B4_2024_L7 SAMREC Code PDF - Mining Past Paper

Linda Iaccheri School of Geosciences [email protected] GEOL3051A Block 4 L6: SAMREC Code Resources Vs Reserves Bonikro Mo-Au opencast, Ivory Coast Resource portfolio: South Africa has huge resources in a huge number of...

Linda Iaccheri School of Geosciences [email protected] GEOL3051A Block 4 L6: SAMREC Code Resources Vs Reserves Bonikro Mo-Au opencast, Ivory Coast Resource portfolio: South Africa has huge resources in a huge number of minerals needed by the world. Sits high in terms of global ranking in terms of these resources. In SA the mining industry is controlled by: MPRDA – Mineral and Petroleum Resources Development Act Mining Charter – which give rules on how companies can operate and targets that must be achieved. SAMREC – which we will discuss today. Mineral and Petroleum Resources Development Act MPRDA Mineral and Petroleum Resources Development Act MPRDA Mineral and Petroleum Resources Development Act MPRDA  SAMREC CODE It is about public reporting of mineral resources and reserves. Why do we need a code in Public Reporting of mineral resources? When the code in Public Reporting started? Public Reports  To promote International best practice in reporting of Mineral Exploration results, Mineral Resources and Mineral Reserves  To inform investors or potential investors and their advisers The reports include but are not limited to: - annual and quarterly company reports, - press releases, information, - Memoranda, - technical papers, - website postings and - public presentations. Background The necessity to introduce CODE in reporting of mineral resources started in Australia in the late 1960s due to concerns about unacceptable reporting practices – the so-called “Poseidon Nickel boom and bust” Australian Stock exchanges responded with proposal of self-regulate, resulting in the Australasian Joint Ore Reserves Committee (JORC) established in 1971 Events during the 1990s such as the BreX Affair (1997) caused re- examination by the regulatory bodies Poseidon Bubble in the Australian Stock Market During the 1960’s, nickel was in extremely short supply in the world. the demand for nickel was booming given the Vietnam War  the prices of nickel shot up in the global markets. Poseidon No Liability (NL) was a company that was listed on the Australian stock exchange: In 1969, the media declared that Poseidon NL had located major nickel deposits in Western Australian region This led to a mania in the stock market and Poseidon’s lowly prices stock doubled in value overnight! Poseidon Bubble in the Australian Stock Market Estimates were just wild guesses as there was no detailed study available, which backed the tall claims made for a very long time Soon the markets realized that the entire activity was speculative in nature  The market was basically driven by multiple false assumptions. The government responded to the public clamor by creating a better regulatory mechanism that would ensure that no more bubbles like the Poseidon bubble were allowed to flourish in the markets.  Starting of Joint Ore Reserves Committee (JORC) in 1971  Bre-X Scandal Bre-X is a Canadian Junior exploration company based in Calgary Exploring for Au deposit Busang, Indonesia May 1990: Bre-x incorporated by David Walsh; at share price of Can$0.30 1992-1993: Exploration at Busang on advice of John Felderhof, Michael de Guzman hired as exploration manager – initial drilling 1994-1995: drilling ramps up and share moves to $14.87 Oct 1995: declaration of 10Moz to 30Moz of Au share price goes to Can$50 Bre-X Scandal April 1996: list on TSX and hits $180 May 10, 1996: stock at $280 June 1996: Announces 39 Moz Au July 1996: announces 47 Moz Au Feb 1997: agreement reached with Indonesian government, Indonesian investors and Freeport to develop a mine Feb 1997: estimate at 71 Moz Au, Walsh says as much as 200 Moz Au Bre-X Scandal 12 March 1997: due diligence by Freeport – only minor amounts of Au was actually found in the samples, Freeport demands to meet geologist De Guzman about the sampling 19 March 1997: De Guzman falls to his death from a helicopter over the Indonesia jungle Suicide? Murder? Fake death? Bre-X Scandal 21 march 1997: Indonesian paper first to report that Busang may not contain much Au; Bre-X shares drop 13% to $152 26 March 1997: Bre-X trading halted after report indicating that Busang deposit contains “insignificant amount of Au” 27 March 1997: Bre-X shares plunge to $2.50 when trading resumes; panicked investors sell 5 May 1997: Report by independent mining company confirm no gold in Busang; Bre-X shares fall to $0.80 and continue plunging, soon delisted; investors lose everything Bre-x Litigation Nov 1997: Walsch resigns June 1998: Walsch dies of a brain aneurysm 11 May 1999: Ontario securities commission lays 4 counts of illegal trading and 4 counts of authorising false press releases against Felderhof 31 July 2007: Felderhof is acquitted of all eight charges of illegal insider trading and approving false press releases  The mining industry is a vital contributor to national and global economies; never more so than at present with soaring demand for the commodities that it produces. It is a truly international business that depends on the trust and confidence of investors and other stakeholders for its financial and operational well-being. Unlike many other industries, it is based on depleting mineral assets, the knowledge of which is imperfect prior to the commencement of extraction. It is therefore essential that the industry communicates the risks associated with investment effectively and transparently in order to earn the level of trust necessary to underpin its activities. Importance of standardized reporting codes Minerals are depleting Assets Mineral projects are based on imperfect knowledge prior to the commencement of extraction Developing a mining project requires: Technical expertise Substantial long-term capital investments Carries numerous risks Globally there are two dominant systems of mineral resources reporting: United Nation Framework Classification Committee for Mineral Reserves (NFC) developed by United Nations International Reporting Standards Economic Commission in Europe (CRIRSCO) developed by leading (UNECE) professional bodies from mineral rich countries Strictly a three-dimensional (EFG-Economic, Public Reporting Standard for Mineral Feasibility, and Geology axis) Classification Resources and Reserves Framework Mainly used in countries where mineral Almost all the mineral rich countries and deposits are developed primarily through developed economies in the world government funding with little or no participation of private funding Australasia, Brazil, Canada, Chile, Colombia, Europe, India, Indonesia, Kazakhstan, Mongolia, Russia, South Africa, Turkey, USA  CRIRSCO Family of Codes Committee for Mineral Reserves International Reporting Standards (CRIRSCO) comprises fourteen self- regulating national bodies www.crirsco.com Currently 14 members Why CRIRSCO? CRIRSCO Style of reporting is based on the principle of: 1. TRANSPARENCY 2. MATERIALITY 3. COMPETENCE TRANSPARENCY, MATERIALITY and COMPETENCY TRANSPARENCY Sufficient information clearly presented without any ambiguity MATERIALITY All relevant information be presented for the investors and their professional advisers to make well-informed decision based on reasoned and balanced judgement COMPETENCY Public Report be based on work that is the responsibility of suitably qualified and experienced persons who are subject to an enforceable professional code of ethics and rules of conduct Why does it matter?  Mining is an international business  Vital contributor to national and global economics  Requires clear communication of risks  Depends on the trust and confidence of investors and other stakeholders for its financial and operational well-being APPLICATION - SAMREC CODE A required minimum standard for public reporting of exploration results, mineral resources and mineral reserves. The code is applicable to the reporting of all styles of solid mineralisation or economic deposit The code does not apply to Oil, Gas and Water Public reports with the purpose of informing investors or potential investors and their advisors South African Framework SAMREC CODE RELATIONSHIP – MINERAL RESOURCES & MINERAL (ORE) RESERVES In-situ Mineable mineralisation production estimates estimates Mineral Resources and Reserves RELATIONSHIP – MINERAL RESOURCES & MINERAL (ORE) RESERVES In-situ mineralisation (Mineable production estimates) estimates RELATIONSHIP – MINERAL RESOURCES & MINERAL (ORE) RESERVES (Mineable production estimates) (In-situ mineralisation estimates) RELATIONSHIP – MINERAL RESOURCES & MINERAL (ORE) RESERVES (In-situ (Mineable mineralisation production estimates) estimates) The Resource and Reserve are controlled by the fact we need to increase our geological knowledge; not mining knowledge which consumes the commercially viable part of the resource, but geological knowledge. MINERAL RESOURCES & MINERAL (ORE) RESERVES: the Modifying Factors (In-situ (Mineable mineralisation production estimates) estimates)  The MODIFYING FACTORS (Mineable production estimates) (In-situ mineralisation estimates) This is the part which is the hardest to predict and hardest to control which is why we MUST constantly assess the risk = RISK ASSESSMENT You cannot get from resources to reserves without passing these aspects – there are NO SHORTCUT What are the modifying factors in the mining industry? Categories of Modifying factors: 1.Mining factors (Geotechnical and groundwater parameters; mining method selection; dilution factors; recovery factors; depth of mining) 2. Metallurgical factors (processing: delineation of ore types; testwork; mineralogical factors – ore deportment; selection of processing method) 3.Environmental factors (Environmental Impact Assessment; rehabilitation and mine closure planning) 4.Infrastructure considerations (transport routes; power supply; water supply; facilities; accommodation options) 5. Economic factors (cost factors e.g. capital cost, operating cost; revenue; financial analysis) 6. Market assessment 7. Social factors (community engagement; social licence to mine, ASM, unions, etc) 8. Legal and Governmental factors (security of tenure; permit requirements; taxes; royalties) Mineral resources Reports are signed by a COMPETENT PERSON  A ‘Competent Person’ is a person who is registered with SACNASP, ECSA or PLATO, or is a Member or Fellow of the SAIMM, the GSSA or a Recognised Overseas Professional Organisation (ROPO).  A Competent Person must have a minimum of 5 (five) years experience relevant to the style of mineralisation & type of deposit or class of deposit under consideration & to the activity which that person is undertaking.  If the Competent Person is estimating or supervising the estimation of Mineral Resources, the relevant experience must be in the estimation, assessment & evaluation of Mineral Resources.  If the Competent Person is estimating, or supervising the estimation of Mineral Reserves, the relevant experience must be in the estimation, assessment, evaluation & assessment of the economic extraction of Mineral Reserves. CLASSIFICATION RESOURCES & RESERVES  Mineral Resources:  Estimated by geologists.  Basis is geoscientific data with input other disciplines.  Mineral (Ore) Reserves:  Estimated Input.  Range of disciplines under supervision competent person  Considers Factors affecting Extraction – Mining / Metallurgical / Economic / Marketing / Legal / Governmental / Environmental / Social.  Concerns such factors that may necessitate measured resources being classified as probable reserves.  Any mining company that is listed on the stock exchange must every year make public statements about their resources and reserves  You can google the “mining company” statement of resources and reserves  This is important if you have to get prepared for an interview for a position in a mining company  In the reports you can see the mining “health” of the company and you can get familiar with the name of the operations  Mine Value Chain Exploration 3D modelling Resources Modifying Reserves Grade Control Estimation Factors Estimation Classification & Classification & Production & Reporting Reporting Reconcilliation