Resource/Reserve Statements-Due Diligence By Directors

Ongoing economic success for mining companies is dramatically enhanced when they really know what they are harvesting, such that they can accurately forecast their head grades for any time period in excess of a month. This is an uncommon experience. It is a very common scenario for resource/reserve estimates to overstate the concentration (grade). Grade is a critical input of revenue, and hence, it is to cashflow projections. With the current direction being taken by the legal climate, it is no longer adequate for directors to accept the resource/reserve estimates of experts at face value. This is because resource/reserve estimates are the foundation of primary mineral economic decisions. Directors of mining assets need to undertake their own due diligence analysis of these estimates, in the best interest of themselves, and the company's shareholders. In the light of the industry's past achievements, this is quite a challenge. This paper suggests a set of new objective tools for directors to undertake an overview of the unique commodity concentration pattern and assess associated economic dynamics of each mineralization. These tools allow the examination of global graphical trends that can be helpful to directors and others in undertaking due diligence of resource/reserve statements. Ensure that it smells right.