The Mineral Resource Estimate

The mineral resource estimate is an evaluation of a deposit’s quantity, quality and economic potential accounting for uncertainty, exploration results and economic assumptions.

What Is A Mineral Resource Estimate

Put simply a mineral resource estimate is an evaluation of a deposit’s quantity, quality and economic potential. It is a regulated report prepared according to enforced standards laid out by the relevant securities regulator. And since no one wants the lawyers getting involved this means that a mineral resource estimate put out by a junior mining company tends to be something that investors can put some faith in. It tells the investor what has been found, the evaluation methodology and provides some clarity as to the potential value of the project. Properly preparing a resource estimate involves a lot of work and requires numerous areas of expertise.

Note:
There is a reason here at mining explained we make it VERY CLEAR we DO NOT prepare resource estimates, we are guessing at what may have been found but leave the final verdicts to the experts. We crank our estimates out in minutes to hours and if we could match what the experts do over weeks and months we would be sitting on a yacht off the coast of Spain not writing on the internet! However, if you are interested in our guesswork please do check out our Napkin Math for all the graphs and disclaimers you can handle!

Where your typical investor normally first encounters a resource estimate is as a press release showing up in their inbox with a title along the lines of:

“Gold Miner Corp Release Updated Mineral Resource Estimate for the Nugget Deposit with an Indicated Mineral Resource of 6.87 Moz Au at a grade of 1.12 g/t !!!”

There will be a bunch of lingo along the lines of INDICATED! INFERRED! Reserves!!! If you have ever wondered what all this means you are in the right place. Let’s dive in!

Why is a Mineral Resource Estimate Needed?

First off why are resource estimates a thing? Why involve the regulators in the pure and wholesome world of junior mining instead of everyone just trusting news releases at face value?

Well, the answer is literally Bre-X.

For those who are not familiar with the Bre-X scandal it was a major fraud in the 1990’s involving a supposed gold find in Indonesia that turned out to be a hoax with billions of dollars in losses for investors. Bre-X Minerals Ltd claimed to have found an enormous gold deposit in the far reaches of the jungle and markets went wild until it was revealed they had been salting their samples and reporting pretty much a complete fabrication. The whole story is wild, we’re talking fortunes wiped out and geologists being thrown falling out of helicopters level wild. We are not going to dive into it today but its well worth reading up on if you’re at all interested.

What you need to know it is was such a gong show the Canadian Government introduced “National Instrument 43-101” which governs how companies can disclose mining related information in Canada “to ensure that misleading, erroneous or fraudulent information relating to mineral properties is not published and promoted to investors on the stock exchanges overseen by the Canadian Securities Administrators”. This helped secure Canada as a world leader in resource exploration as investors could trust that the Canadian Government was ready to whack fraudsters with the long stick of the law.

It was a simpler time.

The Process of Preparing The Mineral Resource Estimate

While each resource estimate meets the standards set by regulators, the unique nature of each deposit will require subtle differences in its evaluation. A banded iron formation in Brazil is not going to have all the same challenges and considerations as a narrow vein gold deposit in Alaska. The Mineral Resource Estimate is not prepared by the exploration company itself as there would be an obvious conflict of interest. Instead, the estimate is contracted out to consultants specializing in resource evaluation and they will have expertise (either in house or sub-contracted) on the many disciplines required to produce a credible evaluation. When you see reference to the “Qualified Person” listed on a resource estimate that is who is certifying that they are suitably experienced in their area of expertise to take responsibility for the preparing and reviewing the resource estimate.

The consultants will factor many topics into their evaluation but a high level these will be:

Project Background

This can consist of where the project is located, local regulations, regional geology, are other deposits being mined nearby and has there been historical mining activity in the past?

Site Visit

The consultants will perform a site visit to ensure that there is actually exploration going on. This is both to get a feel for a property and validate the work done. This is both to better evaluate the project as well as self interest. It would be awkward to produce a mineral resource estimate to find afterwords that company had only consisted of a four geo’s drinking beer in the woods and running ChatGPT prompts to produce their data.

Exploration

What work has been carried out on the project so far? This can include soil sampling, geophysical surveys, field mapping or other evaluations.

Drilling

The heart of the Mineral Resource Evaluation will be based on drilling and the resulting assays. These will be used to produce a model of the resource and the final results. As such there will be a focus on making sure that data verification has been correctly accounted for. This will consist of examining:

Drill Type

What sort of drill was used for exploration and is it suitable for the task. For coal exploration a rotatory drill may be sufficient but for copper a diamond core drill is likely going to be preferred.

Drill Sample - Preparation

How the samples were prepared is important. There are standards that must be followed such as keeping half the core to ensure that results can be reproduced (thanks Bre-X) as well as taking steps to help eliminate sampling bias. Other considerations can be process related such as were steps taken to ensure samples were logged in the correct order and not mixed by accident or that QAQC samples were included in the submission to ensure lab work is carried out correctly.

Drill Sample - Analysis

How the samples were processed and assayed. Which lab did the work, what methods were used for assay (ex: fire assay versus spectroscopy), what preparation was carried out and what standards were followed.

Drill Sample - Security

Was the chain of custody around the samples secure. This may seem easy but perhaps the property was explored decades before and there are boxes full of core just sitting in the woods for decades where any old hiker or moose hunter can root through the shiny rocks. Free drilling but do you use/trust the data? Maybe you use it to guide your drill planning but not include it into your resource estimate? All valid questions that must be addressed.

Mineral Processing and Metallurgy

You can have all the gold in the world but if the host rock is not crushable or the gold amenable to extraction that gold is not going to do you any good. A core goal of the Mineral Resource Estimate is to answer questions of economic viability, and the economics very much depend how much of the gold is actually recoverable. This recovery is assed through labs running experiments simulating mini processing plants to asses factors such as grindability, target particle sized and the recoveries of different processing methods.

Modelling

To turn drill results into usable conclusions the consultants will produce a resource model of the deposit.  First they will prepare 3d models based on drilling, topography, geological structure and lithology to spatially outline estimated ore boundaries. Next they will statistically asses the data for trends to produce variograms and other inputs and then finally will apply geo-statistics to interpolate the values for their models. The different techniques and details that can be used for interpolation are beyond our scope today but the end result is a block model. If you have not dealt with block models before just picture a giant cube made up of Lego blocks, each one with difference numbers written on the side accounting for grade, rock type etc.

Analysis

Finally analysis will be carried out using the resource model to produce the Mineral Resource Estimate. This will be done through mine design and running algorithms to determine what is economically extractable for the project to produce the final estimate.

What Do The Categories of a Mineral Resource Estimate Mean?

So now that the consultants have produced an estimate a whole new set of jargon comes into play around resources versus reserves, Inferred versus Indicated etc.

At first glance it seems a lot to take in but the different categories can be understood simply based on a few principles.

1. Everything is based on two things:

  • How confident is the geology/drilling
  • How confident are the economics/mine plan
 

2. And what this boils down to:

  • Resource means there is enough mineralization to justify saying there is a deposit of X size here.
  • Reserve means that that X amount of that deposit is likely to be profitable to mine

Now there are further rules on how the sub categories of reserves and resources relate to one another but whether a Probable Reserve requires there to be a Measured or Indicated Resource is much more nuanced than we want to go into. If you want to learn more we recommend giving the CIM definition standards a read:
https://mrmr.cim.org/en/standards/canadian-mineral-resource-and-mineral-reserve-definitions/

Global Versus Pit Constrained

As a quick aside we wanted to briefly touch on the difference between a global resource and a pit constrained resource. A global resource reports on the property as a whole (ie how many oz of gold have been found on the claim) while a pit constrained resource takes into account the spatial location of those ounces and mining costs to determine what size and depth of open pit may be mined and reports only what oz would be contained within the pit

Not all resource estimates will provide reserves, nor will they always contain all the resource categories we have listed. An early-stage exploration project likely will not have had time and sufficient drilling to justify the higher confidence categories even if it is destined to become a major mine down the road. While a project which has been drilling for years and has not produced results is worth pondering critically even though they may just be holding off on evaluation. Knowing how to pick up on these sorts of differences is what makes understanding the Mineral Resource Estimate so important.

The Mineral Resource Estimate – Lessons to Take Away

A quick summary of the main points to take away from today:

  • A Mineral Resource Estimate is a regulated analysis of a mineral deposit which aims to provide investors with an unbiased economic estimate and an understanding of the uncertainties present in that estimate.
  • Preparing a Mineral Resource Estimate is an in-depth process factoring in many different geological and economic inputs and knowledge from multiple professional disciplines. This means there will always be some uncertainty in the results that must be accounted for.
  • There are many resource categories, but they boil down to two principles:
    • Is there a deposit here
    • Is it economic to mine it

Conclusion

The Mineral Resource Estimate is a cornerstone of the junior mining industry, providing investors with the information and confidence needed to make better decisions. The process has evolved over the years and continues to develop as regulators monitor and refine their requirements to meet the needs of an increasingly global mining industry. While not a perfect tool they provide a reasonable analysis while addressing the necessary compromises of combining known exploration data and with unknown economic and geophysical uncertainties.

We hope that you enjoyed todays article and till next time…

Cheers!

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Diagram Showing the different classifications that exist within a mineral resource estimate

The Mineral Resource Estimate

The mineral resource estimate is an evaluation of a deposit’s quantity, quality and economic potential accounting for uncertainty, exploration results and economic assumptions.

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