Satisfying the “reasonable prospects for economic extraction” requirement

International professional organisations in Australia, Canada, South Africa, USA, UK, Ireland, and many countries in Europe have adopted comparable codes, guidelines, and standards for mineral resource reporting. The definition of a mineral resource usually includes the requirement that “reasonable prospects for economic extraction” exist.

This requirement implies a judgment by the Qualified Person regarding the technical and economic factors likely to influence the prospect of economic extraction. This in turn implies that the quantity and grade estimates meet certain economic thresholds and that the mineral resources are reported at an appropriate cut-off grade that considers economic inputs, extraction scenarios and processing recoveries.

It is important to apply a consistent methodology when assessing the “reasonable prospects for economic extraction” for mineral resource reporting. SRK applies the Lerchs-Grossman optimising algorithm to develop the conceptual pit shells within which the portions of the block models that show “reasonable prospects for economic extraction” by open pit mining are defined. Portions of the block models that are external to an open pit, but satisfy the cut-off grade criteria for an appropriate underground extraction method, are considered to show “reasonable prospects for economic extraction” by underground mining. Optimisation parameters used to derive the conceptual pit shells are generally optimistic, aligned with standards used in recent comparable studies, and are usually determined in collaboration with an SRK mining engineer and the client.

It is important to state that the results from the pit optimisation are used solely for assessing those portions of the block models that show “reasonable prospects for economic extraction” and do not represent an attempt to evaluate mineral reserves. Mineral reserves can only be estimated based on the results of an economic evaluation as part of a preliminary feasibility study or a full feasibility study.

Glen Cole: gcole@srk.com

 

An oblique view of modelled gold mineralisation wireframes in relation to a conceptual pit shell (Aurora Gold Project, Guyana, 2011). Reproduced with the permission of Guyana Goldfields, Inc.

An oblique view of modelled gold mineralisation wireframes in relation to a conceptual pit shell (Aurora Gold Project, Guyana, 2011). Reproduced with the permission of Guyana Goldfields, Inc.

 


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