Mineral Resource and Reserve

1. Topic 3: Mineral Resource and Reserve Hassan Z. Harraz hharraz2006@yahoo.com 2010- 2011 This material is intended for use in lectures, presentations and as handouts to students, and is provided in Power point format so as to allow customization for the individual needs of course instructors. Permission publisher is required for any other usage. Please see hharraz2006@yahoo.com for contact details. of the author and 1 Prof. Dr. H.Z. Harraz Presentation

2. Outline of Topic Outline of Topic 3 3: :  MINERAL RESOURCE AND RESERVE DECLARATIONS AND ASSET MANAGEMENT 3.1) Resource Evaluation 3.2) Mineral Resource Asset Management a) Inferred Mineral Resources b) Indicated Mineral Resources c) Measured Mineral Resources 3.3) Mineral reserves 3.3.1) Reserve definition 3.3.2) Feasibility study  GEOLOGIC CONDITIONS AND CHARACTERISTIC OF ORE DEPOSITS  MINE GEOLOGY RESPONSIBILITIES 5.1) Geological Database Configuration 5.2) Ore Control Process References We will explore all of the above in Topic 3. 2 Prof. Dr. H.Z. Harraz Presentation

3. Mineral Resource and Reserve Declarations and Asset Management Prof. Dr. H.Z. Harraz Presentation Mining Geology, Introduction 3

4. Mineral Resources  A Mineral Resource is a concentration or occurrence of material of intrinsic economic interest in or on the Earth’s crust in such form and quantity that there are reasonable prospects for eventual economic extraction.  The geological characteristics of a Mineral Resource (such as location, quantity, grade, and continuity) are known, estimated, or interpreted from specific geological evidence and knowledge.  Mineral resources are those economic mineral concentrations that have undergone enough scrutiny to quantify their contained metal to a certain degree. Prof. Dr. H.Z. Harraz Presentation Mining Geology, Introduction 4

5. Nonrenewable Mineral Resources: Categories A) Identified Resources: deposits of a nonrenewable mineral resource that have a known location, quantity and quality based on direct geological evidence and measurements B) Undiscovered Resources: potential supplies of nonrenewable mineral resources that are assumed to exist on the basis of geologic knowledge and theory (specific locations, quantity and quality are not known) C) Reserves: identified resources of minerals that can be extracted profitably at current prices. •Other Resources: resources that are not classified as reserves. Fig. 16-10 p. 340 Prof. Dr. H.Z. Harraz Presentation Mining Geology, Introduction 5

6. 3.1) Resource Evaluation Resource evaluation is undertaken to quantify the grade and tonnage of a mineral occurrence. This is achieved primarily by drilling to sample the prospective horizon, lode or strata where the minerals of interest occur. The ultimate aim is to generate a density of drilling sufficient to satisfy the economic and statutory standards of an ore resource. Depending on the financial situation and size of the deposit and the structure of the company, the level of detail required to generate this resource and stage at which extraction can commence varies; for small partnerships and private non-corporate enterprises a very low level of detail is required whereas for corporations which require debt-equity (loans) to build capital intensive extraction infrastructure, the rigor necessary in resource estimation is far greater. For large cash rich companies working on small ore bodies, they may work only to a level necessary to satisfy their internal risk assessments before extraction commences. Resource estimation may require pattern drilling on a set grid, and in the case of sulfide minerals, will usually require some form of geophysics such as down-hole probing of drillholes, to geophysically delineate ore body continuity within the ground. The aim of resource evaluation is to expand the known size of the deposit and mineralization. A scoping study is often carried out on the ore deposit during this stage to determine if there may be enough ore at a sufficient grade to warrant extraction; if there is not further resource evaluation drilling may be necessary. In other cases, several smaller individually uneconomic deposits may be socialized into a 'mining camp' and extracted in tandem. Further exploration and testing of anomalies may be required to find or define these other satellite deposits. Prof. Dr. H.Z. Harraz Presentation Mining Geology, Introduction 6

7. Mineral Resource Asset Management  The aim of this offering is to check for compliance with an internationally recognized reporting code and declarationfor Mineral Resources and Ore (Mineral) Reserves.  By ensuring that the mineral assets are compliant with an internationally recognized mineral reporting code and that the assets are fairly valued, the most optimal decisions can be made regarding the future potential of the assets, specifically whether and how to proceed with the development of the mineral property.  In common mining terminology, an "ore deposit" by definition must have an 'ore reserve', and may or may not have additional 'resources'.  Estimates of mineralization are first classified into one of two main categories, either Mineral Resources or Mineral Reserves, depending on the different degrees of technical and economic evaluation. Those two categories of classification are further subdivided according to different levels of geological knowledge and confidence.  Mineral Resources must be classified as Inferred, Indicated, or Measured; and Mineral Reserves as Probable or Proved. Figure 2 shows the basic framework for classifying Mineral Resources and Mineral Reserves.  Resources may also make up portions of a mineral deposit classified as a mineral reserve, but:  Have not been sufficiently drilled out to qualify for Reserve status; or  Have yet to meet all criteria for Reserve status. Prof. Dr. H.Z. Harraz Presentation Mining Geology, Introduction 7

8. Mineral resource classification Mineral resource classification is the classification of mineral deposits based on their geologic certainty and economic value. A "McKelvey diagram" showing the relationship of mineral resource classifications to economics and geologic certainty.[1] Prof. Dr. H.Z. Harraz Presentation Mining Geology, Introduction 8

9. Mineral resource classification (Cont. ) Mineral Resources are further categorized based on the level of confidence into (lowest to highest): a) Inferred Mineral Resources; b) Indicated Mineral Resources; and c) Measured Mineral Resources. a) Inferred Mineral Resources  An Inferred Mineral Resource is that part of a Mineral Resource for which tonnage, grade and mineral content (quantity and grade or quality in the CIM Standards) can be estimated based on geological evidence and assumed, but not verified, geological and/or grade continuity. The information on which the estimates are based, may be limited or of uncertain quality and reliability.  It has a lower level of confidence than that applying to an Indicated Mineral Resource. Due to the uncertainty attached to Inferred Mineral Resources, it cannot be assumed that all or a portion of such resource will be upgraded to an Indicated or Measured Mineral Resource as a result of more exploration.  Estimates are based on an assumed continuity beyond measured and (or) indicated resources, for which there is geologic evidence. Inferred resources may or may not be supported by samples or measurements.  This category implies a degree of uncertainty and is used in cases where there is good geological evidence for continuity, but only a limited amount of sample data such as a few widely spaced boreholes. b) Indicated Mineral Resources  An Indicated Mineral Resource is that part of a Mineral Resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a reasonable level of confidence. It is based on exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. The locationsare too widely or inappropriately spaced to confirm geological and/or grade continuity but are spaced closely enough for continuity to be assumed. This category has a confidence level higher than Inferred Mineral Resources but a lower confidence level than Measured Mineral Resources.  Quantity and grade and (or) quality are computed from information similar to that used for measured resources, but the sites for inspection, sampling, and measurement are further apart or are otherwise less adequately spaced. The degree of assurance, although lower than for the measured resources, is high enough to assume continuity between points of observation. c) Measured Mineral Resources  Measured resources are indicated resources that have undergone enough further sampling that a 'competent person' (defined by the norms of the relevant mining code; usually a geologist) has declared them to be an acceptable estimate, at a high degree of confidence, of the grade, tonnage, shape, densities, physical characteristics and mineral content of the mineral occurrence.  A Measured Mineral Resource is estimated in the same manner as an Indicated Mineral Resource, except that: i) it can be estimated with a high level of confidence; ii) the information must be detailed and reliable; and iii) the locations are spaced closely enough to confirm geological and/or grade continuity. Prof. Dr. H.Z. Harraz Presentation Mining Geology, Introduction 9

10. MINERAL RESERVE (OR ORE RESERVES) A mineral occurrence that is deemed to be valuable after considering mining, metallurgical, economic, marketing, legal, environmental, social, governmental and other factors (the ‘modifying’ factors) to determine the viability of the asset.  Natural resources that have been discovered & can be exploited profitably with existing technology. Mineral reserves are resources known to be economically feasible for extraction. Mineral Reserves are further categorized based on the level of confidence into (lowest to highest): a)Probable: The economically mineable part of an Indicated and, in some circumstances, Measured Mineral Resource. b)Proven: The economically mineable part of a Measured Mineral Resource. Generally the conversion of resources into reserves requires the application of various modifying factors, including: mining and geological factors, such as knowledge of the geology of the deposit sufficient that it is predictable and verifiable; extraction and mine plans based on ore models; quantification of geotechnical risk-basically, managing the geological faults, joints, and ground fractures so the mine does not collapse; and consideration of technical risk-essentially, statistical and variography to ensure the ore is sampled properly: metallurgical factors, including scrutiny of assay data to ensure accuracy of the information supplied by the laboratory-required because ore reserves are bankable. Essentially, once a deposit is elevated to reserve status, it is an economic entity and an asset upon which loans and equity can be drawn-generally to pay for its extraction at (hopefully) a profit; economic factors; environmental factors; marketing factors; legal factors; governmental factors; and social factors Fig.11: Relationship between Mineral Resources and Mineral Reserves Not: Measured Mineral Resources can be converted to Proved and/or Probable Reserves and Indicated Resources can only be converted to Probable Reserves. Prof. Dr. H.Z. Harraz Presentation Mining Geology, Introduction 10

11. Resource vs. Reserve Resource vs. Reserve Prof. Dr. H.Z. Harraz Presentation Mining Geology, Introduction 11

12. Prof. Dr. H.Z. Harraz Presentation Mining Geology, Introduction 12

13. Reserve definition  Reserve definition is undertaken to convert a mineral resource into an ore reserve, which is an economic asset. The process is similar to resource evaluation, except more intensive and technical, aimed at statistically quantifying the grade continuity and mass of ore.  Reserve definition also takes into account the milling and extractability characteristics of the ore, and generates bulk samples for metallurgical test work, involving crushability, floatability and other ore recovery parameters.  Reserve definition includes geotechnical assessment and engineering studies of the rocks within and surrounding the deposit to determine the potential instabilities of proposed open pit or underground mining methods. This process may involve drilling diamond core samples to derive structural information on weaknesses within the rock mass such as faults, foliations, joints and shearing.  At the end of this process, a feasibility study is published, and the ore deposit may be either deemed uneconomic or economic. Prof. Dr. H.Z. Harraz Presentation Mining Geology, Introduction 13

14. SOLID MINERAL RESERVES a) Morphology of Reserve • Lode rock: Ore rock Barren rock • Ore rock: mixture of Ore of mine grade Barren rock extracted with ore • Barren rock: is divided into:-  Barren rock extracted separately: A part of the barren rock hoisted to the surface separately from the ore.  Barren rock extracted with ore: A part of the barren rock gets mixed with the ore during stoping extracted with ore. Prof. Dr. H.Z. Harraz Presentation Mining Geology, Introduction 14

15. Fig.9: Mineral reserves and mining losses. Prof. Dr. H.Z. Harraz Presentation Mining Geology, Introduction 15