Towards best practice

Recent developments in evaluating mineral deposits are resulting in a better understanding of the conversion of mineral resources into material mined and milled, i. e., mineral reserves. The public reporting of tonnes and grades is becoming more robust due to the introduction of consistent reporting codes in most securities commission jurisdictions.

Despite minor technical differences between reporting systems such as JORC in Australia, SAMREC in South Africa and NI43-101 in Canada, the principles adopted in most codes are consistent. Many investors (and all practitioners) understand that public reporting requires adherence to the principles of materiality, transparency and competence.

One of the most important ways in which quantitative studies have been used recently is to define more objective, repeatable methods for the allocation of mineral resources into the categories of ‘measured’, ‘indicated’ or ‘inferred’. (Results of a recent study for Codelco in Chile were published in the Proceedings of the 6th International Mining Geology Conference in Darwin, Australia, in 2006.) These categories reflect the confidence with which the resources have been estimated. However, there is another aspect, and that is the confidence with which the resources can be converted into reserves.

There needs to be a better way to define how a published mineral resource can and will change as it goes through the development stages toward mining. Not all material in a mine is the same. Mining small, lower grade ore blocks might incur unacceptable dilution and ore loss if you were using a large scale (bulk) mining approach. It may be possible to mine such blocks where there could be selective mining in open pits, but the same orebody might perform very differently if you were using underground mining methods.

A resource estimate assumes economic viability, but in reality the amount of profitable ore that can be produced may very much depend on the type and scale of mining. In each case there will be different geological and sampling data available, and the resolution and quality of these data sets can be significantly different. The result is that different tonnages and grades are recoverable under different mining scenarios.

The accuracy and precision of the data sets that will be available for decisions are also important considerations. For example, blast hole sampling may appear to save money in the short run, but the sampling method usually has poor repeatability and may be biased. Furthermore, the positioning of blast holes is determined by blasting requirements and is rarely optimal for defining ore blocks. Therefore, investing in a dedicated reverse circulation drill sampling program may be money well spent. Such scenarios can often be evaluated numerically, avoiding the need for expensive tests using different drilling methods. The economic impact of the type of drilling (blast holes or reverse circulation drill holes) will be different depending on the mining cut-off grade, the size and shape of ore blocks, and the proposed mining method. The impact may be very great for selective mining of narrow ore zones, but of no consequence for bulk mining of large, low-grade deposits.

Large computerized simulation models can now be run to determine the impact of different grade control and mining scenarios. Conditional simulation can be used to develop risk studies to examine the effects of local variability on the expected run-of-mine tonnes and grades. Better geological knowledge means that more realistic simulations can be developed, using parameters such as rock mass characteristics and geometallurgical properties. While the process is complex, the results can be compiled for different scenarios in a fraction of the time needed for the reconciliation of actual mining, and a wide range of assumptions about costs and benefits can be individually tested.

The initial focus on determining the size and grade of a deposit can now shift towards developing a better understanding of the practicalities of extraction and the impact of the mining method on the economic value of the project. Such studies can be useful in demonstrating the robustness of a mineral reserve. Beyond reserve estimation, there is also the opportunity to develop a full evaluation of the costs and potential revenues, and the possibility of maximizing the contained metal that can be economically sent to the mill.

Miners are becoming more aware of the value of independent reviews and external audits that address such issues. Audits of resources and reserves provide a way to address the new requirements of good corporate governance that mining companies are facing. Audits are also becoming a vehicle for continuous improvement by testing preconceptions and introducing new alternative strategies.

Bill Shaw holds a doctorate in mining grade control, and a masters degree in mineral economics. He is co-leader with

Dr. Si Khosrowshahi of the global Ore Evaluation Services practice of Golder Associates and is based in Perth,

Western Australia. Contact: wshaw@golder.com.au