Qualified Persons and Mineral Resource and Reserve Estimation

Published: Friday, 22 February 2013

One of the key components of mineral resource disclosure standards across the world is that projects are certified by somebody who is sufficiently “qualified” to make the necessary assessment. Don Hains* discusses what makes a Qualified Person and how this relates to resource reporting under NI 43-101.

Over the last two decades, classification standards governing the disclosure of mineral resources and reserves have moved from very loose and highly subjective, even arbitrary terminology, to much more rigorously defined terms.

Professional technical societies have worked closely with national securities regulators to ensure that enhanced classification standards are complementary to more rigorous disclosure requirements for companies seeking outside investment.

Nowhere is this more evident than in Canada, where National Instrument 43-101 (NI 43-101) has become the de-facto world model for mineral resource disclosure.

One of the key components of NI 43-101 and other mineral resource and reserve disclosure standards such as JORC and SAMREC, and of the securities legislation applying to disclosures, is the “Qualified Person” requirement.

This dictates that the resource and/or reserve estimate, the supporting work behind the estimate and any associated economic analysis such as a prefeasibility study (PFS) or feasibility study (FS), be prepared or supervised by one or more Qualified Persons (QP) in the case of Canada, or Competent Persons (CP) in the case of Australia, New Zealand, South Africa and the UK.

In Canada, a QP must be a member of one of the provincially legislated self-regulated geoscience or professional engineering associations. NI 43-101 also provides for members of numerous foreign professional associations to be recognised as QPs (see Table 1).

The term Qualified or Competent Person is a regulatory concept, not a licence to practice.

This means that the possession of a Professional Geologist/Geoscience (P. Geo) or Professional Engineer (P.Eng.) designation does not make one a QP or CP for all mineral projects.

As the Canadian Institute of Mining, Metallurgy and Petroleum’s (CIM) Resource and Reserve definition standards put it: “Qualified Person(s) should be clearly satisfied that they could face their peers and demonstrate competence and relevant experience in the commodity, type of deposit and situation under consideration”.

QPs and Best Practices

In order to assist QPs in their work, the CIM has developed a series of “Best Practice” guidelines to enhance consistency in the application of the resource and reserve classification definitions.

These guidelines are referenced in NI 43-101 and the accompanying Companion Policy (NI 43-101CP) and Form (Form 43-101F1) which detail the contents of specific sections of an NI 43-101 technical report.

Areas covered by the guidelines include:

- Mineral exploration best practices

- Estimation of mineral resource and reserve best practice

- Guidelines for reporting diamond exploration results

- Estimation of mineral resources and reserves best practices for industrial minerals

Specific guidelines have been issued for some minerals, including potash, bauxite laterite deposits, placer deposits and lithium brines.

Best Practice guidelines for mineral processing have also been issued to guide QPs in the preparation of Preliminary Economic Analysis (PEA), PFS and FS reports.

In managing or reviewing exploration work to support a resource or reserve estimate, the QP is responsible for ensuring best practices are used throughout the programme.

This should include, as a minimum:

- Design of exploration programme

- Overseeing exploration methods and data collection

- Design/oversight of QA/QC programme

- Design/management/supervision of sampling programmes

- Supervision of drill programme design and management

- Design/oversight of sample preparation methods

- Design/oversight of sample security programme

- Review/analysis of assay methods, laboratory selection

- Review of assay results and assay QA/QC programme

- Design/oversight of metallurgical test work

- Oversight of data records and data verification

- Mineral resource/reserve estimate and classification

- Adherence to safety, environmental and community relations requirements

Resource classification and industrial minerals

The inferred resource classification is often based on limited and highly variable data. The QP therefore proceeds on the basis that “confidence in the estimate is insufficient to allow the meaningful application of technical and economic parameters or to enable an evaluation of economic viability worthy of public disclosure”.

As confidence in the estimate increases, the QP may classify the resource as an indicated resource. This is a key step, as an indicated mineral resource estimate is of sufficient quality to support a preliminary feasibility study which can serve as the basis for major development decisions.”

The highest level of resource classification is a measured resource. A QP can classify a resource as measured only when “the nature, quality, quantity and distribution of data are such that the tonnage and grade of the mineralisation can be estimated to within close limits and that variation from the estimate would not significantly affect potential economic viability.”

Application of these terms to industrial mineral deposits can often be more difficult than for metallic minerals.

Not only must the QP understand the geology and geological controls on the deposit, but they must also consider the special characteristics of industrial minerals.

Quality factors such as particle size and particle size distribution, particle shape, density, surface area and chemical limitations, for instance, may limit the level of classification.

Requirements for specialised process tests to establish resource volume or tonnage, recovery and product quality may also impose more restraints on the category of classification than for a comparable metallic mineral deposit.

Additionally, market volume, pricing mechanisms and logistical factors come into play when classifying an industrial mineral resource as inferred, indicated or measured.

PEA to final feasibility

When a project moves into the advanced exploration stage, the QP must ensure that any shift in classification from resource to reserve is consistent with both the geological data and the required engineering data to support a PFS or FS.

The QP must be careful to distinguish between a PEA or scoping study which is designed to broadly determine if a project does exist, and the more definitive PFS or FS, which are intended to evaluate the project’s economic viability.

A PEA has a low level of confidence in both the geological and engineering data. It may use inferred resources as all or part of the production feed.

The QP highlights the uncertainty associated with a PEA, especially when inferred resources are used, through the use of appropriate cautionary language.

The more advanced PFS, by contrast, contains sufficient detail to enable classification of indicated resources and measured resources as probable and (potentially) proven reserves.

For a project to advance to the FS stage, the QP must have completed a “comprehensive technical and economic study of the selected development option for a mineral project” that includes assessments of mining and processing options as well as legal, social environmental considerations, amongst others, to demonstrate that extraction is justified.

An FS permits classification of at least part of measured and (possibly) indicated resources to proven and/or probable reserves, and often serves as the basis for a final investment decision by a project developer or financial institution.

Thus, the QP responsible for the resource and reserve estimate must be confident that “the nature, quality, quantity and distribution of data are such that the tonnage and grade of the mineralisation can be estimated to within close limits and that variation from the estimate would not significantly affect potential economic viability.”

Who Is a QP?

The key attributes of the Qualified or Competent Person are:

- Academic training and significant experience in geoscience, mining engineering, metallurgical engineering or other discipline related to minerals exploration, mining or minerals processing;

- Membership of a professional organisation (usually with legislated self-regulating authority) having licencing and disciplinary powers and a code of professional ethics;

-Significant experience relevant to the subject matter of the mineral project and the technical report.

QP’s role in PEAs and PFSs

The role the QP in a PEA is to:

- Indicate, at least on a conceptual basis, the amenability to a certain processing method and a generic level of recovery;

- Indicate the form and quality of the products (both valuable and waste), the range of capital cost and process operating cost of the processing facilities;

- Identify any potential fatal flaws; and

- Indicate scope and provide cost estimate of future test work.

The QP’s role in a PFS is to:

- Define what portion of the mineral resources can be classified as mineral Resources;

- Indicate the method and projected levels of recovery for a deposit, including evaluation of alternatives;

- Provide an assessment of variability of the deposit on recovery;

- Identify major unit operations and their contributions to process objectives;

- Indicate the factors influencing throughput, recovery, capital and operating costs; and

- Indicate scope and provide cost estimate of future test work and identify opportunities for further process optimisation.

*Don Hains is an industrial minerals economics specialist with more than 30 years of experience in geological exploration, development, and analysis of mineral properties. He has held product research and business development responsibilities with Fiberglas Canada Inc. and Domtar Construction Materials. He is registered as a P. Geo. in Ontario and is the author or editor of several monographs on industrial minerals.