QUANTIFIABLE MINERAL RESOURCE CLASSIFICATION - A LOGICAL

APPROACH

CHRISTINA DOHM
Mineral Resource Evaluation Department (MinRED), Exploration Division of
AAplc, Johannesburg, South Africa

Abstract. In terms of the reporting codes Mineral Resource classification is a function

of increasing confidence in the geoscientific information and the associated resource
estimate. An overview of Mineral Resource classification approaches is given; the
tendency in resource classification is to concentrate on the confidence associated with
the grade estimate. Uncertainties linked to tonnage and metal estimates are rarely
explicitly mentioned. As for the risk associated with the underlying geological model it
is often, if at all, only considered on a global rather than a local basis. The objective is
to present a quantifiable Mineral Resource classification guideline that recognises
uncertainty in both geological and resource models, considers confidence in estimation
of metal content for specified production periods and also takes into account both the
correlation of blocks in the block model as well the change of support between an
estimated block and the production period. This classification method builds on a
previous publication (Dohm, 2003), where a technique for assessing the combined risk
associated with both the geological and grade models was demonstrated. The final
result is a succinctly classified mineral resource model, which is based on objective
quantifiable classification rules that recognises the uncertainty related to subjective
interpretations of the available information.

1 Introduction

The classification of Mineral Resources and Ore Reserves forms an integral part of
Mineral Resource evaluation and reporting. Mineral Resource classification categories
correspond to an increasing function of geoscientific knowledge and confidence. A
Mineral Resource is classified as Inferred if the tonnage, grade and mineral content can
be estimated with low confidence. Indicated Mineral Resources represent that part of the
Mineral Resource for which tonnage, densities, shape, physical characteristics, grade
and mineral content can be estimated with a reasonable level of confidence. For
Measured Mineral Resources these attributes can be estimated with a high level of
confidence. Only Measured and Indicated Mineral Resources can be converted to Ore
Reserves. In terms of the guidelines of the reporting codes the Competent Person
(JORC, SAMREC) or Qualified Person (NI 43-101) is to provide a view of the relative
confidence the investment community should place on the published Mineral Resources
and Ore Reserves of mining and exploration companies.
2 CE DOHM

The main elements that affect the confidence in the resource estimate are the reliability
of the geological model, the continuity of the mineralisation, the sampling grid
configuration, the quality of the sampling data, and the reliability of the evaluation
method. The most important element is the interpretation of the geology and the
delineation of the resource (Stephenson, 1995). In practice the level of uncertainty in
the geological model is often not easily incorporated in the Mineral Resource
classification. In many cases global discount factors are applied to take account of the
unpredictability of the geological features.

A number of approaches that the author encountered during project reviews presented
here illustrate the evolution of Mineral Resource classification methodologies,
concluding with a holistic Mineral Resource classification guideline. This guideline
recognises uncertainty in both geological and resource models, considers confidence in
estimation of tonnage, grade and metal content for specified production periods and also
takes into account both the correlation of blocks in the block model as well the change
of support between an estimated block and the production period.

2 Questionable Mineral Resource classification strategies

Since the Bre-X scandal the spotlight has been focussed on Mineral Resource
classification methodologies. Two interesting but not recommended classification
strategies observed during project appraisals in recent years are discussed.

2.1 NUMBER OF SAMPLES PER BLOCK OR PER UNIT AREA

The crudest set of classification rules the author has come across is: One drillhole per
hectare identifies an Indicated Mineral Resource, more drillholes per hectare allow for
the resource to be classified as Measured and when there are no drillholes but the area is
within the mining lease it can be considered as an Inferred Mineral Resource.

This method does not take cognisance of the spatial continuity of the mineralisation, and
anisotropy, if it should exist, is also ignored. Change of support is also not considered
as 10000 square metres (1ha) can be achieved in a number of ways for example a
rectangle (40m x 250m) or square (100m x 100m) are equivalent in this scheme.

The relative locations of the drillholes are not recognised; for example four 2x2, 1ha
squares with a set of clustered drillholes close to the four touching corners will be
considered Indicated as will four 1ha squares, with evenly spaced drillholes at their
centroids, be classified as Indicated.

2.2 RESOURCES WITHIN A PRODUCTION PLANNING PERIOD OF RESERVES

In this two-dimensional example ordinary kriged estimates were produced for the entire
mine lease area. Blocks were assigned the average grade of the deposit when their
estimation became unreliable, e.g. the criterion for the minimum number of samples
in the search volume is not met. The classification rule applied here was established
from time-based production planning considerations. Resources were classified as a
QUANTIFIABLE MINERAL RESOURCE CLASSIFICATION A PRACTICAL APPROACH 3

consequence of the reserve classification and not the other way round. The argument
put forward was that grade control information acquired during mining activities would
be adequate to support the classification.

Planned 5-year and 20-year production period mining outlines were used to differentiate
between Proved and Probable Ore Reserves. The Proved Ore Reserves incorporated the
Measured Mineral Resources and the Probable Ore Reserves partially incorporated the
Indicated Mineral Resources. Resources lying beyond the 20 year planning limit were
also defined as Indicated if sufficient drilling information was available. The area
between the 20-year plan and the lease boundary were to be considered as Probable Ore
Reserves. Inferred Mineral Resources were non-existent. It is obvious that this set of
classification rules was unacceptable and required revision. On recommendation the
company adopted a quantifiable risk based classification strategy, still related to
production periods but independent of mining lease boundaries and also including the
confidence of the resource estimates.

3 Range of influence of the variogram model and Resource Classification

Methods in place for classifying resources are often based on the kriging variances of
grade estimates or functions of the variogram parameters and kriging parameters. The
semi-variogram of a mineral deposit reflects the spatial variability of the sample grades
at fixed distances and along a given direction. Snowden (1996) suggests interpreting
this spatial continuity to determine appropriate drillhole patterns to achieve various
levels of confidence in resource classification.

Resources are classified as Inferred when drillholes are further apart than the range of
influence of the variogram. The drill spacing at which a distinction between Measured
and Indicated is made is based on a rule of thumb and is taken as the distance equivalent
to two thirds of the total variability i.e. two thirds of the sill of the variogram model.

The ranges of the variogram are not sufficient for resource classification; the nugget
effect will for instance have a significant influence in this classification. If the nugget
effect is high and the structured component is relatively short, as is common for
Witwatersrand gold deposits, this classification method will be of little use; the majority
of the mineral resources will be classified as being Inferred resources.

4 Kriging variance and variations thereof in the classification scheme

One of the advantages of kriging estimation techniques is that when correctly applied
these techniques produce unbiased block estimates and ensure minimum estimation
variance known as the kriging variance. The kriging variance is dependent on the
variogram model, and the sampling grid configuration in relation to the block that is
being estimated. It is possible to calculate the kriging variance without producing the
estimate. It is thus not surprising that a number of classification schemes in the past
were based on the kriging variance: a few applications are given below:
4 CE DOHM

4.1 INTERPOLATION, EXTRAPOLATION AND RESOURCE CONFIDENCE

This classification rule was based on the following reasoning related to the type of
estimation. Measured Mineral Resources arise from interpolated blocks, which have
lower kriging variances and therefore higher confidence associated with them.
Indicated Mineral Resources occur when blocks are extrapolated, this means that these
blocks have higher kriging variances and thus a reduced confidence is associated with
them. Any blocks extrapolated beyond the range of influence of the variogram is
classified as Inferred blocks.

4.2 SAMPLE VARIANCE, KRIGING VARIANCE AND NUMBER OF SAMPLES

The Mineral Resources are classified as Measured if the kriging variance of the block is
less than the sample variance. If not Measured and at least 4 samples were within the
maximum range of influence of the block the resource is classified as Indicated.
Inferred Mineral Resources are those blocks that did not fall into the previous two
categories but with a kriging variance equivalent to that of blocks in the Indicated
category.

4.3 SAMPLE VARIANCE, BLOCK VARIANCE AND KRIGING VARIANCE

Blocks are classified as Measured if their kriging variance was less than the block
variance. Blocks classified as Indicated have a kriging variance less than the sample
variance but greater than the block variance. Blocks with an estimated mineralised
proportion less than 20 % were considered to be in the Inferred category.

5 Resource classification and relative variances

Using the kriging variance, as the only measure to quantify uncertainty in block grade
estimate, is questionable as the only relationship the kriging variance has to the local
sample grade values is through the variogram model, which is on a global average basis
rather than a local basis. This means that the kriging variance for a specific sample to
block configuration is a fixed value irrespective of whether the grade values are highly
variable or more uniform. It is clear that there is greater confidence in the estimate of
the latter block than that of the former block. This anomaly led to the introduction of
classification techniques that concentrated on relative variances that recognise the local
data configuration and variability.

5.1 RELATIVE KRIGING ERRORS AND THE NUMBER OF SAMPLES

Blackwell (1999) presented an argument for introducing the Relative Kriging Variance
(RKV); the ratio of the kriging variance and the kriged estimate squared. From this the
Relative Kriging Standard Deviation (RKSD) is defined as the square root of the RKV.
The RKSD is plotted against the number of samples used in the kriging of the block.
Two threshold values for the RKSD are selected arbitrarily, but based on experience, to
separate the Measured, Indicated and Inferred categories.
QUANTIFIABLE MINERAL RESOURCE CLASSIFICATION A PRACTICAL APPROACH 5

5.2 RELATIVE VARIABILITY INDEX

The implementation of the Relative Variability Index (RVI) as a measure of confidence

in the estimate was proposed (Arik, 1999). The RVI is the ratio of the square root of the
combined kriging variance and the kriged estimate of the block. The combined kriging
variance is the square root of the product of the kriging variance and the local weighted
average variance. The histogram of the RVI is analysed to determine thresholds for
distinguishing between categories, and the proposal is to use the 50th and 90th percentile
RVI values to identify the three different resource categories.

5.3 INTERPOLATION VARIANCE

Yamamoto (2000) introduced the Interpolation Variance (IV) as an alternative measure

of the reliability of ordinary kriging estimates. The IV reflects the local variability as
expressed by the data. It is the weighted average of squared differences between the
data values and the block estimate. An advantage is that this variance recognises the
proportional effect when present. This interpretation of the variance is however, only
valid if and only if all the ordinary kriging weights are positive.

6 Mineral Resource classification linked to a production period

The philosophy of applying a classification rule that considers the % error in the
estimate of the block being classified is within 15% with 90% confidence for a specific
production period has been around for a number of years, at least since the early
1990s. This is an empirical rule that has been accepted in the mining industry. The
specific production period should define the resource category: the shorter the
production period, the higher the confidence category, for a longer production period
the resource category is lower. Many variants of this rule are applied in practice.

The percentage error in the estimate of the mean is given by

s
Standard Error n 100% = s 1 100% = CoV
% error = 100% = 100%
Estimate z z n n

CoV is the coefficient of variation; s is the standard deviation and z is the average of
the samples.

Relative 90% confidence limits can be established from the product of the CoV/n and
1.645, the standard normal deviate.

If the resource blocks can be considered independent the relative variability of a block
can be converted to the equivalent of the variability in a production period by dividing
the coefficient of variation of the block in the resource model by n. Where n would be
the number of independent blocks that would be required to represent the production
period as shown below.
6 CE DOHM

COV
CoV = Block
Production Period n

The estimated resource blocks are correlated and the support of the blocks are relatively
small compared to the support of for instance the annual production. In general, if the
histogram of the sample support is skew and if the block support is small the histogram
of estimates will be skew and as the support increases the histogram of the estimated
blocks in the resource model will approach normality as per the central limit theorem.
This means that the histograms of estimates of production periods, which consist of
many resource blocks, are expect to approach normality and independence.

Mining, though, does not take place in independent blocks thus the effect of correlation
must be brought into account when an individual estimated resource block is being
classified in terms of production periods.

6.1 THE INDEPENDENT n

It is necessary to modify the 90% limits of the estimated blocks in the block model to
represent the equivalent variability of a production period. Therefore, a factor that takes
this correlation and the production period into account has to be determined to replace
the independent square root of n.

CoV CoV
CoV = Block ~ Block
Production Period n Factor Production Period
Thus
CoV
Factor Production Period = Block
CoV
Production Period

The problem is to find estimates for a representative CoV of blocks in the block model
and for the CoV of the production periods. As the resource has not yet been classified
the CoV of the production periods cannot be established. It is nonetheless possible to
determine estimates for these values from many realisations of a conditional simulation
exercise.

6.2 CONDITIONAL SIMULATION AND UNCERTAINTY ASSESSMENT

In an endeavour to attain quantifiable Mineral Resource classifications, the trend in the

mining industry has been towards the application of conditional simulation techniques.
A specific set of drilling or sampling results provides one view of the resource, a
different set will provide a different view, the luxury of a second campaign is however
not always available. A fairly quick and inexpensive method for obtaining a spectrum
of possible views of the global statistical and spatial characteristics of the orebody can
QUANTIFIABLE MINERAL RESOURCE CLASSIFICATION A PRACTICAL APPROACH 7

be obtained through conditional simulation. The variability in realisations of the

simulations can be interpreted to assess the uncertainty in the resource estimates.

It is assumed that conditional simulations are carried out to reflect both the uncertainty
in the geological model as well as the uncertainty associated with the grade model.
Dohm (2003) introduced a technique to combine conditional indicator simulations for
geology and conditional sequential Gaussian simulations for grade to assess the
combined uncertainty of the geological interpretation and the grade estimation.

It is, however, vital to realise that if this tool is applied to assess the risk associated with
the Mineral Resource then it is important to establish the integrity of the simulation
results. For example the number of simulations to be considered for assessment and
validations of the reproducibility of both variogram model and histogram of the
conditioning data are crucial. When these validations are not carried out, the results can
lead to incorrect Mineral Resource classifications that could have disastrous effects on
Ore Reserve classifications and investment decisions.

The task at hand is to establish from the conditional simulations, what the expected
coefficient of variation for the estimated grade, tonnage and metal content of a real
months or years mining would be.

6.3 THE 15% RULE A LOGICAL APPROACH

The purpose is to produce a measure of confidence in the resource estimate. The

specific classification rule considered here is based on two production periods, namely a
monthly production period for Measured Mineral Resources and an annual production
period for Indicated Mineral Resources.

Critical to this resource classification guideline are the following three CoV values

CoVLocal: a typical CoV for blocks of the same size as used in the estimation model.

CoVMonthly: CoV signifying the relative variability of a monthly production period.

CoVAnnual: CoV signifying the relative variability of an annual production period.

To establish the monthly and annual CoV values the moving block technique is applied.
Every realisation of the conditional simulation is cookie cut by likely production
periods at various positions within the orebody. This process is repeated for a
sufficiently large number of times, e.g. at least 120 months (10years) per realisation of
the simulation exercise.

Representative CoV values for monthly and annual production periods can be calculated
from the statistical analysis of these two supports.

The example considered is for a Zn deposit and the three critical CoV values obtained
from 40 simulations were:
8 CE DOHM

CoVLocal = 0.754 The relatively large CoV for a block in the resource model
confirms the earlier remark that blocks are correlated.

CoVMonthly = 0.1564 The CoV of monthly periods is less than that of the block.

CoVAnnual = 0.0667 The CoV of the annual production is as expected significantly less

The monthly adjustment factor is then calculated from

COV 0.754
Factor Monthly Production Period = Block = = 4.821
COV 0.1564
Monthly

The annual adjustment factor is then calculated from

COV
Factor Annual Production Period = Block = 0.754 = 11.304
COV 0.0667
Annual

For a Measured Mineral Resource where the error in the monthly production estimate
has to be within 15% with 90% confidence the threshold value is:

0.15 4.821
CoV = = 0.440
Measured 1.645

For an Indicated Mineral Resource where the error in the annual production estimate has
to be within 15% with 90% confidence the threshold value is:

0.15 11.304
CoV = = 1.030
Indicated 1.645

Each block in the estimation model is considered in turn and its coefficient of variance,
CoV block estimate is calculated

CoV block estimate = K
ZK

Where ZK is the kriged estimate and K is the kriging standard deviation of the block.
QUANTIFIABLE MINERAL RESOURCE CLASSIFICATION A PRACTICAL APPROACH 9

The CoV block estimate value of each block in the estimation model is then compared to
the above threshold values and the decision rules are:

If the CoV block estimate CoV Measured then the block is classified as Measured.

If CoV Measured < CoV block estimate CoV Indicated then the block is classified as
Indicated.

If the CoV block estimate > CoV Indicated then the block is classified as Inferred.

Once all the blocks in the estimation model have been classified the Measured and
Indicated Mineral Resources can be considered for conversion to Proved and Probable
Ore Reserves. It is recommended, that as with any automated mathematical process, the
classified Mineral Resource model be validated; at least visually.

The final result is a succinctly classified Mineral Resource model, which is based on
objective quantifiable classification measures that recognise the uncertainty related to
subjective interpretations of the available information.

7 Comments and discussion

It is essential to ensure the integrity of the simulations by validating the inherent and
spatial; variability of each realisation in terms of the histogram and variogram of the
conditioning data.

An advantage of applying the conditional simulation techniques is that once the

resources have been converted to reserves it is possible to compare the variability of the
actual mine plan with that expected from the simulations.

The author has come across two other approaches for determining n, the number of
independent blocks to use in the above classification. The first method determines n
as the number of independent production blocks required to reach the range of the
variogram. In the second method n is calculated as the ratio of the production period
tonnage divided by the block tonnage. In both cases the square root of n is used as
the divisor for the CoV to determine the 90% confidence limits.

The classification guideline proposed does not assume that the variance reduction factor
should be in terms of a square root and uses CoV measures to address the change of
support effect.

8 Conclusion

A number of Mineral Resource classification methodologies were discussed showing

the development of understanding and incorporating uncertainty associated with the
grade estimates. The final classification guideline presented is based on the assessment
10 CE DOHM

of conditional simulations that have incorporated the uncertainty in the interpretation of

geological boundaries, tonnage, grade and consequently metal content estimates and
likely production periods

The proposed classification technique does not replace the resource estimation; rather it
serves as an additional tool to quantify confidence in the resource evaluation model.

It is further appreciated that particular Mineral Resource classification techniques are

appropriate for specific situations.

A fundamental concept in Mineral Resource classification is the need for common sense
and experience to prevail and it is therefore recommended that any automated
mathematical technique applied be scrutinised.

9 References

Arik, A. (1999), An Alternative Approach to Ore Reserve Classification. 1999 APCOM Proceedings, SME.
Denver, p. 45-53
Blackwell, G (1998), Relative Kriging Errors A Basis for Mineral Resource Classification, Explor. Mining
Geol., Vol.7 Nos 1 and 2, p. 99-105.
Dohm, C.E. (2003), Application of simulation techniques for combined risk assessment of both geological and
grade models an example. 2003 APCOM Proceedings, SAIMM, Cape Town, p. 351-354
Deutsch, C.V. and Journel, A.G., GSLIB: Geostatistical Software Library and Users Guide, 2nd Edition,
Oxford University Press, 1998.
Goovaerts, P., Geostatistics for Natural Resources Evaluation, Oxford University Press, 1997.
Isaaks, E.H. and Srivastava, M.R., An Introduction to Applied Geostatistics, Oxford University Press, 1989.
Journel, A.G. and Huijbregts, C.J., Mining Geostatistics, Academic Press, 1978.
Snowden, D.V. (1996), Practical Interpretation of Resource Classification Guidelines, AusIMM Annual
Conference Procedings, Perth March 24-28, p. 305-308.
Stephenson, P.R. and Stoker, P.T. (2001), Classification of Mineral Resources and Ore Reserves, Mineral
Resource and Ore Reserve Estimation, The AusIMM Guide to Good Practice, Monograph 23, p. 653-659
Yamamoto, J.K. (2000), An Alternative Measure of the Reliability of Ordinary Kriging Estimates,
Mathematical Geology, Vol32, No. 4, pp489-509.