Mineral Resource and Mineral Reserve (MRMR) Conference 2024

The level of detail for each discipline depends on the stage of study for the Resource estimate.

This presentation will focus on the choice of underground mining methods selection for RPEEE evaluation. It begins with a review of the deposit’s geology and geotechnical conditions. Each mining method has specific advantages and constraints that must be matched to the geology and geotechnical conditions of the deposit. Other considerations for UG mining method selection are equipment, workforce, ventilation, material handling systems, environment, safety, surface disturbance, etc., as well as mining costs. Costs of mining methods can vary considerably and have a significant impact on the cut-off estimate.

The cut-off estimate for UG RPEEE is calculated considering the following inputs: metal prices, exchange rates, royalties, transportation and refining costs, metallurgical recoveries, operating and sustaining capital costs. Compliance for RPEEE requires confining the UG mineralization within wireframes above the cut-off estimate. All materials (ore as well as planned dilution) within the UG wireframes must be reported out in the Resource estimate, but the modifying factors of unplanned dilution and mining losses are not applied to the UG RPEEE estimates. The presentation will further discuss this methodology for underground RPEEE estimation.

Resource models provided to mine planners often have features that produce unintended effects in the mine planning and Reserves estimation processes, making them unfit for these purposes. Two of the most concerning are: (i) the specification of Resource categories on a block-by-block basis, and (ii) the deletion of geological confidence information (i.e., Measured, Indicated, or Inferred categorization) for low-grade blocks by reclassifying them as “unclassified” or “waste.”

Block-by-block Resource categorizations are typically based on mathematically-derived values from the grade estimation process. The Codes definitions indicate that the Resource category depends on the geological confidence of continuity of grade between sample points. This requires the application of geological experience and expertise. While mathematical modelling artefacts may be useful supporting information, zones of different Resource categories should in principle span multiple drillholes and samples, with relatively smooth and potentially flexible boundaries, not consist of a patchwork of spots or small zones of different confidence categories around or between sample points.

The Reporting Codes state that Reserves include diluting materials. For mine planning leading to Reserves estimates, Resource categories should be seen purely as indicators of geological confidence, not economic viability. Planning determines to what extent material of any grade forms part of the economically viable Reserve. Low-grade material with Measured or Indicated confidence should therefore be included in the Reserve, but cannot be if irrevocably reclassified as “Not-Resource” by applying high-level RPEEE considerations before planning is done. Detailed modifying factors supporting Reserve definition should override less-rigorous assessments for Resource classification.

Spotty Resource models lead to underground stopes or open pit blasts comprising model blocks of multiple Resource categories. Inferred and Unclassified or Waste material cannot be converted to Reserve, so appropriate Reserve categorization of practical mining units becomes problematic. Granularity is the critical issue. Geological model blocks are useful, but artificial, constructs. Their sizes are typically significantly larger than the natural granularity of the mineralization but smaller than practical mining units. Confidence, and hence Resource categorization, should be attributed to volumes no smaller than the smallest practical stope or pit blast block that will be extracted as a unit. Zones of the same Resource categories should be informed by both geology and mine planning, with boundaries aligned with mining block boundaries, not interpolated in geological models.

Conceptual and practical issues with how cut-off grades are derived and applied create additional concerns for both Resource and Reserve estimation and publication.

Consideration of these and other issues indicates that, rather than the typical current linear siloed approach, an integrated collaborative and iterative process for both Resource and Reserve estimation is needed to achieve geological and mine planning best practice. This in turn suggests that Resource and Reserve estimation cannot be squeezed into a short timeframe within the typical corporate annual planning cycle, but should rather sit outside the cycle as a continuous process, with the publicly reported Resources and Reserves being simply a snapshot of the status of the process on the reporting date.

The increased concerns from policy makers in the EU, UK and elsewhere over the supply of raw materials to support key industries, particularly in the context of the energy transition, has led to the identification of official lists of critical raw materials (CRMs).  Additionally, the EU’s Critical Raw Materials Act (CRMA) has defined a separate subgroup, termed strategic raw materials (SRMs), which includes CRMs that are strategically important for green, digital, space and defence applications and subject to future supply risks.  To reduce supply chain risks there is a need to forecast likely sources of future production including mineral projects that are at the exploration or development stage.  This relies on the availability of reliable estimates and reports on minerals project which use consistent terminology.

The mining and investment community are very familiar with the CRIRSCO family of reporting codes and standards which are primarily aimed at governing minerals reporting to investors and their advisors to assist them in making decisions on investments in minerals companies or projects.  Those working in government organisations are often more familiar with using the United Nations Framework Classification (UNFC) which was initially developed to support the development of national mineral inventories including both minerals projects which are considered to be currently economic and those which are of strategic interest but may not be currently considered amenable to economic exploitation.

In the context of establishing EU wide mineral inventories, the EU’s CRMA has specified the use of the UNFC in order to facilitate the development of harmonised databases from all 27 member countries which use a variety of different minerals reporting systems for the purposes of geological survey databases and minerals lease management.  This has led some people in the mining industry to ask whether continued use of a CRIRSCO Template aligned reporting code is really necessary.  This displays a lack of the understanding of the characteristics of the CRIRSCO aligned systems and the UNFC and the purposes for which they were designed.  The strengths and weaknesses of both systems in meeting the requirements of government land use and strategic planners and investors in the minerals sector are assessed.

It is explained that the organisations responsible for the two systems, CRIRSCO and the UNECE, regard the two systems as complementary.   To facilitate correlation between the two systems a ‘bridging document’ was jointly developed and released in 2015.  An updated version of the CRIRSCO Template to UNFC Bridging Document formally adopted by the UNECE, and officially released, in April 2024, together with a guidance note on its usage produced jointly by CRIRSCO and the UNECE.  A brief overview of the bridging document and how it can be usefully applied in the context of consideration of strategic projects, as defined by the CRMA, is provided.

Given the reward potential, especially where precious metals and minerals are involved, mining is also inextricably linked in the public mind with fraud and underhand business dealings; perhaps most clearly stated in the (in) famous quote, that “A (Gold) Mine Is a Hole in the Ground with a Liar at the Top” (Twain, incorrectly).

The development of modern Mineral Resource reporting codes was in response to the effects of fraudulent business practices on stock markets in Australia and Canada. In particular, insider trading and misleading information in the case of the Poseidon Nickel NL boom and bust saga; and good, old fashioned, salting, in the case of the Bre-X, Indonesian, Busang fraud.

Several factors influenced the development of the CRIRSCO family of reporting codes and standards, with one of the primary drivers being the need for a common terminology (agreed definitions) to allow investors to more easily compare the merits of different projects in different jurisdictions. It was implicit in the earlier iterations of the codes, that adherence to the principles of transparency, materiality, and competency, as exercised by the Competent Person / Qualified Person (CP/QP), would allow the investor to make a properly informed decision about investment in a particular endeavour, given that uncertainty and risk, as well as potential upside opportunities would have been clearly articulated.

Various factors, such as: the requirement for small and medium sized companies to raise capital; the pressure to deliver projects ahead of time and under budget; the cyclical nature of the mining industry; and the pressure on CEOs to deliver positive growth on a quarterly basis, have all contributed to a situation where the CRIRSCO codes have become increasingly detailed in their reporting requirements. This can be clearly seen if we analyse the frequency of the words risk(s) and uncertainty in the various CRIRSCO code updates.

Additionally, problems may arise when a CP/QP, who has a personal financial interest in a company is tempted to abuse the system for personal and financial gain. Such issues are difficult to avoid without regular independent checks or rigorous corporate governance procedures and proper scrutiny by company boards. An example of this is ‘digital salting’ – where the assay results used and reported by a company have been adjusted after receipt of the assays from a certified laboratory.

The authors conclude that the use of a CRIRSCO reporting standard when reporting Mineral Resources and Mineral Reserves can assist in reduction of project risk via the reporting of material issues in a manner that is transparent by persons or a team comprised of Competent Persons; however, like any legislation or regulation, a code cannot prevent fraud occurring.