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542Re: AI-GEOSTATS: What are appropriate measures of reliability for Mineral Resource and Ore Reserve estimates?

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  • Marcel Vallée
    Feb 27, 2002

      I was not yet aware of the JORC call for submissions on this
      subject. Thanks for the information.

      See my responses in between the key paragraphs of your

      I have published a considerable amount of material on
      these subjects, and the following comments only scratch
      the top of the subject. Some of that material, I could email
      to you but the printed material would be more convincing.
      So I need your address.

      Good luck in this endavour

      Marcel Vallée Eng., Geo.

      Géoconseil Marcel Vallée Inc.
      706 Routhier Ave
      Sainte-Foy, Québec G1X 3J9
      Tel: (1) 418 652 3497
      Fax: (1) 418 652 9148
      Email: vallee.marcel@...


      02-02-25 20:07:59, "Bill Shaw" <wshaw@...>
      > From: "Bill Shaw" <wshaw@...>
      > To: <ai-geostats@...>
      > Subject: AI-GEOSTATS: What are appropriate
      > measures of reliability for Mineral Resource and Ore
      > Reserve estimates?
      > Date: Tue, 26 Feb 2002 09:07:59 +0800
      > Organization:Golder Associates
      > Greetings
      > You may be aware that in Australia the Joint Ore Reserve
      > Committee (JORC) s called for submissions regarding
      > the next revision of the JORC Code. The current JORC
      > Code effective September 1999) can be downloaded
      > from www.jorc.org and the call for submissions is also on
      > that site.
      > I am involved in the teams looking at the definitions for
      > Mineral Resources and for Ore Reserves.
      > Frequently questions are raised about the expected
      >reliability of estimates for Resources classified as
      > Measured, Indicated or Inferred or for Ore Reserves
      > classified as Proved or Probable. There are a number of
      > arguments, both for and against, regarding attempting to
      > quantify the accuracy (and precision?) of such estimates.
      > The Joint Ore Reserve Committee is considering whether
      > it may be timely to introduce some discussion into the
      > Code regarding the pros and cons of such quantification
      > of expectations.
      > Not all such arguments for and against quantifying the
      > reliability of estimates are technical, for example:

      > · FOR - The primary purpose of the Code is to
      ensure Public Reports best inform investors. It thus
      appears important that similarly classified
      estimates have similar ?reliability? even if such reliability
      can only be broadly generalised, rather than quantified.
      > · AGAINST - The JORC Code is not currently
      prescriptive and relies on the Competent Person making
      decisions about many issues including
      Comment by MV: --------------------------------------------------------

      Complete non-prescriptivity raises a basic issue. Can one
      reasonably expect that results may be comparable
      between two QPs or CPs or different projects under this
      condition. My opinion is that objectives and some basic
      requirements basic requirements should be formulated to
      ensure a minimum amount of focussing on what is actually
      required in a particular case, and still leave the QP / CP a
      considerable of authonomy in the practice of his profession.

      --------------- End of Comment ------------------------

      > Transparency, Materiality and Competence (all defined
      > in the Code).
      > Quantification of ?expected reliability? presumably
      > requires estimates of tonnes and grades to be made
      > using a method that would allow ?errors? to be also
      > estimated.
      > This may make the Code more prescriptive if such errors
      > are only provided by certain estimation methods.

      ----------------- Comment by MV ---------------------

      Non prescriptivity again! It this part of some sort of a mining
      gospel or koran!

      ------------------End of Comment ---------------------

      > Either way, if the JORC Code discusses this issue it must
      > get it right. For example it is not very meaningful to
      > suggest that Measured Resources are within +/- 10%? if
      > such a statement can never be tested or demonstrated.
      > Thus it has been suggested that confidence limits and
      > parcel size must also be stated.

      --------------Comment by MV -------------------------

      All solutions need not be complicated. In most cases it
      helps to try and break down the problem first. After the
      recent crop of revisions, we have an international
      resource/reserve system but we still have the same
      problems because, in my opinion, the people that mattered
      wanted to have a SIMPLE and EASY TO APPLY and NON
      PRESCRIPTIVE REPORTING system, not an inventory

      What sort of objectives were present when juniors were, in
      practice given the opportunity to make early ore reserve
      announcements that are «economically mineable» on the
      basis of «at least a preliminary feasibility study» (Canada)
      or , in several jurisdictions like Australia, «appropriate
      assessments that may include feasibility studies».

      Feasibility studies that, under "generally accepted industry
      practice" are required to launch a mining project, have
      been swept under the rug and are not even defined in
      recent definitions systems. Now an issuer (some are also
      very efficient promoters) could announce an "economically
      mineable reserve» that may never reach production!

      Is this contributing to adequate information to the investors?
      To more efficient mine project development?

      - - - End of comment - - -
      > We would appreciate your considered opinion on this
      > specific issue: What are appropriate measures of
      > reliability for Resource and Reserve estimates and
      > how they are currently used by practitioners? I will
      > undertake to collate submissions, to circulate these and >
      > to prepare an overview for JORC. Please
      > circulate this email to any colleagues that you believe
      > are interested in this issue.

      - - - - - - Comment by MV - - - - - - - -

      For now, I would start by saying that the present resource /
      reserve systems, have been designed without taking into
      accounts the fact that mineral resource and ore reserve
      statements, are primarily INVENTORIES for work purposes
      BEFORE they become REPORTING documents, despite
      the fact that you've got to estimate it before you report it.
      Neither the formulations nor the requirements for reporting
      carry any objetive related nor quantitative requirement.

      Here is an example how useful quantitative requirements
      may be worked in with limited prescriptivity and without
      significant hardship.

      More than 25 years ago, as Chief Geologist, Mines for the
      SOQUEM group, I made minor adaptations to the then
      current Canadian reserves definitions (proven, probable
      possible) to use in our operating mines and advanced
      projects. The chief geologist at the Louvem base metal
      mine (his name is Réal Bourassa) had read the revised
      text and was prepared for my next visit to Val d'Or..

      "Marcel, your definitions are OK, but we have a problem:
      they only provide two levels for delimined reserve (proven
      and probable) , but we have four levels of information in the
      mine with, in addition, the possible reserve level.

      "In the proven category, we have drill proven ore on a 7.5 m
      section spacing and we develop for long hole open stoping
      or shrinkage stoping - undercut at the base overcut at the
      summit, and raises, plus drilling at 12f ft in the ends of zones
      to check projections. Our probable category is based on
      two drill section spacings grids, 15m and 30 m. Would it be
      possible to adapt "your definitions" to take all this into
      account. We did!

      For inventory purposes, we subdivided the proven and
      probable levels to have four categories: «proven
      developed », «proven drilled», «probable 1 and probable
      2». These could be regrouped for reporting, but in such
      cases, I insisted on supplying with each global category the
      information regarding drilling grid size and the percentage/
      and grade for each grid dimension. We rapidly found that
      this system made the work of the geologist easier to
      understand for mining engineers, mine supers, managers
      and directors, as wall as easier to manage for the

      Another of our operating mines, with much larger and
      multiple zones, was a 50/50 joint venture. . The mine
      geologist had more leeway, as the partner was the mine
      operatior and, despite my advice, he decided that is was
      not usefull to distinguish between the probable 1 and
      probable 2 categories. After several years of exploring for
      new zones on a 60 m spacing and a first filling next to
      promising intersections at 30 m spacing, the area
      manager refused to grant additional exploration /
      delineation budgets in that sector, as he could not see from
      the reserve statements any significant progress in the past
      year or two. I was called in. This problem was solved fairly
      easily by recompiling the last two or three reserve
      statements with the probable sub-categories, to show the
      progress in moving large tonnages from probable 2 to
      probable 1. Being a reasonable person, he granted the
      budgets required to carry on.

      Whether with four or with only the two current information
      levels, more information could be available to the investors,
      other industry professionnals managers and mining
      analysts that no resource/reserve information should be
      published without giving a «comprehensive summary» (!) of
      the sampling information network includind number of drill
      holes and samples, and all grid spacings for each
      category wit. Sorry, but somebody has to be prescriptive
      sometime when information needs to be provided.

      This does not mean to be inflexible or unadapted. One
      question I have frequently been asked is: What is the
      requirement for proven ore? My answer is objective based
      and generic:

      ««The sampling grid for proven ore required must be
      adapted to the deposit size, mineralization grade and
      distribution, and be adequate to support the engineering,
      marketing and economic studies required for project
      feasibility for a new project, for efficient mine extraction,
      mineral processing/ metallurgy for specific mining and
      processing methodsin an operating mine. »»

      This somewhat prescriptive, but implementation certainly
      requires professional experience and judgement as well as
      team work.

      In summary, it probably would not be worthwhile to revise
      the JORC guidelines, if they are to be kept non-prescriptive
      in the present fashion and if the people involved do not
      introduce the essential concepts required.

      These include i) a more adequate model of the
      development and mining process is required, ii) both
      global and phase objectives. From these objectives, can
      be developed explicit but fairly high level requirements that
      will help the QPs and CPs to carry out their professional
      responsibilities more efficiently.

      ------- End of Response --------------------

      > Regards,

      > Bill Shaw
      > wshaw@...

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