Mineral Reserve

A mineral reserve is an estimate of tonnage and grade or quality of indicated and measured mineral resources that, in the opinion of the qualified person, can be the basis of an economically viable project (17 CFR 229.1300). More specifically, it is the economically mineable part of a measured or indicated mineral resource, and it includes diluting materials and allowances for losses that may occur when the material is mined or extracted.

The two classes

• Probable mineral reserve: the economically mineable part of an indicated and, in some cases, a measured mineral resource.
• Proven mineral reserve: the economically mineable part of a measured mineral resource. It can only result from conversion of a measured mineral resource.

How a resource becomes a reserve

A qualified person must apply and evaluate modifying factors to convert measured and indicated mineral resources to proven and probable mineral reserves. The rule lists the modifying factors as mining, processing, metallurgical, infrastructure, economic, marketing, legal, environmental compliance, plans or agreements with local individuals or groups, and governmental factors.

What cannot become a reserve

An inferred mineral resource may not be converted to a mineral reserve. An indicated mineral resource may only be converted to a probable mineral reserve.

The study behind a reserve

An initial assessment cannot be used as the basis for disclosure of mineral reserves. A pre-feasibility study must be sufficient for a qualified person to determine whether indicated and measured mineral resources may be converted to mineral reserves, and its financial analysis must demonstrate that extraction is economically viable. A feasibility study is more comprehensive and carries a higher confidence level than a pre-feasibility study.

Required accuracy of the cost estimates

• Pre-feasibility study: accuracy of approximately ±25 percent, with contingency not exceeding 15 percent.
• Feasibility study: accuracy of approximately ±15 percent, with contingency not exceeding 10 percent.

A reserve is an opinion at a point in time

A mineral reserve is what a qualified person concludes can be mined economically at the time of reporting. It depends on the prices, costs, and conditions assumed in the study. Change the assumptions and the reserve changes, even though the rock has not.

Where mineral title fits

Legal factors are among the modifying factors. A reserve assumes the project holds the right to mine the ground. Where that right rests on unpatented mining claims, it depends on those claims having been properly located and maintained every year.

Standards

These definitions are from SEC Regulation S-K subpart 1300, adopted at 83 FR 66448 on 12/26/2018. Canada's NI 43-101 incorporates by reference the CIM Definition Standards adopted on 5/10/2014.