‘Resources vs Reserves 101’ for mining investors (Twitter thread unrolled)

Understanding the difference between mineral resources & reserves is key to investing in mining and metals.

Here’s your ‘Resources vs Reserves 101’ to help you interpret news releases and reports:

Let’s get some definitions in first. Both are basically estimates of the grade and tonnage of economically interesting mineralisation existing in a deposit.

While tonnage is the size of said deposit, grade is the concentration of valuable minerals within it.

Going a bit deeper (pun intended 😜), a mineral resource is a deposit that has enough valuable materials, that using reasonable assumptions (normally, industry averages), COULD be mined at a profit.

On the other hand, a mineral reserve is the economically mineable part of a measured or indicated mineral resource (yes, you need a resource first), demonstrated at least by a pre-feasibility study. This study must include adequate information on the ‘modifying factors’.

There are 5 different classifications, within these two groups.

Resources can be:
• Inferred, or
• Indicated, or
• Measured

Reserves can be:
• Probable, or
• Proven

📊 by @CIMorg

Think of them as two symmetrical ladders in a videogame. At any time, you can move down or up within your current ladder, but to move from one to the other you need some specific situations, a ‘special power’.

In a natural favorable progression, companies can move forward (which is down one step), by increasing the level of geological knowledge and confidence. This is done mainly by drilling, drilling and yes, you guessed it, more drilling. But other methods also contribute.

Now, to move from resources to reserves, the special power is not additional exploration. Enter the ‘modifying factors’, or mining, metallurgical, economic, marketing, legal, environmental, social, and government factors that may strengthen -or weaken- the project’s potential.

Let’s break them further down.

Inferred resources are estimated with limited sampling & there is reasonable but not yet verified assurance of continuity of mineralisation & grade. Cannot be basis of a pre-feasibility or feasibility study, and thus cannot be converted to reserves

An indicated resource is the portion of a resource that was estimated based on reliable and detailed sampling from drill holes that are too widely spaced to confirm, yet close enough for reasonable assurance of continuity & grade.

Measured resources are the part of an estimate with a high level of confidence, based on reliable and detailed sampling from drill holes that are spaced close enough to confirm continuity & grade.

Indicated and measured can be both used as basis of engineering & economic studies

Indicated resources are normally converted to probable mineral reserves and measured resources to proven reserves. In some cases, where the modyfying factors are insufficiently known, measured resources may be converted to probable reserves instead.

Reserves can be reverted back to resources when a significant change in the modifying factors occurs. E.g., increase in costs, ESG issues, losing a license, etc.

This is a dynamic process and can shift more than once.

A range of factors and assumptions are used:
-Metal prices
-Cut-off grade
-Net smelter return (NSR) cut-off
-Capping high assay values (Nugget effect)
-Mine and mill recovery
-Metal equivalents
-Dilution

E.g., if metal prices increase, economics improve and worsen if they fall

All estimates are done by qualified or competent persons. A QP/CP is a geoscientist (geologist or mining engineer) with at least 5 years of relevant experience in exploration or mining, and is a member* in good standing of a professional association such as @TheAusIMM

Side note: someone with a geoscience degree doesn’t automatically become a QP. They must register in one of short list of professional bodies, have peer references, and verifications. I know because my dad was a QP, one of the first 5 in Argentina, and I did his in 2006!

There’s more to unpack but will leave it there for now.

Differentiating each when reviewing mining stocks will help with you greatly.

For more, get Rob Stevens book

If you thought this was useful, please retweet the first tweet of the thread so more people can see it!

Originally tweeted by Paola Rojas 🐝 (@paola_rojas) on June 24, 2022.


If you enjoy my content for investors and are ready for more, start here:



Keen to keep browsing? Here’s a collection of my best content:


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s