Reporting Metal Equivalents and Industrial Mineral Exploration Results, Resources and Reserves
The AIG Complaints Committee has recently dealt with several complaints relating to reporting in compliance with the JORC Code (2012). These have related to the use of metal equivalents and industrial mineral resources. The complaints raised suggest that these are aspects of public reporting in compliance with the JORC Code (2012) that are not completely understood by some Competent Persons.
The use of metal equivalents is, without doubt, convenient when reporting resources for polymetallic deposits, where the value of the principal mineral of economic interest is supplemented by other, less abundant or less valuable components. Reporting of metal equivalents is covered by Clause 50 of the JORC Code (2012). Clause 50 sets out minimum conditions for metal equivalent reporting that include:
- Reporting of individual grades for all metals included in the equivalence calculation.
- Assumed commodity prices for all components (prices must be stated explicitly – it is not acceptable to refer to “prevailing spot prices”, company “long-term planning prices”, “broker consensus prices” or similar concepts. Some latitude is provided in Clause 50 for price information that is considered to be commercially sensitive, where companies are able to provide sufficient information for investors to understand the methodology used to determine the prices used.
- Assumed metallurgical recoveries for all components, with a clear explanation of how the recoveries used were determined (e.g. metallurgical test results, detailed mineralogy, performance of similar deposits etc.).
- A clear statement that the company believes that all components contributing to the metal equivalence value used have potential to be recovered and sold.
- The metal equivalence calculation formula used.
The subject of the equivalence calculation should be the metal that contributes most value to the result. If not, an explanation of why another metal has been used must be provided.
A metal equivalent cannot be reported if meaningful metallurgical recovery information is not available.
Note that metallurgical recoveries, alone, present a simplistic view of mineral value. Polymetallic mineralisation frequently contain components that detract from mineralisation value. In addition, smelter contracts rarely provide payment for the full value of minor components, with smelters and refiners frequently retaining part, if not all of their value. The proportion of value returned to producers also depends on the grade of the minor component in question. Best practice should dictate reporting of metal equivalents used in statement of Ore Reserves taking these factors into account and which should be available for projects at that stage of development.
Reporting of in-situ or in-ground values for polymetallic mineralisation is explicitly discouraged by Clauses 28 and 51 of JORC (2012). Financial metrics for describing resources and reserves are onsidered to be inconsistent with the JORC Code’s underlying principles of transparency and materiality.
Reporting industrial minerals Exploration Results, Mineral Resources and Ore Reserves differs from reporting results for metalliferous deposits because their prospects for economic development are determined more by their quality and conformance with physical and chemical specifications, than their concentration. In essence, an industrial mineral is valued, sold and utilised in mineral form, rather than refined to produce a metallic component for sale. Industrial minerals include, for example, talc, limestone, gypsum. It also includes minerals like graphite, which may be used industrially because of their carbon content, but physical factors such as flake yield and size are the principal determinants of value.
Reporting of industrial minerals is covered by Clause 49 of the JORC Code (2012).
Assays are not always relevant in industrial mineral evaluation and reporting, where reporting of physical properties and compliance with established product specifications is more important in assessing prospects for eventual economic extraction. This frequently requires more work to determine than mineral abundance, and may prevent reporting of Mineral Resources until this work has been completed. A Mineral Resource must have reasonable prospects for eventual economic extraction, which need to be stated by Competent Persons in compliance with the JORC Code’s underlying principles of transparency and materiality.
Competence is a fundamental concept in public reporting in compliance with the JORC Code, set out in Clause 4 of JORC (2012). Clause 11 of the code states that “a Competent Person must have a minimum of five years relevant experience in the style of mineralisation or type of deposit under consideration and in the activity which that person is undertaking”,
What constitutes relevant experience is critical in determining competence. This can be a difficult area in which exercise of professional judgement is required.
It can be useful to ask the question “would I be considered competent by a panel of my peers?” This, essentially, may be how competence is determined should it be questioned in a professional practice complaint. AIG members are able to discuss competence, without prejudice, with the Complaints Committee should advice be required.
Chair, Complaints Committee