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Re: [ai-geostats] Re: Geostats Scam?

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  • Stephen Henley
    Marcel - I couldn t agree more. As someone who has worked for many years with the Russian as well as the western system of reserves/resource classification, it
    Message 1 of 4 , Feb 9, 2006
      Marcel -

      I couldn't agree more.

      As someone who has worked for many years with the Russian as well as the
      western system of reserves/resource classification, it is my experience that
      the Russian system - being more prescriptive - frequently yields better
      resource estimates than the western, despite its reliance on 'antiquated'
      polygonal and polyhedral computational methods. Unfortunately, in recent
      years the pressures from western companies have led to similar problems to
      those you describe, such as lumping together Russian C2+P1 category
      resources. Within each category, for each type of deposit, the intensity and
      type of work done (drill-hole spacing for example) is well defined: but as
      soon as you combine categories this information is lost.

      There is another reason that the Russian system, operated mainly by
      geologists trained in the Soviet system, yields better quality estimates.
      This is quite frankly political. There was, in Soviet times, pressure at the
      individual mine management level to minimise stated reserves on which
      production quotas were based - in order to make it easier to achieve the
      quotas and to receive bonuses for exceeding quotas. This balanced the
      geologists' natural optimism to produce fairly reliable estimates.

      In the western system, on the other hand, there is often pressure on
      consultants from clients who wish to maximise their stated reserves and
      resources in order to boost their share price. In one blatant case where I
      was personally involved, my own estimate - which was smaller than it might
      otherwise have been (and smaller than the client expected) - because I took
      into account geological zonation of the deposit - was rejected, and another
      consultant was asked to do a new model using a particular flavour of
      geostatistics (specified by the client) and ignoring the geological zoning.
      Needless to say the second consultant's estimates came out substantially
      higher and were the fgures that were published. I do not know the effect on
      the client company's share price at the time, but I doubt if it was negative
      ! However, there is some justice. Not too long after that, the client's
      entire board of directors were replaced. Unfortunately mining has still not
      started on that deposit, so it remains to be seen whose model was closer to
      the truth.

      As for the use of inferred resources - the Russian system has three
      categories P1, P2, and P3 of "prognostic" resources. Of these only P1 has
      any counterpart in the west ('inferred') - the other two reflect different
      even more rarefied degrees of geo-philosophy and wishful thinking. There is
      perhaps just one justification for either the western or the Russian
      categories for inferred or prognostic resources, and that is to indicate the
      possibility - NO MORE - that further detailed exploration work might
      establish something worth mining. In my view none of these categories should
      have any place in the main body of a formal feasibility or pre-feasibility
      report or any market statement based on it.

      What is even worse, though, in my opinion, is the balds statement in company
      announcements of individual drill-hole intersections: e.g. "15 metres at 5
      grams per tonne". It just takes three or four of these, and investors, many
      of whom should know better, will start joining the dots and doing their own
      calculations. The answers they get are invariably over-optimistic (just as
      the company intended) and the share price gets an unjustified boost as a
      result. I think the reporting of isolated exploration results like this
      should simply be outlawed.

      - Steve

      ----- Original Message -----
      From: "Marcel Vallée" <vallee.marcel@...>
      To: "Fran Manns" <artesian1@...>
      Cc: "Stephen Henley" <stephen.henley@...>; "Isobel Clark"
      <drisobelclark@...>; "J. E. Tilsley" <J.Tilsley@...>; "AI
      Geostats mailing list" <ai-geostats@...>
      Sent: Thursday, February 09, 2006 3:15 PM
      Subject: Re: [ai-geostats] Re: Geostats Scam?

      > Francis Mann et al,
      > This is a very interesting discussion, with several interesting and
      > valid points of view. I aggree with most of them. Here are some
      > additional comments from a mining geologist..
      > As one of my professors (F.F Osborne, petrology) repeated a few times
      > when he felt that we were slow to understand : "Rocks are geological
      > bodies that occur in the field." Ore bodies also only occur in the
      > field, and they also three dimensions and limits, all to be determined
      > along with their composition. I wish all professors of mining
      > geostatistics used similar statements in their lectures occasionally.
      > Geology is a considerable part of determining the limits of orebodies!
      > Actually, I feel we are going.backwards. In the past few years, thanks
      > to NI 43-101 in Canada (and some other similar texts in other
      > countries), and to loose implementation, we find that less and less
      > discrite information on drill hole spacing(s) and regularity (or absence
      > thereof) is provided. Feasibility and pre-feasibility studies are as
      > bad as scoping studies in this regard. This is a major information
      > shortcoming not only for the geologists that will be responsible for the
      > final delineation and extraction of that material, but for the various
      > people that have to appraise that information for technical, investment
      > or other purposes, given the nature of orebodies.
      > Another major information shortcoming that is tolerated by regulators,
      > despite texts to the contrary, is systematically reporting measured
      > resources and indicated resources together. How can the investing
      > public, or even an independent consultant, find out that only 20% of the
      > total is measured resources and 80 % is indicated resources, for instance.
      > Current regulations and practice also allow much generous reporting of
      > inferred resources as well as their use in pre-feasibility study and
      > feasibility if closely associated with the measured and indicated
      > categories. In spite of the much lower level of delineation, hence
      > precision, both grade and tonnage are reported with the same number of
      > significant figures ! ! !.
      > These are matters of concern professional geostatisticians as well as to
      > professors of geostatistics.
      > Marcel Vallée Eng., Geo.
      > =============================
      > Géoconseil M. Vallée Inc.
      > 706 Routhier St
      > Québec, Québec
      > Canada G1X 3J9
      > Tel: (1) 418 652-3497
      > Email: vallee.marcel@...
      > =============================
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