Mining Terms for Investors: Resource Estimates



Mining investing is filled with terminology that can be difficult to grasp if you are new to the industry. What is the difference between inferred and indicated resources? What does grade mean and how is it measured? Keep reading to learn more about 5 common terms used by mining companies that will help you better understand the industry. 


Used as a measure of the quality of ore (that is, the raw material obtained from mining), the grade of mined, raw ore is measured in grams per tonne (g/t) of ore. High-grade ore contains more resources per tonne. 

The first thing investors must understand is that “high-grade” mineralization is relative to the depth and size of the intersection. Generally, in modern large-scale mining operations, if a zone of intersection is less than 300 metres deep and the drill intercept is over 100 metres in thickness, then the threshold for a “high-grade” intersection is significantly lower. These parameters will differ depending on the type of mine, whether it is an open pit, underground, or smaller-scale mining operation. 

In terms of mine quality, higher-quality mines have higher ore grades while lower-quality mines have lower grades. Mining companies will often announce the depth and thickness of an ore body that they are exploring, or indicate whether the mineralized area is “open,” meaning that the full extent of the area has yet to be discovered and indicating the potential for higher grades. 

Inferred Resource

Inferred resources are the part of a mineral resource (the concentration of ore or material within a certain project area) for which the quantity, grade, and mineral content can be estimated with a low level of confidence. The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes.

Inferred resources may be upgraded to indicated resources with more exploration, but inferred resources cannot provide any data on meaningful economic viability and must not be converted to a mineral reserve. 

Indicated Resource

Indicated resources represent the quantity, grade, density, shape, and physical characteristics that can be estimated sufficiently to support production planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable information gathered through appropriate techniques to confirm both geological and grade continuity. 

An indicated mineral resource has a lower level of confidence than that applying to a measured mineral resource (the part of a mineral resource with enough characteristics to confidently support economic viability) and may only be converted to a probable mineral reserve.

Probable Reserves

Probable reserves are the economically mineable part of an indicated or measured mineral resource demonstrated by at least a preliminary feasibility study. This study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate that economic extraction is justified. 

Probable reserves also include diluting materials and allowances for losses which may occur when the material is mined.

Proven Reserves

The amount of resource contained under a piece of land with a 90% or greater probability of profitable extraction. These can have a significant effect on a company’s share price and are used in conjunction with probable and possible reserves by investors to estimate a company’s profits. 

According to the Canadian Institute of Mining, Metallurgy and Petroleum (CIM), placing a mineral resource in the proven reserve category implies that the qualified person (the person preparing the report) has the highest degree of confidence in the estimate. As such, the term should be restricted to that part of the deposit where production planning is taking place and for which any variation in the estimate would not significantly affect the potential economic viability of the deposit. 

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