4. Mineral resource statements
As outlined in the notes on Mineral Compliance and Mining Inspectorate Functions, companies publish mineral resource statements which must comply with internationally recognised codes of practice. For the protection of investors, these codes contain clear guidelines. The statements be prepared and signed off by a professionally registered competent person.
These statements are a key component of feasibility studies and form the basis of mining plans. They are usually updated at least annually to take account of exploration results and to account for depletion of resources by mining. Publicly quoted companies are normally obliged to publish an annual report which includes a mineral resource statement.
This effectively means that publication of reserves requires an approved feasibility study. In order for a portion of a resource to be reported as a reserve, there must have been sufficient design and planning carried out to ensure that mining it is technically feasible and to allow an estimation of costs and recoveries.
Resources: fundamentally, mineral deposits are classified into different categories of resources on the basis of geological information and exploration results.
Reserves can only be reported on the basis of an assessment of the potential for economic exploitation of Resources. Thus, reserves are those portions of a mineral resource which have been proved to be technically and economically amenable to mining.
Certain modifiers are applied in the assessment, including technical and economic facts and assumptions. In this context, “facts” implies that all necessary research or test work has been carried out to give a reasonable assurance of accuracy, for example, metallurgical recoveries.
Some “facts” contain elements of assumption, e.g. capital expenditure and operating costs may include assumptions of some data to produce detailed estimates.
Royalties, taxes and duties may be clearly defined by law in some countries, whilst in others, they may be subject to negotiation or at risk of change by fickle administrations.
Perhaps the highest-risk assumption is commodity prices. Planners rely on projections published by expert analysts but these can be extremely erratic.
The diagram below illustrates the difference between resources and reserves.
The diagram below gives more detail relating to the classification of mineral resources.
The third diagram below shows how either an open pit or an underground mine design might generate sufficient technical and economic data to publish a reserve.