Theory vs. Reality
Published:January 01, 1995
Throughout the foregoing, we have stressed the fact that very few mines operate exactly as forecast, that in most instances the actual results are below original expectations, and that this fact is usually due to a failure to anticipate geologic complexities in the orebody, rather than to the computational techniques employed in the reserve estimation process. Mason (1993) has suggested that the two main reasons for incorrect reserve estimates are (1) a lack of detailed mine geology (including a fundamental geologic understanding of the deposit), and (2) “advances” in computer skills and technology.
It has been pointed out to us that on occasion, a property has been brought into production simply because the company involved is anxious to become an active producer, even though the deposit in question is clearly uneconomic—a situation that seems especially prevalent with small gold occurrences. There is a legal term for this sort of action (“fraud”), and further discussion of this sordid subject is beyond the scope of this text.
The intent of this chapter is not to present a detailed list of “horror stories,” but is, rather, to summarize some general observations that can be drawn from the literature. This literature contains a great many studies comparing predevelopment ore reserve projections with actual production (e.g., Section B, CIM Special Vol. 9, 1968; Blackwell 1992; Manns and Ellingham, 1992).
In many of these studies, the mine staff takes pride in the fact that the operation has produced more metal units than forecast. A study
Figures & Tables
Ore Reserve Estimates in the Real World
In Simplest Terms, the work of the mineral industry may be defined as the search for and production of some naturally occurring mineral substance useful for some specific purpose, and as such, that substance is both a defining element of and the underlying basis for our existence as a species.
The fundamental requirement for any venture designed to extract a mineral substance from the ground is the presence of a reserve of that substance, and the estimation of the quantity and quality of the available reserve is the single most important step in the development of a mineral discovery. In fact, the basic purpose of ore reserve estimation is to provide the first step in the evaluation of a business opportunity:
… all financial calculations can be no more than the transposition of the ore reserve estimate into other terms.
(King et al., 1982, p. 65)
Prior to roughly 1970, there was little or no standardization of nomenclature regarding the various levels of reliability attached to estimates of mineral resources or reserves, and quite frequently the same term was applied to estimates of widely differing reliabilities, made for widely different purposes. It was generally accepted that the term “ore” should be restricted to material having at least a remote possibility of economic viability, and that the terms “proven” or “measured,” “probable” or “indicated,” and “possible” or “inferred” should be used to denote estimates based on progressively less reliable data. In 1980, based on modifications of a standardized system proposed in 1976, the U.S. Bureau of Mines (USBM) and U.S. Geological Survey (USGS) published a revised classification system (Fig. I-1), in which the term “resources” was applied to an overall “concentration of [a] naturally occurring solid, liquid or gaseous material in or on the earth’s crust in such form and amount that economic extraction from the commodity is currently or potentially feasible.” The term “reserves” was restricted to “that part of an identified resource that meets specified minimum physical and chemical criteria ...[and] may encompass those parts of the resources that have a reasonable potential for becoming economically available within planning horizons beyond those that assume proven technology and current economics” (USBM … USGS, 1980, p. 2).
In 1996, the United Nations proposed a three dimensional scheme for the classification of resources and reserves (Fig. I-2) that assigns a numerical degree of reliability to each of three axes, representing economic, feasibility, and geologic elements of the evaluation (United Nations, 1996; Kirk, 1998).