How important is ore variability? The ethics of feasibility studies

Transcription

1 Council for Mineral Technology How important is ore variability? The ethics of feasibility studies 5 June 2009 Alan McKenzie Manager: Minerals Processing

2 Bre-X History 101 Junior Canadian mining company. In 1993 bought the Busang Gold Deposit in Indonesia. In 1995 announced significant amounts of Gold. Increased from 30Moz to 70Moz in Market capitalization of US$ 4.4 Billion. Share price increased from a few cents to over $280 per share.

3 Bre-X Continued Placer Dome failed in a takeover bid. Indonesian President intervened with a deal involving Freeport-McMoRan (Feb March 1997 Freeport-McMoran began due diligence. 17 March Bre-X geologist fell out of a helicopter. 26 March Freeport- McMoran announced insignificant gold.

4 Reporting Codes for Exploration Results Bre-X precipitated Stock Exchanges requiring reporting codes for publically traded stocks. Canada NI Australia JORC South Africa SAMREC + Others These have evolved in the past 12 years and there is much commonality.

5 The various reporting codes have lead to attempts to form a unified code. Committee for Mineral Reserves International Reporting Standards (CRIRSCO). Recognized by CRIRSCO International Accounting Standards Board (IASB) United Nations Economic Commission for Europe (UNECE) International Council on Mining and Metals (ICMM)

6 SAMREC The South African Code for the Reporting of Exploration results, Mineral Resources and Mineral Reserves. Under the Joint Auspices of the Southern African Institute of Mining and Metallurgy and the Geological Society of South Africa. Accepted by the JSE.

7 Basics

8 Mineral Resources Drilling sampling programme to calculate resources is designed by a geostatistician. Sampling frequency etc is dictated by the geostatistician. Full QA/QC procedures and protocols. The project principals have little choice but to comply if they want a compliant resource.

9 Competent Person All codes are based on a Competent Person. Must have a minimum of five years experience relevant to the style of mineralization and type of deposit or class of deposit under consideration. If estimating Mineral Resources experience must be in Mineral Resource estimation. If estimating Mineral Reserves experience must be in Mineral Reserve estimation. Must be able to face and defend in front of their peers.

10 Competent Person Currently on most feasibility studies the Competent Person is from a geological background and the CP report is signed off by this person. The codes require that mineral reserves are calculated at an equivalent level of scrutiny to mineral resources.

11 Mineral Resources Drilling sampling programme to calculate resources is designed by a geostatistician. Sampling frequency etc is dictated by the geostatistician. Full QA/QC procedures and protocols. The project principals have little choice but to comply if they want a compliant resource.

12 Mineral Resources

13 Mineral Reserves In contrast during metallurgical assessments, often supplied with the left over geological samples fro the Resource calculation. Usually the Metallurgical Competent Person is unhappy with the amount and representativity of the metallurgical samples. If we were required to sign off as the CP we probably would not.

14 Why

15 Problem By and large the metallurgical factors for the Mineral Reserves calculations are not determined to anywhere near the level of scrutiny that they should be. The geological Competent Person is signing off the CP full report, even when a metallurgical CP would probably not do so. NOTE: This is more of a problem in the entry level of the industry.

16 Problem There has not yet been a Metallurgical Bre-X, although some, e.g. Ravensthorpe are starting to be significant (equipment rather than metallurgy). Much investor money has been lost because of inadequate development work. Most problems with plants is that the plants do not receive the ore they were designed for.

17 Crystal Ball There is a changing paradigm. Multiple Competent Persons will have to sign the CP report (in cases as many as 15). Changes being lead by Canada. Metallurgists will start to sign off on the metallurgical work as CP s Will have to apply levels of professionalism, common sense etc. Will no longer be able to accept any samples for testwork and development.

18 Competent persons and compliance Workable model One large pilot plant sample representative of something. Many smaller lab samples for testing of variability. Full QA/QC procedures. Build a complete picture and do not sign a Competent Person s report until you are happy and can defend it. If it was your investment money would you be happy.

19 Reporting codes All members of the SAIMM and GSSA are required to report according to the SAMREC code whether you are signing as a Competent Person or not. If you willingly breach this or do not object in a case where you know your results will be over interpreted you can be disciplined for malpractice. ROPO lists give reciprocity.

20 Crystal Ball 2 Between now and Mintek 100, I predict that there will be significant changes in reporting compliance. Will be one of the major changes in metallurgy in the next 5 to 10 years.

21 Thank you