Improving Ore Reserve Estimates for Precious Metals Projects

INTRODUCTION The increasing price of gold and silver over the past 10 years has caused increasing activity in the exploration, evaluation and development of precious metals projects. Many of these deposits are relatively low grade and short lived which makes them economically sensitive to the major project variables such as metal price, capital cost, operating cost and of course, tonnage and grade. These deposits often have a high variability (a coefficient of variation -- o/u -- of 2 to 5) and an intermixing of ore and waste, making ac- curate ore reserve estimation difficult, especially when using traditional estimation techniques. Often, the estimation errors are not the 10-20% that we see in base metal deposits, but the errors in grade and tonnage can be as high as 50%, which can obviously have a very substantial impact on project Recent developments in geostatistics when coupled with a sound geologic under- standing of the deposit can significantly improve reserve estimates of these variable precious metals deposits. Examples will be given of actual deposits where the traditional estimates were significantly different from the mining reality. An attempt will be made to explain the applicable geostatistical tools with a minimum of geostatistical jargon and without complicated formulas. The key to improving the reserve estimates is a clear understanding of the deposit geology and especially the structural controls, the use of local estimation techniques that recognize the intermixing of ore and waste and the effect of selective mining on recoverable reserves, and the use of a global reserve estimation technique to check the results of local estimation. Geologic Controls The vast majority of gold and silver deposits being mined or developed in the western United States would be classified as epithermal deposits. These are formed by hydrothermal fluids (hot water) flowing upward through the rocks and depositing the precious metals as the fluids cool or reach areas of lower pressure or favorable chemical sites. These environments are similar to present day hot springs-type environments with some deposits being clearly associated with surface hot springs such as the Homestake McLaughlin deposit in northern California. These hydrothermal deposits can occur in sedimentary rocks resulting in deposits such as those of the Carlin district or the Jerritt Canyon deposit or the hydrothermal systems can occur in volcanic rocks forming deposits such as Round Mountain, Manhattan or Paradise Peak. The mechanisms of formation were similar in either case with the solution flow controlled by geologic structure and precious metals deposited when the conditions of temperataure, pressure and chemical environment were favorable. The gold and silver hearing solutions travel through permeable faults and fracture systems depositing the metals along these channels. The grades are often highest in the central parts of these conduits (veins) with lower grades in the surrounding rocks. An understanding of the nature, distribution and orientation of these plumbing systems is important to a realistic reserve estimate. The point to be emphasized here is that, good, sound geology in the form of geologic mapping, logging of rotary chip samples and a few carefully logged core holes can signifi- cantly improve an ore reserve estimate.