During the last couple of weeks a TSX and NYSE listed company reported a downgrade of 90% in the mineral resource of one of their gold projects between two reporting periods.

The downgrade caused the company to stop operations (exploration and mining operations) and started the process of delisting. This caused a stir in the world of Mineral Resource Estimation and the liability of the Competent Person.

Social media blogs featured various opinions to what might have been the cause of this significant downgrade. Everything from the relevant reporting code (NI 43-101), geological modelling methods applied to estimation parameters were blamed, discussed and analysed.

This discussion is not a fault finding or alternative method suggestion to what should have been done versus what was done. This discussion will focus on risk – something one might forget when reporting Mineral Resources.

The bulk of the company’s Mineral Resources was classified as Indicated Mineral Resources. For Indicated Mineral Resources the confidence in the continuity of grade and mineralisation should be between 20 to 50%. In terms of risk it can be seen as a medium risk investment.

This implies there is still additional investment required in further exploration activities to solidify the business case and calculate a robust return on the project based on resources, which will then be in a high confidence level.

The question is therefore raised: How is risk quantified for a mineral project?

For Mineral Resource Estimation, numerous geostatistical methods can be utilised based on the data to estimate the grade and various statistical tests are performed to provide a confidence level to the grade estimation and spatial distribution of the grade.

Continuity in Mineralisation

It is however the continuity in mineralisation that is normally not well defined in terms of confidence. Interestingly enough reporting codes provide us with a lead as to determine the confidence.

One of the points normally raised in reporting codes is if an alternative interpretation of the deposit can be modelled and what is the influence of with this alternative model on the Mineral Resource estimation.

This provides us with a way to evaluate uncertainty in the mineralised continuity. I worked with a colleague that told me that if a section with drill hole information is given to five geologists for geological interpretation and you get five different interpretations you have insufficient data to make statements regarding mineralised continuity.

The more the interpretations correspond the higher your confidence level in the mineralisation.

Constructing geological models is a tedious task and is open to interpretation of the geological modeller (although implicit modelling has reduced the amount of wireframe digitising required). The truth is that when the model is completed very few modellers return and see if an alternative interpretation is possible.

This is mostly due to timelines from clients and our over emphasis on the geostatistical part of the estimation that focusses on the grade continuity.

The risk of assuming continuity of the mineralisation, without a consideration of the geology and quantification of the risk the assumptions hold, can be detrimental for a project.

The Competent Person

It is the responsibility of the Competent Person to ensure the project developer and investor understands the risk, in terms of not only Measured, Indicated and Inferred, but also the risk inherent to certain assumptions made.

The following is required to understand the risk of what is reported in Mineral Resource Estimates:

• If the modelled interpretation of continuity is not correct or robust then the grade estimation through geostatistical methods are obsolete.
• To ensure robust geological modelling and mineralised continuity alternative interpretations should be considered and compared with one another.
• If there is uncertainty in the mineralised continuity due to gaps in the knowledge base, this should be reflected in the Mineral Resource classification.
• If assumptions are made regarding the continuity of mineralisation the risk of these assumptions should be quantified.
• Third party review of the interpretation and assumptions is a risk mitigation strategy.
• Compare the modelled deposit to similar type of mineral deposits.