With the introduction of CRIRSCO (Committee for Mineral Reserves International Reporting Standards) template based mineral asset disclosure S-K 1300 (Regulation S-K part 1300, 2019 (S-K 1300) by the United States (US) Securities
and Exchange Commission (SEC)), Mineral Resources are now required to be reported exclusive of Mineral Reserves for companies listed on the New York Stock Exchange. These ‘Exclusive Mineral Resources’, also referred to as ‘Mineral Resources additional to Mineral Reserves’, have been permitted in jurisdictions
outside the US for many years.
The reporting of an Exclusive Mineral Resource is considered by many to be more transparent for investors as the portion of Mineral Resources not converted to Mineral Reserves is clear. However, estimating the Exclusive Mineral Resource is
not a straightforward subtraction approach since the spatial conditions, modifying factors and reasonable prospects for eventual economic extraction all need to be considered. The term ‘eventual economic extraction’ is used in respect to Mineral Resources in the CRIRSCO template, the JORC Code 2012 edition and SAMREC Code 2016 edition, whereas S-K 1300 does not use the term ‘eventual’. These differences need careful consideration, not only when companies are reporting in multiple regulatory jurisdictions, but for the purposes of valuation of these remaining Mineral Resources.
The Exclusive Mineral Resources include ‘remnant material’ such as mineralised fill, mining remnants, pillars, or low-grade mineralisation which are recognised and discussed within the JORC and SAMREC codes, but which are not defined in the Canadian and US disclosure requirements.
From a valuation perspective, Practitioners must carefully consider the prospects for, and likely timing of, material to ultimately become mineable thereby producing a cashflow. Mineral Reserves typically inform the majority of material within the production schedule (albeit some Mineral Resources may be included for practical mining purposes) which are valued using a discounted cashflow approach, whereas Exclusive Mineral Resources and/or remnant materials are likely to be valued using
other market-based methods. This distinction in valuation methods in part reflects the Practitioners’ view regarding:
• Location of remnant material and its likely future recoverability (i.e. extension at depth or along strike, isolated, sterilised?)
• Likely timeframes to development or production
• Ability to satisfy ‘reasonable prospects’ criteria now and in future, by considering:
- Whether material that is currently sub-economic, but for which there is a reasonable expectation that it will become economic in future, may potentially be classified as a Mineral Resource and still has value
- Whether remnants have merely been ‘carried forward’ by depletion and hence may ultimately prove unrecoverable
- Whether remnants represent ‘marginal grade material’ intended for treatment towards the end of the mine life.
