Resources and Reserves: What an Investor Should Know

Mining companies often announce discoveries of "large resources" and claim their "reserves are growing." Many treat the terms as interchangeable — yet understanding the difference is essential to evaluate project risk, valuation, financing potential, and how much credence to give a story.

1. What a mineral resource is

A mineral resource can be defined as an estimate of ore in the ground that can reasonably be extracted at an economical scale. It is estimated through exploration geology, which gathers results across geophysical methods, sampling, drilling and geological modelling, among other methods.

Mineral resources are split into three types based on increasing confidence — Inferred → Indicated → Measured:

Category	Confidence	What the data shows & how it is used
Inferred	Lowest	Limited data. Continuity is suggested but not proven. Used for preliminary exploration planning.
Indicated	Moderate	Enough data to assume continuity between data points with reasonable confidence. Sufficient to estimate the economic viability of a project.
Measured	Highest	Detailed and reliable data showing continuity with high confidence. Used to plan the feasibility studies for the eventual mine.

2. How a resource is upgraded

As to how a resource is actually "upgraded" from one category to the next, there is no single fixed drill spacing or hard numerical cutoff in JORC that automatically moves a resource from one category to the next. These categories rest directly on the Competent Person's (CP) judgement of geological confidence, using the available quantity and quality of data and of modelling simulations.

That data includes increasingly tighter drill spacing, higher sample quality, demonstrated geological continuity, more reliable assay and density data, and ever stronger, higher-confidence geological models.

3. What an ore reserve is

An ore reserve, on the other hand, is the economically mineable part of a Measured or Indicated resource that has been demonstrated through pre-feasibility or feasibility level work — adjusted for the modifying factors: recovery, mining, dilution, environmental, infrastructure, economics, metallurgical and other factors that affect how much of the resource can actually be extracted. As modelling work progresses, the reserve naturally increases as more of the mineral resource becomes confirmed.

Ore reserves are separated into two categories — Probable and Proven:

Probable Reserve

The economically mineable part of an Indicated and/or Measured resource, adjusted for recovery, mining, dilution, environmental, infrastructure, economics, metallurgical and other factors that affect how much of the resource can actually be extracted.

Proven Reserve

Based on Measured resources and supported by the strongest level of geological confidence, as well as a high degree of confidence in the modifying factors used to convert the resource into a mineable reserve.

4. How a reserve is upgraded

As with resources, the "upgrade" from Probable to Proven is driven by improvements in data. That can include more detailed drilling, stronger continuity of grade and geology, better confidence in metallurgy and recovery, better mine design and cost assumptions, and clearer permitting, legal, infrastructure and schedule assumptions — with a pre-feasibility study completed as a minimum. The Competent Person has the direct say in the technical classification.

5. What it means for the investor

Resource classification is the framing on risk and opportunity. A lower-confidence resource is early-stage and somewhat uncertain — but this does not make it a poor opportunity. Such a resource offers potentially significant upside from further discovery, expansion and reclassification as more drilling is conducted.

In contrast, projects with more Indicated and Measured resources are generally easier to value, because the geology is better understood and the project is closer to becoming a reserve and, eventually, a mine. Again, more Indicated and Measured resource does not make a project "good": a well-defined resource can still be unattractive if the grade is too low, the metallurgy is poor, costs are high, the jurisdiction is difficult, or the project lacks a credible path to permitting, financing and development.

The real question investors should ask is what their objective is when investing in exploration and mining. A high-risk, high-upside investor may well prefer an early-stage project over one with higher-confidence resources, because it usually carries a lower valuation and larger growth potential. A more conservative investor may prefer stronger resource confidence — less geological uncertainty, and a relatively clearer road towards financing, production and the mine itself.

Investors should also look beyond the headline numbers. Factors such as grade, metallurgy, costs, jurisdiction, permitting, infrastructure and management quality can matter just as much as the resource category itself, and deserve the same scrutiny.