Grade capping for mineral resource estimates

High grade drill intersects are often a welcome occurrence for a mining company, its shareholders and/or potential investors. They represent the potential for even greater metal content in the deposit. However, from a resource evaluation perspective, they may present complications in generating a realistic resource estimate, by overestimating or underestimating grade.

Capping high grades by lowering the outliers to a ‘reasonable’ level can, by itself, affect the analysis of the economic viability of a project. Still, this arbitrary choice is often made more by art and tradition than by sound technical analysis.

Two major reasons for grade capping are to guard against overstating the true underlying average grade, and against an overly optimistic assessment of local block grades located near some very high grade assays. For these reasons, capping is often considered a “better-safe-than-sorry” practice on most mineral resource models. 

We propose a procedure that can deal with outlier data in two phases. The first phase analyses the data before estimation is performed and focuses on identifying true outliers and an appropriate cap for them. The second phase focuses on restricting high grade assays that would likely be capped to further mitigate the influence of high grades during estimation without capping. 

Outlier data, or extreme high values, may significantly skew simple summary statistics like the mean grade, variance and coefficient of variation. To determine the impact of a potential outlier on these statistics, first assess the actual average grade in a mineralised domain. This could lower the risk of distorting the average grade. Once the risk is lowered to acceptable levels, further capping may not be necessary. This process usually results in fewer capped assays than a typical process. Any undue influence of high grade assays can be further corrected during estimating. 

The following procedure is recommended for treating outliers during resource estimation:

  • Determine data validity. Are the data free of sampling, handling, measurement and transfer errors
  • Review geology logs for samples with high grade assays. Capping may not be necessary for assays where the logs clearly explain the presence of high grade
  • Capping should not be considered for deleterious substances that have negative impacts on project economics
  • Decide if capping should be considered before or after compositing
  • Keep capping to a necessary minimum. If high grade assays unduly affect overall grade average, cap them. Bootstrapping or cutting curve plots could help determine capping levels
  • Restrict influence of very high grade assays. Commercial software is well designed for this approach
  • Visually and/or numerically assess the effect of high grade assays to be sure they don’t affect estimated block grades
  • Check the effect of capping on final resource estimates and document the differences

Marek Nowak: mnowak@srk.com

This article represents an excerpt from a “Suggestions for Good Grade Capping Practices from Historical Literature” Paper.
Authors: Marek Nowak (SRK Vancouver), Oy Leuangthong (SRK Toronto) and Mohan Srivastava (Independent).

 


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