JORC resources versus reserves

When a mining company says it holds “500 million tons,” the next question is which 500 million. The JORC Code, the Australasian reporting standard used widely across the industry, draws a hard line between a resource (what geology suggests is in the ground) and a reserve (what can actually be mined at a profit). Conflating the two is how retail investors overpay.

Resources: confidence in the geology

A mineral resource is an estimate of material in the ground with reasonable prospects for eventual economic extraction. It is graded by how well the geology is understood, in rising order of confidence:

• Inferred: estimated from limited sampling. The lowest confidence; not a basis for economic decisions on its own.
• Indicated: enough drilling to assume continuity with reasonable confidence.
• Measured: dense sampling, high geological confidence.

Reserves: confidence in the economics

A reserve is the part of a Measured or Indicated resource that survives the “modifying factors”: mining method, processing recovery, commodity price, costs, permitting, and environmental constraints. Inferred material can never become a reserve until more drilling lifts it to a higher category. Reserves come in two grades:

• Probable: derived from Indicated (or sometimes Measured) resources after modifying factors.
• Proved: derived from Measured resources, the highest confidence reserve category.

How material moves up the ladder

1. Inferred

   A resource, not bankable

   Sparse data. Cannot be converted directly into a reserve.

2. Indicated / Measured

   Higher-confidence resource

   More drilling raises geological confidence.

3. Modifying factors

   The economic test

   Price, cost, recovery, permits, and method are applied.

4. Probable / Proved

   A reserve

   What can be mined at a profit under those assumptions.

Why it matters to an investor

Reserves are not static. They shrink when commodity prices fall (some ore is no longer worth mining) and grow when prices rise or costs drop, even with no new drilling. A headline resource number tells you the size of the deposit; the reserve, and the price assumptions behind it, tell you what the business can actually sell.

Resource is geology. Reserve is economics. Only one of them pays dividends.