Discussion - Geologic Resources Vs. Ore Reserves - Noble, A.C.

Discussion by E.J. Garrison A.C. Noble presents a clear and concise summary of the factors pertinent to a competent reserve evaluation of a mineral occurrence. However, I believe that he confuses the difference between a resource and a reserve. By definition, a reserve estimate includes all known economic, legal, mining, metallurgical and environmental factors impacting the recovery of the product(s) found in the deposit. A resource estimate, however, is an estimate of what is there - what is available for exploitation and should not include economic and other considerations. Only after defining the resource, its extent, location, physical and chemical properties, can an intelligent selection process begin of the extraction and processing technologies most appropriate to the circumstances encountered. The early and almost certainly inappropriate application of these often cookbook choices has probably lead many companies to walk away from good properties. (How many mines have been found in others rejects?) An example of the process is the early selection of metallurgical samples, after encouraging values are found in a few holes or surface samples, in an attempt to determine the economics of the prospect. Unfortunately, the sampler does not know how representative of the occurrence the sample is because he does not know what the deposit looks like. As a consequence, the property becomes saddled with a bad metallurgical sample that is often inappropriately used in evaluating the deposit which it does not represent. Reply by A.C. Noble E.J. Garrison asserts that I confuse the difference between a resource and an ore reserve. In fact, this paper was motivated by the observation that resources and reserves are almost universally confused throughout the industry. While Garrison is concerned that too-early consideration of engineering, metallurgical and economic factors will result in dropping properties too soon, some issues that must be considered include: •The purpose of exploration is to discover ore reserves, not to discover resources. •Ore reserves are always smaller than resources. • Decisions on exploration expenditures must be made based on the expectation of the quantity of ore reserves that will ultimately be defined. Noble's Fig. 2 can be used to give guidance as to when it is appropriate to begin reserve calculations. When exploration enters the "flat" portion of the curve, representative samples can be selected for metallurgical studies and appropriate mining methods chosen. It is at this stage that we know enough about the deposit to make intelligent choices of representative samples and recognize constraints on mining caused by the deposits shape, environment and physical properties. Once the appropriate technologies have been chosen, then their cost can be estimated with reasonable accuracy. Early entry of economic and process factors gives the false appearance of reserve status to the resource estimation. It would be more informative and less subject to abuse and misunderstanding if resource calculations were made at a number of cutoff grades. The cutoff grades should be chosen to cover the range of grades found in practice in existing operations of similar type. This would emphasize the open nature of resource estimates and encourage creative evaluation of mining and process technologies. It does not preclude the use of economic, environmental and recovery technology factors in deciding the advisability of continuing exploration expenditures, but would highlight their speculative nature. It is thus hoped that decisions on the future of the deposit would not be made on the presumed suitability of a given technology but on the actually known reality. I agree that resource estimates should be reported as a range of cutoff grades. Since reporting at a cutoff implies application of underlying economics (even by analogy to similar properties), however, it should be clearly stated that resources do not consider economic, mining or cost factors, and that ore reserves will be substantially less. The dilemma of the explorationist is that until the continuity and limits of ore-grade mineralization have been established, it is difficult to make quantitative estimates of either resources or ore reserves. Further industry discussion is needed regarding standards for disclosing early exploration information in such a way as to fairly represent the potential of an exploration property.