A Methodology for Estimating Reserves from Resource Models

The investment worth of a mineral deposit can only be realistically evaluated in relation to specific engineering design criteria, which fully details the proposed method of exploitation. These criteria have not in general been taken into serious consideration when leaseholders have reported reserves in the past. In fact, many "reserve" figures quoted are probably more correctly classified as geological resources. The industry now recognises that it is necessary to take into consideration not only grade and mill recovery factors, but also likely mining and processing costs as well as the current market price for the commodity. Once having estimated those costs which are applicable to the resource under study, they can be deducted from the gross inherent worth of the orebody to result in an estimate of the potential net revenue. Through a process of interactive trial mine designs and evaluation, reserves can be quantified to provide an estimate of the available recoverable economic reserves given a set of assumed cost and operational parameters. It follows then, that the available economic reserve recoverable from a given resource will vary from time-to-time as cost and price factors vary in response to changing technology and economic factors. A methodology is described which may be used to derive economic recoverable reserves based on a computerised model of the geological resource data and appropriate economic and operational cost algorithms. Examples are provided from both coal and gold studies to illustrate the impact of economic criteria on the magnitude of the reserve figure reported for each project.