What is Ore & Who Can Call it Ore?
By definition, ore is “A naturally occurring solid material from which a metal or valuable mineral can be profitably extracted.” However, when it comes to public reporting and legally binding definitions, it isn’t so simple. Let’s dig in to the US SK-1300 requirements.
Data Collection and Reporting:
Establishing the viability of a mineral resource is expensive for the owner and vital for the investor. It’s nice to think that all the in-ground resources are economic to extract, but that is rarely (never) the case.
In order to maintain credibility with investors, mining companies must:
Show due diligence in exploration
show due diligence through sample collection
retain and publish assay reports from established (credible) assay companies
maintain credible leadership and management of the process by experienced professionals
The reasoning for showing competence and due diligence in each step of the exploration and reporting process is due to the natural transition from exploration to the development stage. Simply put, the exploration data must be sound in order to advance a project towards development. Reporting findings appropriately also brings credibility to the process and investors in the project. Most importantly, however, this protects potential investors and governments from fraud (i.e. BRE-X).
The purpose of the SK-1300 guidelines, then, is to provide governments and investors in determining the feasibility of a project as well as the potential benefits and risks of entering into an agreement. There are other standards for international mineral reporting (depending on the country where the company is headquartered), some examples of this are (links included):
Committee for Mineral Reserves International Reporting Standards (CRIRSCO)
International Council on Mining and Metals (ICMM)
Canadian National Instrument 43-101 (NI 43-101)
Australasian Joint Ore Reserves Committee (JORC)
SEC Industry Guide 7 (Now US Regulation SK-1300 as of January 2021)
In countries where there are no set guidelines or less stringent reporting standards, any of the above would suffice.
US Regulation SK-1300
Fundamentally, the goal of SK-1300 is to provide a more comprehensive understanding of mining properties to help investors make more informed decisions. These US regulations are closely aligned with CRIRSCO, maintaining a universal standard for reporting standards, and cover the following:
Reporting Company (Who owns the ore?)
Disclosure (How much ore is there?)
Technical Report Summary (Confirming the ore…)
Qualified Persons (Who gets to call it ore?)
Reporting Company: Who owns the Ore?
A reporting company is any company with mining operations that materially contribute to its business. Both the quantitative and qualitative factors of the overall business and financial conditions are considered. What does this mean?… It reflects the TYPE of company that owns a direct or indirect economic interest, operates the mine, or has a royalty or associated right to the project. It also reflects the STAGE of the company, where it will fall under one of three categories:
Exploration Stage (no property with mineral reserves)
Development Stage (preparation of mineral reserves)
Production Stage (extraction of mineral reserves)
How much Ore and what is it?
Now that we have covered who owns the ore, we can dig into how much ore there is and what category it falls under. There are two distinct categories mineral assets fall under:
Mineral Resources
Mineral Reserves
Mineral Resources are,” 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.” In essence, all of the mineral assets on-site fall under this category. Yeah, your deposit might not be economic now with $1600/oz gold, but if prices hit $5000/oz you’ll be rolling in revenues. Mineral reserves also fall under three separate categories based on quality and quantity of data available:
Inferred Mineral Resources “Quantity and grade or quality are estimated on the basis of limited geological evidence or sampling, using a standard of “more likely than not””
Indicated Mineral Resources “Quantity and grade or quality are estimated based on evidence or sampling, using a standard of reasonable certainty”
Measured Mineral Resources “Quantity and grade or quality are estimated based on conclusive geological evidence and sampling sufficient to test and confirm geological grade or quality with certainty”
Mineral Reserves are a little more detailed and defined as “ An estimate of tonnage and grade or quality of indicated and measured resources that, in the opinion of a Qualified Person, can be the basis of an economically viable project.” Mineral reserves cover all of the MINEABLE ore/mineral assets on site. Mineral reserves must be economic for extraction at the time of calculation to be considered so, and all economic factors of the operation are considered when determining mineral reserves (CAPEX, OPEX, SUSEX, Reclamation, etc.). Mineral reserves also fall under two categories:
Proven Mineral Reserves The economically mineable part of indicated resources (in some cases measured)
Probable Mineral Reserves The economically mineable part of a measured resource
Confirming the Ore…
Simply put, the Technical Report Summary is the bread and butter of mineral reporting. A TRS "covers the disclosure of exploration results for mineral resources/reserves prepared and signed off by a Qualified person on a specific date, based on and accurately reflecting information and supporting documentation. The Technical Report Summary has a minimum requirement for the content which covers:
Summary of mining properties both individually and aggregate
Overview of mining operations
Exploration results and activity of material importance to investors
Assumptions
Economic analysis supporting a property’s economic viability assessed by a discounted cash flow analysis
When to file a TRS can depend on a variety of factors, however, assessment of mineral resources/reserves related to mining operations, and upon any material change to that assessment relating to mining operations, and any changes to that assessment, must be filed with the SEC. These TRS’s can be filed based on a final feasibility study (least risk), or pre-feasibility study (most risk), even if the PFS is high risk, with cautionary and explanatory statements. Fundamentally, any material changes to reserves and resources need to be addressed and disclosed.
Who gets to call it Ore?
So after all of the above… Who gets to call ore, ore? A Qualified Person is by definition, “ A mineral industry professional who, at the time of the Technical Report Summary preparation, is a member in good standing in a recognized professional organization, with at least 5 years of relevant experience in the type of mineralization and type of deposit under consideration and in the specific type of activity that person is undertaking on behalf of the reporting company.” In simple terms, a QP must be a member of a Recognized Professional Organization with 5 years of relevant work experience OR a board authorized by US Federal, State, or foreign statute to regulate professionals in the mining, geoscience, or related field (having a Professional Engineers designation in the US or a P.Eng designation in Canada, for example).
A QP must be a member of a “Recognized Professional Organization”, what is that? Again by definition, “ An organization recognized within the mining industry as a reputable professional organization.” There is a list of requirements for professional organizations, the most common of which in the United States is the Society of Mining, Metallurgy & Exploration (SME).
Eligible members are admitted based on both academic qualifications and experience
Require and establish compliance with professional standards of ethics and competence
Encourage or require continuing professional development
Have the power to suspend or expel members regardless of where the member practices or resides with disciplinary powers
Provides a list of members in good standing
A pretty detailed list, but there are a variety of professional organizations both in the United States and abroad that are considered “professional organizations” as would be recognized by the SK-1300 definition.
Qualified persons also get all the liability. A QP is responsible for everything in a TRS, or their TRS section except the following:
Relying on macroeconomic trends
Relying on marketing information and plans within the control of the reporting company
Relying on legal matters outside of the QP’s expertise, such as statutory or regulatory interpretations
Environmental matters
Government factors
Accommodations of the reporting company’s commitments or plans to provide to local individuals or groups in connection with a mine plan
In essence, a QP is responsible for everything in the TRS that they calculate, define, or report other than items that they themselves have no control over (trends, regulations, government matters, etc.).
In conclusion:
Mining companies and ventures across the globe need solid government and investor relations. Potential investors and lenders use technical reports in order to check the credibility of the company and its projects. Governing agencies provide guidelines such as SK-1300 to ensure mineral reporting is consistent and standardized for ease of achieving solid public government and public relations as a mining company.
