Classification Criteria

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Classification Criteria

• For Public Reporting of Mineral Resources and/or
  Reserves
• Beijing, 13 November 2008
• Acknowledgements
• To my many JORC, CRIRSCO AMC colleagues, but
  particularly my thanks to
• Dr Harry Parker of AMEC
• Mr Pat Stephenson of AMC Mining Consultants
  (Canada) Ltd,
• who prepared the originals of some of the
  material used in this presentation.

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Outline - focus questions

• How to classify a resource or reserve
• What are the minimum requirements for Inferred
  Resources (or what qualifies as an Inferred
  Resource?)
• What is the drilling density necessary for
  Inferred Resources and what of trenches,
  geophysical and geochemical sampling.

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CRIRSCO style standards/Codes - Principles based
CRIRSCO style standards/Codes are principles
based not prescriptive Codes. The principles in
Clause 3, CRIRSCO Template are
Materiality all reasonable information expected
Transparency clear unambiguous presentation
CRIRSCO Template
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Figure 1 General relationship between Exploration
Results, Mineral Resources Ore Reserves
Exploration Results
MINERAL RESOURCES
ORE RESERVES
Inferred
Increasing level of geological knowledge and
confidence
Probable
Indicated
Proved
Measured
Consideration of mining, metallurgical, economic,
marketing, legal, environmental, social and
governmental factors (the Modifying Factors").
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Why are Resources and Reserves Classified?

• To enable users of the estimates to make informed
  decisions regarding relative risk

From Classification of Mineral Resources and Ore
Reserves, P R Stephenson P T Stoker APCOM 99
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Stakeholders
Resource Reserve Estimators
Mining Company Management
Reporting Codes Capital Market Regulations
Investment Community
Financing Community
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Resource/Reserve Classification

• does not have to be a complicated process
• BUT
• does have to reflect the Competent Persons view
  of the deposit

8
Statistical Confidence subdivisions should be
used as a basis for, but not instead of,
Experience-based Decisions by Competent Persons
9
In addition to Data Density, other important
issues are

• geological interpretation
• quality of data
• scale of classification
• cut-off grade

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Whenever possible, involve project geologists in
classification decisions
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In deciding between resource categories, try to
imagine effect of additional sampling
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ACCURACY/CONFIDENCE LIMITS?

• A difficult question but one that needs serious
  consideration
• Harry Parker of AMEC has advanced the discussion
  of the application of confidence limits as
  follows

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Summary

• So there is generally insufficient information
  available during the estimation and
  classification of Inferred Resources for any
  estimate of confidence to be made.
• For Indicated and Measured Resources there may be
  sufficient information for an estimate of
  confidence along the lines proposed by Harry
  Parker.

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Important Points about Mineral Resource and Ore
Reserve Estimates

• Resource estimates are ESTIMATES, not
  calculations. New information or a different
  geological interpretation can materially change
  estimates
• There is no single correct resource or reserve
  estimate for a given deposit,
• in fact
• the only thing that is certain is that the
  estimate is not absolutely correct!

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Figure 1 General relationship between Exploration
Results, Mineral Resources Ore Reserves
Exploration Results
MINERAL RESOURCES
ORE RESERVES
Inferred
Increasing level of geological knowledge and
confidence
Probable
Indicated
Proved
Measured
Consideration of mining, metallurgical, economic,
marketing, legal, environmental, social and
governmental factors (the Modifying Factors").
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What is a Mineral Resource?

• A Mineral Resource is an estimate of tonnage and
  grade for a mineralised body, based on sampling
  of that body
• The estimate represents a realistic inventory
  that, under assumed and justifiable technical and
  economic conditions, might, in whole or in part,
  become economically extractable
• Portions of a deposit that do not have reasonable
  prospects for eventual economic extraction are
  NOT Mineral Resources
• Sub-divided, in order of increasing geological
  confidence, into
• Inferred Mineral Resources (low level of
  confidence)
• Indicated Mineral Resources (reasonable level of
  confidence)
• Measured Mineral Resources (high level of
  confidence)

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Mineral Resource Estimation

• Requirements for estimating Mineral Resources
• Geological interpretation
• Representative samples and assays
• Application of appropriate estimation technique
• This comes from
• Mapping and sampling the deposit
• Ensuring the highest standards of sampling and
  assaying integrity
• Employing experienced, qualified professionals
  (Competent Persons)

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Criteria for Classifying Mineral Resources
Measured, Indicated or Inferred

• Confidence in geological and grade continuity
• Quantity and distribution of sampling data
• Quality of sampling data
• Sensitivity of the Resource estimate to
  additional data or changes in the geological
  interpretation
• Judgement of the Competent Person

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Mineral Resource Classification
Continuity is important Continuity is between
not around
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Inferred Resources - discussion

• Inferred Mineral Resource estimated with a low
  level of confidence
• Reasons for low confidence may include
• Inadequate geological knowledge
• Limited sampling data
• Data of uncertain or poor quality
• Uncertain geological and/or grade continuity
• Low in this context means usually not
  sufficient to allow the application of technical
  and economic parameters to be used for detailed
  planning
• Therefore Inferred Resources may not be converted
  directly to Ore Reserves for Public Reporting.

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Indicated Resources - discussion

• Indicated Mineral Resource estimated with a
  reasonable level of confidence
• Reasonable in this context means sufficient
• to allow the application of technical and
  economic parameters, and
• to enable an evaluation of economic viability
• May be converted directly to Probable Ore Reserves

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Measured Resources - discussion

• Measured Mineral Resource estimated with a high
  level of confidence
• High in this context means sufficient
• to allow the application of technical and
  economic parameters, and
• to enable an evaluation of economic viability
  that has a greater degree of certainty than an
  evaluation based on an Indicated Mineral Resource
• May be converted directly to Proved Ore Reserves
  (or in some circumstances to Probable)

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What is the expected confidence of Measured,
Indicated and Inferred?

• Publicly stated resources are reports of
  estimates
• The Codes are not prescriptive. They do not
  define the classification methodology to use, nor
  does it define the required accuracy or precision
  of estimates or indeed the estimation procedures
• Competent Persons have over time adopted
  criteria expected of geologists when preparing
  to estimate and classify mineralised bodies,
  these typically include
• Type of data drilling and sampling techniques
• Quality of the data as reflected by QA/QC
  information including sample recovery and
  drilling conditions
• Geological complexity and the Competent Persons
  understanding
• Statistical and geostatistical aids for
  establishing confidence
• The Competent Person has sufficient experience to
  know what is required, and it is their reputation
  that is on the line. Commonly Companies undertake
  audits which ensure a reasonable approach
• There is guidance in the Codes and encouragement
  to discuss the relative accuracy and/or
  confidence of the Mineral Resource estimates. As
  noted companies also have guidelines with
  additional information.

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What is the expected confidence of Measured,
Indicated and Inferred?

• If we poll a number of professionals regarding
  the confidence they believe exists in the various
  classes of mineral resources we are likely to get
  a range of answers.
• In my experience we can summarise the likely
  range as follows

At what scale (local or global) to these
confidence limits apply?
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Continuity is critical

• Confidence in both geological and grade
  continuity
• If this continuity is not apparent in the block
  model then
• have to ask whether the classification is
  appropriate. Lets look at this continuity
  question specifically.

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So classification is the responsibility of the
Competent Person

• What guidance is available?

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• AusIMM Monographs
• CIM Best Practice
• guidelines
• Etc.,

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• Australian Coal Guidelines

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• Major Coal Fields in Queensland are extensive and
  generally not structurally disrupted
• So continuity is generally good
• Allowing the Coal Guidelines to be specific
  regarding drill spacing
• 100Km

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• New South Wales
• 100Km

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Australian Coal Guidelines

• Specifies the spacing of Points of Observation
• Inferred Coal Resources may be estimated using
  data obtained from Points of Observation up to 4
  kilometres apart
• Indicated Coal Resources may be estimated using
  data obtained from Points of Observation normally
  less than 1 kilometre apart
• Measured Coal Resources may be estimated using
  data obtained from Points of Observation normally
  less than 500 metres apart.

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Australian Coal Guidelines

• But this is guidance only and includes advice to
  the Competent person that the distance may be
  extended if there is sufficient technical
  justification to do so for example, if supported
  by geostatistical analysis.

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What is an Ore (Mineral) Reserve?

• An Ore Reserve is the economically mineable part
  of Measured and Indicated Mineral Resources.
• It includes diluting materials and allowances for
  losses which may occur when the material is
  mined.
• Appropriate assessments and studies have been
  carried out, and include consideration of and
  modification by the application of realistically
  assumed Modifying Factors.
• These assessments demonstrate at the time of
  reporting that extraction could reasonably be
  justified.
• Sub-divided, in order of increasing confidence,
  into
• Probable Ore Reserves
• Proved Ore Reserves

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Ore Reserve Classification
Ore Reserves (for public reporting) may not be
derived from Inferred Mineral Resources
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Modifying Factors

• The term Modifying Factors is defined to
  include
• mining,
• metallurgical,
• economic,
• marketing,
• legal,
• environmental,
• social and
• governmental considerations.
• What effect do all these Modifying Factors have
  on the conversion of Measured and Indicated
  Mineral Resources to Ore Reserves?

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SUMMARY

• Resource/Reserve classification is important
• It should not be treated as a statistical
  exercise devoid of geological input
• It should be used as a means of communicating
  the Competent Persons feel for the deposit to
  users of the Resource/Reserve estimates
• Use common sense

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TWO FINAL THOUGHTS firstly

• The problem with common sense is that it isnt
  (Oscar Wilde)

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AND

• Put the geo back into geostatistics
• (Dennis McMahon, CRA 1979)