Reporting Mineral Resources and Ore Reserves – how confident are we? by Mark Noppé FAusIMM(CP), Principal Consultant, Xstract Mining Consultants
Recent interest in industrial minerals
Industrial minerals such as phosphates, potash, graphite and spodumene have recently become the focus of much attention for listed exploration companies, particularly the latter two due to developments in battery technologies related to the emerging electric vehicle and green energy market.
Consequently the race has been on to report larger industrial mineral exploration targets and resources, sometimes being described for example as ‘the biggest or second biggest in the world’, or ‘world-class’ with perhaps hundreds of millions of tonnes containing a certain percentage of a particular mineral. However, being the biggest doesn’t necessarily mean being the best and the author’s intention is to highlight the need to report resources by market-related specifications, as such headline claims run the risk of being seen as misleading by investors and regulators.
Caution should be exercised to ensure that headline and details in public reports reflect the state of knowledge and the viability of successfully developing a resource or reserve, having taken account of all relevant ‘modifying factors’. In this regard, attention is drawn to CIM (2003) guidelines page 37, where the issue of market size and technical barriers to entry is addressed:
‘Market considerations incorporate not only the requirement for detailed market analyses and/or contracts of sale, face value of the reported Mineral Resource and Ore Reserve categories, quantities and grades and study outcomes may not be fully aware of the risks or opportunities inherent in the data and thus may not be in a position to make an informed decision based on the provided information.
"Of particular importance in today’s industrial minerals arena, crystalline graphite may range from $700/t ($635/ st) to as much as $1,300/t ($1,180/st). It is clear that such price variations could have a significant impact on the economics of a graphite project, especially considering the range of possible markets e.g. friction linings, lubricants, electrical, refractories and foundries.
From the above examples, it is obvious that when publicly reporting an industrial mineral resource it is insufficient to simply report a tonnage and the contained percentage of the mineral. Not only is this contrary to JORC 2012 requirements, but it could be misleading to investors. An example is, the case of a hypothetical flake graphite resource reported as 200 Mt (220 million st) at 10 percent graphitic carbon. Essentially, all this tells us is that the resource contains 20 Mt (22 million st) of in situ flake graphite, but it conveys nothing about the size range of graphite flakes; the likely purity of extracted graphite flakes or impurities such as sulfides that may impact on mineral extraction or possible markets."
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