The CIM Definition Standards on Mineral Resources and Reserves define Mineral Resources as “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, including sampling.” (emphasis added).
Not all mineral deposits necessarily contain mineral resources. There are deposits for which there are insufficient geological or physical data with respect to form, grade or quality and quantity to support the requirement of reasonable prospects for eventual economic extraction.
Qualified Persons (QPs) who undertake a mineral resource estimate must not only be aware of the quantity and quality of the geological data available, but must also assess objectively all of the other factors that go into determining whether or not a mineral resource exists. Among the factors that must be considered are metallurgical recovery, potentially deleterious elements, mining method, land title, social license and permitting requirements. In order to conclude that a mineral resource exists, it is not necessary to have definitive data with respect to each of these factors, but there must be reasonable assurance that none of them constitutes a fatal flaw inhibiting the potential for ultimate commercial development of the deposit.
The second draft (May 2, 2019) of the CIM Estimation of Mineral Resources and Mineral Reserves Best Practice Guidelines set out the extent of the physical data and the degree of geological knowledge that are needed to prepare an appropriate and credible mineral resource estimate.
While the underlying geological and physical data provide the basis from which a mineral resource estimate is prepared, the quality and reliability of the estimate are dependent upon the experience and knowledge of the QP responsible for the estimate. This has been demonstrated time and time again, when the failure or under-performance of a mining project has been traced to an overly optimistic estimate of the underlying mineral resources.
Over-optimism in resource estimation can arise from a number of sources:
- Failure to recognize variability in the favourable geological formation or structure that hosts the mineralization.
- Often more importantly, failure to recognize that continuity of a favourable geological formation or structure does not necessarily imply continuity of potentially economic mineralization within that geological formation or structure.
- Failure to correctly classify mineral resources as measured, indicated or inferred. Where continuity of potentially economic mineralization has not been demonstrated, that portion of the resource must be classified as inferred. Similarly, if metallurgical testwork has not yet demonstrated that a saleable mineral commodity can be produced from the deposit in question, using proven technology and at reasonable cost, the mineral resource should be classified as inferred.
While Canadian National Instrument (NI) 43-101 places the responsibility for an independent estimate of mineral resources squarely upon the shoulders of the QP or QPs who prepared the estimate, the client company that owns the deposit also has a role to play in ensuring that the estimate is appropriate and not overly optimistic. In particular, the client company, through the geologists, engineers and executives who are familiar with the deposit, has an obligation to discuss thoroughly and openly with the independent QP its theories of the genesis of the deposit, the geological controls on the mineralization, the adequacy of the exploration database, the nature and results of the sampling and assaying quality assurance/quality control program, the results of metallurgical testwork, the occurrence of any deleterious elements and any perceived deficiencies in the work conducted to date.
Frequently, the independent QP will find errors and inconsistencies in the exploration database provided by the client company. It is the duty of the QP to communicate those errors and inconsistencies to the client company, and it is the company’s responsibility to correct them.
Failure of the client company to be completely open and frank with the independent QP responsible for the estimation of mineral resources will render that company at least partially responsible if the resource estimate subsequently turns out to be overly optimistic.
Since mineral resources are the underlying foundation of any mining project, it is imperative that the resources are estimated using the best methods available at the time, and the independent QP needs to be diligent in analyzing and interpreting all of the available data. The QP must also be willing to point out deficiencies in the data or assumptions to the client company, even if they potentially contradict the current understanding of the deposit or the geological model. An individual QP also needs to be able to confer with — and rely upon — other QPs in areas for which the individual QP might not have relevant experience. For a geologist, that usually means metallurgists and mining engineers.
Finally, both the client company and its shareholders need to recognize that reported mineral resources for any project are estimates and not precise calculations. These estimates are only as good as the underlying data and the assumptions on which they are based: subsequent revisions to data or changes in assumptions may yield resource gains or losses.