Reasonable prospects for eventual economic extraction (RPEEE)

The Committee for Mineral Reserve International Reporting Standards (CRIRSCO) has consolidated reporting codes and standards to produce a consistent definition of a Mineral Resource.

“A ‘Mineral Resource’ is a concentration or occurrence of material of economic interest in or on the Earth’s crust in such form, quality and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade, continuity and other geological characteristics of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge. Mineral Resources are subdivided, in order of increasing geological confidence, into Inferred, Indicated and Measured categories.”

This definition raises two key questions: first, what is considered “reasonable” and second, what is the time scale for “eventual economic extraction”?

Following CRIRSCO’s, the eventual economic extraction can be stated clearly. The Template continues: “The term ‘reasonable prospects for eventual economic extraction’ implies the Competent Person [judges] the technical and economic factors likely to influence the prospect of economic extraction, including the approximate mining parameters. It is a realistic inventory of mineralisation which might become economically extractable.”

The Competent Person (CP) makes preliminary judgments on factors used when converting a resource to a reserve (see Figure 1) including: mining, metallurgical and processing, economic, marketing, legal, infrastructure and environmental and social.

Figure 1:

Figure 1 Exploration Results

*The “Modifying Factors”: Consideration of mining, processing, metallurgical, economic, marketing, legal, environmental, infrastructure, social, and governmental factors

 

In defining eventual, the CP might ask: what will the resource price be 30 years from now? Will there be sufficient electrical power to grow the minerals industry? How will power be generated? The CP has to wrestle with such questions, even at this early stage.

Why, then, are resources declared when, at best, they should be in Mineral inventory? First, at this stage, the Resource Geologist usually estimates resources to meet the stringent QA/QC requirements and assess the level of geological confidence. Would he need to involve an engineer or economist now? Second, client pressure. With an ambitious exploration target and sizeable investment, the client needs results. The client may suggest the chance of follow up work for the geologist’s company are slim without results.

How then does the CP decide what is reasonable? The geological confidence is the primary consideration but not the only one. This multi-disciplined decision must consider all the modifying factors.

As Erich Fromm said, in part:

“What the majority of people consider to be ‘reasonable’ is that about which there is agreement, if not among all, at least among a substantial number of people; ‘reasonable’ for most people, has nothing to do with reason, but with consensus.”

After considering the modifying factors and geological confidence, would the decision stand the scrutiny of the majority of your peers? That’s the benefit of a multi-disciplined peer review process in the preliminary stages of declaring a resource.

Roger Dixon: rdixon@srk.co.za

 


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