Mining and exploration companies listed on the ASX are required to report in line with the JORC code, but what is the JORC Code?
The Joint Ore Reserves Committee (JORC) Code sets the minimum standard for public reporting of Exploration Results, Mineral Resources and Ore Reserves in Australia and New Zealand.
Also known as the Australasian Code for Reporting of Exploration Results, Minerals Resources and Ore Reserves, the JORC Code provides a system for classifying resources and reserves.
It does this in terms of tonnage/grade estimates according to geological confidence and technical/economic considerations that are subsequently published in reports prepared by companies to inform investors, or potential investors and their advisors.
JORC was originally established in 1971 and several reports containing recommendations for the classification and public reporting of ore reserves were published until the first edition of the code was eventually published in 1989.
The main purpose of the Code was to establish consistency in reporting of the resources and reserves of Australian projects.
According to the 2004 edition of the Code it has been, “Adopted by The Australasian Institute of Mining and Metallurgy (‘The AusIMM’) and the Australian Institute of Geoscientists (‘AIG’) and is therefore binding on members of those organisations.
“It is endorsed by the Minerals Council of Australia, and the Securities Institute of Australia as a contribution to good practice.
“The Code has also been adopted by and included in the listing rules of the Australian (‘ASX’) and New Zealand (‘NZX’) Stock Exchanges.”
The JORC Code is used by mining companies to tell the market place what they have been able to find out about their respective projects in a uniformed manner.
As a company carries out any exploration activity that provides it with any bearing as to how it may be progressing, it must continually disclose any knowledge it learns concerning what may or may not be held in the ground within its tenements.
“Public Reports concerning a company’s Exploration Results, Mineral Resources or Ore Reserves should include a description of the style and nature of the mineralisation,” the Code says.
“A company must disclose any relevant information concerning a mineral deposit that could materially influence the economic value of that deposit to the company.
“A company must promptly report any material changes in its Mineral Resources or Ore Reserves.”
For the purposes of this reporting Mineral Resources are divided into three different categories according to their geological confidence, which is based on the location, quantity, grade, geological characteristics and continuity.
Once this geological evidence and knowledge has been ascertained a Resource can be estimated or interpreted to be classified to be in either the Inferred, Indicated or Measured category.
Each of these categories pretty much live up to their titles.
An Inferred Resource, for instance, is exactly that. It is a resource that infers a company is reasonably certain mineralisation exists, but it has yet to do enough drilling to obtain the appropriate information to be able to say how big it is or if it is economically viable to justify the construction of a mine.
“An ‘Inferred Mineral Resource’ is that part of a Mineral Resource for which tonnage, grade and mineral content can be estimated with a low level of confidence,” the Code tells us.
“It is inferred from geological evidence and assumed but not verified geological and/or grade continuity.
“It is based on information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes which may be limited or of uncertain quality and reliability.”
The next target for a mining company is to take its resource from the Inferred stage to become an Indicated Resource.
After enough work has been carried out on the Inferred Resource a company reaches a point where it has a much better idea as to the nature, quality, amount and distribution of whatever commodity it may be looking at.
At this stage the company is able to confidently interpret the geological framework of the project and perhaps to also be able to assume continuity of the mineralisation.
The company should now also be able to apply technical and economic equations to the resource to provide an evaluation of its economic viability.
“An ‘Indicated Mineral Resource’ is that part of a Mineral Resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a reasonable level of confidence,” according to the Code.
“It is based on exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes.
“The locations are too widely or inappropriately spaced to confirm geological and/or grade continuity but are spaced closely enough for continuity to be assumed.”
When the company is finally reaches the point where there is “no reasonable doubt”, in the opinion of the Competent Person [Another article for another time], overseeing the project that the nature, quality, amount and distribution of the data means the tonnage and grade of the mineralisation can be estimated to within close limits without any slight variations affecting its potential economic viability, it may then be categorised as a Measured Mineral Resource.
“A ‘Measured Mineral Resource’ is that part of a Mineral Resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a high level of confidence,” the Code says.
“It is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes.
“The locations are spaced closely enough to confirm geological and grade continuity.”
Of course this is just the beginning of the reporting process. Ore Reserves, “the economically mineable part of a Measured and/or Indicated Mineral Resource”, are also subjected to stringent reporting parameters.
Understanding the difference between Indicated, Inferred, and Measured Mineral Resources, is vitally important for any investor but it is just the tip of the iceberg when it comes to fully understanding what companies are reporting and what it actually means.