The JORC Code 2012 Edition : Resources and Reserves
The JORC (“Joint Ore Reserves Committee”) Code, in effect, defines standards and guidelines for public reports on geological matters, such as those issued by listed companies to ASX. The Code primarily covers reporting of Exploration Results, Exploration Targets (read more here), Mineral Resources and Ore Reserves. It also covers other, related issues, such as how to report “equivalent grades” (read more here).
The current mandatory code is the 2004 Edition. The 2012 Edition is effective as of December 2012 and mandatory as of December 2013. This is important, as the 2012 Edition significantly tightens the requirements for reporting of Mineral Resources and Reserves. My intention below is to provide a brief definition of the two, together with a brief comment on the changes from the 2004 to the 2012 Editions.
The definition from the 2012 Edition:
“A ‘Mineral Resource’ is a concentration or occurrence of solid material of economic interest in or on the Earth’s crust in such form, grade (or quality), and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade (or quality), continuity and other geological characteristics of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge, including sampling. Mineral Resources are sub-divided, in order of increasing geological confidence, into Inferred, Indicated and Measured categories.”
It is not necessary for Mineral Resources to be mineable, but there must be reasonable prospects for eventual mining. Two examples:
- an iron ore resource may be located in an area of political tension with limited or no infrastructure. However, if it is of sufficient grade and tonnage, it may be reasonable to assume that it may be mined at some future date.
- A resource of disseminated copper may have a grade that is too low for current economic development. However, it may be reasonable to assume that ongoing exploration may increase the size and/or grade, or that higher future prices will allow development.
There are three categories of Mineral Resource: Inferred, Indicated and Measured, in ascending level of confidence in the resource estimate.
[As an aside, it is worth noting here that all resource and reserve estimates are just that, estimates. Man, in his hubris, can sometimes believe that he understands Nature. In my career I have come across many projects where geology has outwitted geologists, engineers and metallurgists. Unfortunately most, but not all, have ultimately failed.]
The objective with Mineral Resource estimates is to better understand factors such as possible tonnage upside, grade range and other factors that may most affect development economics. For example, continued exploration drilling of a coal project may show that, even at the Inferred category, a project which has an existing Mineral Resource of 100 million tonnes has the potential to be a billion tonnes in size.
The definition from the 2012 Edition:
“An ‘Ore Reserve’ is the economically mineable part of a Measured and/or Indicated Mineral Resource. It includes diluting materials and allowances for losses, which may occur when the material is mined or extracted and is defined by studies at Pre-Feasibility or Feasibility level as appropriate that include application of Modifying Factors. Such studies demonstrate that, at the time of reporting, extraction could reasonably be justified.
The reference point at which Reserves are defined, usually the point where the ore is delivered to the processing plant, must be stated. It is important that, in all situations where the reference point is different, such as for a saleable product, a clarifying statement is included to ensure that the reader is fully informed as to what is being reported.”
Mineral Resources can be converted to Ore Reserves through the application of “Modifying Factors”. These factors primarily relate to the current economics of mining, processing and selling the reserve. For example, while a coal seam that is 1 metre thick and several hundred meters below surface may be legitimately included in a resource, it may be uneconomic to extract under current circumstances. It should not therefore be converted to a reserve.
There are two categories of Ore Reserve, Probable and Proven. In terms of geological confidence, but not economics, an Indicated Resource is comparable with a Probable Reserve and a Measured Resource is comparable with a Proven Reserve.
Edition 2004 vs Edition 2012
There are two main changes that affect Resource and Reserve reporting in the 2012 Edition. Firstly, a long and detailed table of reporting requirements has been introduced, all of which have to be reported on an “if not, why not” basis. Secondly, a positive Pre-Feasibility Study is required before reporting Ore Reserve estimates.
I like the 2012 edition of the JORC code. It lifts the bar on reporting and introduces economic considerations at an early stage. This all puts pressure on the technicians preparing the reports to be thorough. Other significant changes, not discussed here, cover increased requirements for independence of “Competent Persons”.
I think this is all good for investors. But, as a geologist, please remember that we are only human after all.