SETTING NEW STANDARDS — The CIM definitions

The Canadian Institute of Mining, Metallurgy & Petroleum (CIM) is considering modifications to its classification system for defining the various categories of reserves and resources.

The modifications are being considered as part of an effort to establish an internationally accepted system. Toward that end, representatives from Canada, Australia, Britain, South Africa and the U.S. met earlier this year in Denver to prepare a draft set of definitions. The meeting was chaired by Norman Miskelly of the Council of Mining and Metallurgical Institutions (of which CIM is a member).

The committee’s draft report called for mineral resources (in situ) to be divided into three categories: inferred, indicated and measured. According to this classification, the measured resource would carry the highest level of confidence; inferred, the lowest.

Mineral reserves (minable) were divided into only two categories: probable and proved, with the latter having the highest degree of confidence. However, the CIM still has possible reserves in its classification system, largely because its industry members had argued that it allowed the calculation of amortization using proven, probable and possible reserves as a devisor.

John Postle, co-chairman of the CIM Standing Committee on Reserve Definitions, says the use of the term “possible reserve” continues to generate debate in Canadian mining circles.

“A lot of people don’t like it,” Postle told delegates attending a conference sponsored by the Toronto Stock Exchange and The Northern Miner.

The CIM classifies a resource as a deposit or concentration of a natural, solid inorganic or fossilized organic substance in such quantity and at such grade or quality that extraction of the material at a profit is currently or potentially possible.

The CIM’s classifications of resources are defined in the proposed National Instrument 43-101 on the basis of the degree of confidence in the estimate of quantity and grade of the deposit. The classifications are as follows:

o Inferred resource means the estimated quantity and grade of a deposit, or a part thereof, that is determined on the basis of limited sampling, but for which there is sufficient geological information and a reasonable understanding of the continuity and distribution of metal values to outline a deposit of potential economic merit.

o Indicated resource means the estimated quantity and grade of that part of a deposit for which the continuity of grade, together with the extent and shape, are so established that a reliable estimate of grade and tonnage can be made.

o Measured resource means the estimated quantity and grade of that part of a deposit for which the size, configuration and grade have been well established by observation and sampling of outcrops, drill holes, trenches and mine workings.

A reserve, according to National Instrument 43-101, is that part of a resource which can be legally mined at a profit under specified economic conditions that are generally accepted by the mining industry as reasonable under current economic conditions, demonstrated by at least a preliminary feasibility study based on measured resources and indicated resources only.

Reserves are categorized as follows on the basis of the degree of confidence in the estimate on the quantity and grade of the deposit:

o Possible reserve means, where proven and probable reserves have been estimated, the estimated quantity and grade of that part of a measured, indicated or inferred resource that are determined from limited sample data and for which geology, grade continuity and operating parameters are principally based on reasonable extrapolations, assumptions and interpretations.

o Probable reserve means the estimated quantity and grade of that part of a measured or indicated resource for which the economic viability has been demonstrated by adequate information on engineering, operating and economic factors, with sufficient accuracy to be used as a basis for decisions on further development and significant capital expenditures.

o Proven reserve means, for that part of a deposit which is being mined or developed or which is the subject of a mining plan, the estimated quantity and grade of that part of a measured resource for which the size, grade and distribution of values, together with technical and economic factors, are so well established that there is the highest degree of confidence in the estimate.