A Starting Point for Best Practices in the Classification of Mineral Resources and Mineral Reserves for Public Disclosure: The 2014 SME Guide

"INTRODUCTION The 2014 SME Guide for Reporting Exploration Results, Mineral Resources, and Mineral Reserves (the SME Guide) has been adopted by the Society for Mining, Metallurgy, and Exploration, Inc. (SME). The SME Guide is recommended as a minimum standard and a basis for developing industry best practices in the classification of Mineral Resources and Mineral Reserves for public and private purposes. The Guide is therefore strongly recommended to be used by members of this organization. The SME Guide was updated in 2014 to include CRIRSCO (Committee for Mineral Reserve International Standards) core definitions, and it is envisioned that the U. S. Securities and Exchange Commission (SEC) will adopt the SME Guide in 2016. However, as of the end of 2015, the SEC Industry Guide 7 remains the standard for the U.S. reporting of Mineral Reserves. This paper will cover the classification of Mineral Resources and Reserves, a discussion of Modifying Factors, and the classification definitions and guidelines. The definitions and guidelines contained in this report are from the SME Guide. FRAMEWORK FOR MINERAL RESOURCE AND MINERAL RESERVE CLASSIFICATION Figure 1 illustrates the classification of Mineral Resources and Mineral Reserves using the Guide. Mineral Resources are divided into three classifications of Inferred, Indicated, or Measured while Mineral Reserves include Probable and Proven classifications. These classifications reflect improved knowledge and confidence of the deposit from the top of the figure to the bottom. In other terms, the deposit risk also decreases from top to bottom.The relationships in Figure 1 reflect different levels of geoscientific knowledge and different degrees of technical and economic evaluation. Mineral Resources can be estimated on the basis of geoscientific information with input from other disciplines to establish reasonable prospects for eventual economic extraction. It was not too many years ago that the classification of a Mineral Resource was based on the evaluation of a limited set of factors that included spatial drill hole and grade distribution (kriging variance, as example), distance to the closest hole, and number of samples used to estimate a block grade. These are still important considerations, but classification following the Guide must also take into account sample integrity, sample QAQC, database integrity and completeness, geological understanding, and geological and grade or quality continuity. In addition, a general consideration of the Modifying Factors, to establish reasonable prospects for eventual economic extraction, adds complexity to the classification."