Relating Resource and Reserve Assessments to International Code Standards

In the current boom time for coal mining, SRK frequently receives requests from clients to undertake resource and reserve estimations in line with various internationally recognized codes such as JORC – probably the most widely utilized code within the coal industry. These requests come from a variety of sources – from companies wishing to adhere to IFRS standards, to float on international stock exchanges, or to purchase other companies or licences; from financial institutions lending money for the purchase of new equipment, and so on. These codes require an examination not only of exploration, geology and mining, but also of other modifying factors, such as economic, environmental, geotechnical and licensing issues.

SRK can mobilize experienced multidisciplined teams to visit greenfield sites, open pit or underground coal operations and assess working conditions first hand, collect data and hold discussions with managers and technical specialists, before providing an independent report and statement of resources and reserves.

This process does not usually involve reworking geological data and models from first principles, although this can be done where necessary. Instead, it requires a critical examination of data collected and assessed by other professionals.

Often, these previous assessments of resources and reserves have been carried out to the standards of the country in which the deposit is located. In recent years SRK has carried out numerous such assessments in Russia and the former CIS countries, in China and Mongolia as well as elsewhere in the world. In SRK’s experience, exploration and resource/reserve assessments carried out in these countries have been done in line with strict standards by well-trained professionals and the process was comprehensive.

Often, far more drilling and analytical testing was carried out under the various state systems than would be undertaken by a privately owned enterprise in the Western world. However, this testing was not always confined to high recovery coal cores and critical analysis of the results by a geologist was often lacking. Most of the drilling in Russia, though, is backed up by extensive downhole geophysical logging.

Assessments are usually based on hand-drawn plans and manual calculations, without recourse to computer modelling. This doesn’t make the findings wrong, but it does take a long time to examine alternative options or modify constraints, such as a minimum thickness, quality parameters or working limits. Where the State assessments fall short of current international standards is in the application of truly economic and other modifying factors. The State decreed that reserves should not be wasted and current economics weren’t always an issue to be taken into account. Re-assessments were only done after major new exploration programmes had been completed or when a new mine plan was to be introduced. This has led to the inclusion of coal under the category of mineable reserves (the Industrial Reserves of the Russian GKZ system), which cannot now be considered a Proved or Probable Reserve, for example, under JORC guidelines. Seams may be too thin to work economically underground, they may contain so much dirt that washing costs become prohibitive, the sulphur contents may be higher than can be readily marketed, or open pit cut-off stripping ratios may be set at unprofitable levels.

At one open pit, overburden was being placed on future reserves in another seam, thus drastically increasing stripping ratios and decreasing profits. At another, SRK found an element of double accounting of reserves between an open pit and an adjacent underground operation working the same seam from inclines driven into the highwall of the open pit.

When carrying out these assessments, SRK would like to think that our geologists and engineers not only carry out a thorough investigation of the available data but are also able to assist the client and mine owner to get added value from SRK’s observations and advice. For example, it may be possible for a licence holder to relinquish one area of the licence, say, with an unfavourable seam section or faulting which will preclude economic longwall mining, in favour of an adjacent area with more favourable geology. At other operations, SRK can act as a facilitator and encourage a consistency of approach from a diverse group of geologists and engineers working for a single company but on a number of different pits or mines. On greenfield sites or relatively new operations, SRK can advise on the introduction of suitable software packages, build geological models, and carry out mine planning and pit optimization on these models in order to improve working methods, make monitoring more visible and increase profitability. Above all, SRK can encourage well qualified, capable and hard working professionals who have rigidly followed ‘the rules’ throughout their career to think more freely and consider a wider range of scenarios and issues.

Keith Philpott: kphilpott@srk.co.uk


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