at Balaria ZnePb metal mine of Zawar Group, India.
8.4.2.2 Submarginal
Submarginal represents the portion of Subeconomic resources that would require a much higher price at the time of mining or a major cost reduction by advanced research and development technology toward low-cost mining and higher metallurgical recovery. An example is Sindesar- Kalan near-surface base metal deposit with 100 million - tonnes of resources of low grade 2.5% ZnþPb in graphite mica schist. The deposit is situated at the fringe of deep- seated Sindesar-Khurd producing mine with 61 million - tonnes of reserves at 9.6% ZnþPb and 215 g/t Ag, and 6 km north of Rajpura-Dariba mining project, having 42 Mt of 8.0% ZnþPb and 82 g/t Ag calc-silicate host rocks.
The Sindesar-Kalan deposit with large tonnage and low grade in graphite mica schist host rock is exposed to aflat surface. The open pit mining cost will be low with the support of major common infrastructure at Rajpura-Dariba and Sindesar-Khurd mining complex. The metallurgical breakthrough in recovery of low-grade ore from graphite mica schist and increase in metal price will convert it to the economic category.
8.4.2.3 Hypothetical
Hypothetical or Prospective resources are undiscovered academic mineral bodies in nature that may logically be expected to exist in known mining districts or regions under favorable geological conditions. Their existence, if confirmed by exploration and revealed by quantity and quality assessment, would be reclassified as Reserves or Identified Subeconomic resources.
The Neves Corvo polymetallic deposit, Portugal, locatedw250 km in the southeast extension of the Iberian pyrite belt in Spain, and the Sindesar-Khurd zinc-lead- silver deposit, located 6 km in the northeast extension of Rajpura-Dariba mine, India, were discovered at a depth ofþ330 and 120 m, respectively, under similar geological conditions below barren surface cover during routine exploration in the known belt.
8.4.2.4 Speculative
Speculative or Prognostic resources are tentative min- eral bodies in nature that are yet to be discovered and may occur either in known favorable geological settings where no discoveries have yet been made, or are un- known types of deposit that remain to be recognized.
This is useful for the long-term allocation of an explo- ration budget. Their existence, if confirmed by explora- tion and revealed by quantity and quality assessment, would be reclassified as Reserves or Identified Sub- economic resources.
Uranium deposits worldwide are hosted by one of the following geological settings: unconformity-related conglomerate, sandstone, quartz pebble, vein type, breccia complex, collapse breccia pipe, intrusive, phosphorite, volcanic, surficial, metasomatite, metamorphic, lignite, and black shale. The search for uranium can be speculated for these favorable environments and tested.
FIGURE 8.16 United States Geological Survey (USGS) resource classification scheme.Adapted fromMcKelvey (1972).
8.4.3 United Nations Framework Classification
The UNFC system is a recent development in reserve categorization (E/2004/37-E/ECE/1416, February 2004) (UNFC, 2004). The scheme is formulated giving equal emphasis to all three criteria of exploration, investment, and profitability of mineral deposits. The format provides: (1) stage of geological exploration and assessment, (2) stage of feasibility appraisal, and (3) degree of economic viability.
The model is represented by multiple cubes (433 blocks) with geological (G) axis, feasibility (F) axis, and economic (E) axis. The three decision-making measures for resource estimation are further specified in descending order:
Geological axis (G) 1. Detailed exploration 2. General exploration 3. Prospecting 4. Reconnaissance
Feasibility axis (F)
1. Feasibility study and mining report 2. Prefeasibility study
3. Geological study Economic axis (E) 1. Economic
2. Potentially economic 3. Intrinsically economic
The scheme is presented in a 3D perspective (Fig. 8.17) with simplified numerical codification facilitating digital processing of information. Each codified class (Table 8.5)
displays a specific set of assessment stages with associated economic viability. The scheme is internationally under- standable, communicable, and acceptable across national boundaries under economic globalization, which makes it
FIGURE 8.17 Resource and reserve scheme by United Nations Framework Classification (UNFC) system adopted by many countries, including the government of India.
TABLE 8.5 Example of United Nation Framework Classification (UNFC) Codification System Economic
Axis
Feasibility Axis
Geological
Axis Code
Economic Feasibility study and mining report
Detailed exploration
111
Economic Prefeasibility study
Detailed exploration
121 Economic Prefeasibility
study
General exploration
122 Potentially
economic
Feasibility study and mining report
Detailed exploration
211
Potentially economic
Prefeasibility study
Detailed exploration
221 Potentially
economic
Prefeasibility study
General exploration
222 Intrinsically
economic
Geological study
Detailed exploration
331 Intrinsically
economic
Geological study
General exploration
332 Intrinsically
economic
Geological study
Prospecting 333
Intrinsically economic
Geological study
Reconnaissance 334
easy for the investor to take the right decision. The government of India has accepted and adopted the UNFC classification reporting code for submission of annual mineral reserves and resources updates for all official purposes. The Indian Bureau of Mines process and publish the annual mineral reserves and resources in theMinerals Yearbook.
8.4.4 Joint Ore Reserve Committee Classification Code
The Minerals Council of Australia, the Australian Institute of Mining and Metallurgy, and the Australian Institute of Geoscientists established the Australian JORC (JORC, 2004) for public reporting of exploration results, mineral resources, and ore reserves. The scheme was formulated on the basic principles of transparency, materiality, and competency. The other organizations represent in JORC are the Australian Stock Exchange (ASX), the Securities Institute of Australia, and incorporated into the New Zealand Stock Exchange (NZX) listing rules. All explora- tion and mining companies listed in Australian and New Zealand stock exchanges are required to comply with the JORC Code, which regulates the publication of mineral exploration reports on the ASX. Since 1971 the Code has been effectively updated for comparable reporting stan- dards introduced internationally. The JORC Code applies essentially to all solid mineral commodities, including diamond and other gemstones, energy resources, industrial minerals, and coal. The general relation between explo- ration results, mineral resources, and ore reserves classifies tonnage and grade estimates. The format reflects the increasing levels of geological knowledge and rising confidence. It takes due consideration of mining, metal- lurgical, technical, economic, marketing, legal, social, environmental, and governmental factors. The scheme imparts a checklist for authenticity at each level.
Mineral resources are concentrations or occurrences of mineral prospects that eventually may become sources for economic extraction. They are placed in the Inferred category. Mineral reserves on the other hand are the economically minable parts of Measured and/or Indicated ore. They include the dilution and allowance on account of ore losses likely to occur during mining. The relationship between mineral resources and reserves is presented in Fig. 8.18.
The reporting of exploration results includes total database, sufficient information, and clear, unambiguous, and understandable nonmisleading reports generated by exploration programs that may be useful to investors. The report comprises statements of regional and deposit geology, sampling and drilling techniques, location, orientation and spacing, core recovery, logging, assaying, including reliability and cross-verification, 3D size and shape diagrams, estimation methods used, mineral tene- ments, and land tenure status. It should also include exploration done by other agencies, baseline environ- mental reports, and the nature and scale of planned further work.
The reporting of mineral resources and ore reserves is comprised of database integrity, location, geological char- acteristics, continuity, dimension, cut-off parameters, bulk density, modeling techniques, quantity, grades, estimated or interpreted specific geological evidence and knowledge, accuracy, confidence and reviews, mining and metallurgical factors and assumptions, cost and revenue factors, and market assessment.
The Code applies to the reporting of all potentially economic mineralized material in the future. This includes mineralizedfill, remnants, pillars, low-grade mineralization, stockpiles, and dumps and tailings where there are reason- able prospects for eventual economic extraction in the case of mineral resources, and where extraction is reasonably justifiable in the case of ore reserves.
FIGURE 8.18 Joint Ore Reserve Committee (JORC) Code developed by professionals of the Australian Institute of Mining and Metallurgy (AusIMM) showing the relationship between mineral resources and mineral reserves. JORC compliance organizations are registered with the Australian Stock Exchange (ASX).
The JORC Code is now well accepted in Australia and New Zealand. In recent years it has been used both as an international reporting standard by a number of major international exploration and mining companies, and as a template for countries in the process of developing or revising their own reporting documents, including the United States, Canada, South Africa, United Kingdom/
Europe, and South America, including Mexico, Argentina, Chile, and Peru.
8.4.5 Canadian Resource Classification
The mineral resource classification scheme in Canada (Fig. 8.19) is known as National Instrument 43-101 (NI 43-101) used for standards of disclosure of scientific and technical information about mineral projects within the country. NI covers metallic minerals, solid energy products, bulk minerals, dimension and precious stone, and mineral sands commodities. The NI is a codified set of rules and guidelines for reporting mineral properties owned or explored by national or foreign exploration and mining companies listed on the stock exchanges of the TSX Venture Exchange, Toronto Stock Exchange, Canadian Securities Administrators, ASX, Johannesburg Stock Exchange, and London Stock Exchange. The NI is broadly comparable and interchangeable with JORC and SAMREC codes. NI 43-101 ensures that misleading, erroneous, or fake information relating to mineral properties is not published and promoted to investors on the stock exchanges within the country overseen by the Canadian Securities Authority. The reporting format includes scien- tific or technical information on mineral resources or mineral reserves of the property.
8.4.6 Oil and Gas Resources Classification
The hydrocarbon (crude oil and gas) resource classification is based on the same concept as metallic/nonmetallic minerals established byMcKelvey (1972). The model has undergone changes (Fig. 8.20). The total resource base is the sum total of estimated contained hydrocarbon in the subsurface, including quantities already produced.
The resource is the volume estimates derived from an- accumulation, and reserves are only quoted for a known accumulation. The reserves are a subset of the resource base.
Reserves are those quantities of hydrocarbon that are anticipated to be commercially recovered from known ac- cumulations from a given date forward. They must satisfy four criteria: discovered, recoverable, commercially viable, and remaining. The reserves are classified under three categories of Proved (1P), Probable (2P), and Possible (3P) with increasing range of geological uncertainties and decreasing range of commerciality (Fig. 8.20). The project status is subdivided into three categories:
1. Currently on production and marketing.
2. Under development and all essential approvals obtained.
3. Planned for development as it satisfies all criteria for re- serves, and there is afirm intent to develop, but detailed development planning and/or necessary approvals/
contracts have yet to befinalized.
Contingent Resources are those discovered and potentially recoverable quantities that are currently not considered to satisfy the criteria for commerciality.
Contingent Resources are those quantities of hydrocarbon
FIGURE 8.19 A schematic view of the Canadian mineral resources classification scheme.