Mineral reserves and resources disclosures

Which codes govern mineral reserves and resources?

Most countries' codes follow a common template developed by CRIRSCO, the international committee of reporting code bodies. The main ones are the JORC Code in Australia and New Zealand, whose 2012 edition is still in force while a revised code is finalised; NI 43-101 in Canada, using the CIM definitions; SAMREC in South Africa; PERC in Europe; and subpart 1300 of Regulation S-K, known as S-K 1300, for SEC registrants, which has applied since 2021. Each requires estimates to be prepared or supervised by a competent or qualified person and published with supporting technical information.

What is the difference between resources and reserves?

• Mineral resources are concentrations of mineralisation with reasonable prospects for eventual economic extraction, classified by geological confidence as inferred, indicated or measured.
• Ore reserves, called mineral reserves in some codes, are the economically mineable part of measured and indicated resources, after applying modifying factors such as mining, processing, metallurgical, economic, marketing, legal, environmental, social and governmental factors, supported by at least a pre-feasibility study. They are probable or, with higher confidence, proved.

Inferred resources cannot be converted to reserves, and most codes restrict how they are used in economic studies.

What does IFRS require?

No IFRS standard requires disclosure of reserve quantities, and the codes, not IFRS, govern how they are estimated. But IAS 1 requires disclosure of the judgements with the most significant effect on the accounts and of the key sources of estimation uncertainty that could cause material adjustments within the next year. For a miner, reserves are usually among both, so companies explain how reserves are used in depreciation, impairment and provisions, which reserves base they use, and how sensitive the results are. Many also present the reserves statement in the annual report, outside the audited statements.

Where do reserves feed into the accounts?

Mineral reserves: tracing a downgrade

A mine has assets with a carrying amount of US$ 480 million, depreciated on a units of production basis over 40 million tonnes of reserves. A new estimate cuts reserves by 20% to 32 million tonnes, shortening the mine life from 10 to 8 years. Closure costs of 50 million are discounted at 5%.

The change is applied prospectively: nothing already reported is restated. But it raises depreciation for the rest of the mine's life, increases the rehabilitation provision because closure comes sooner, triggers an impairment test, and may reduce the net realisable value of low-grade stockpiles that will no longer be processed. See mining depreciation, mining impairment and mine rehabilitation provisions.

Why must reserves and accounting assumptions be consistent?

Reserves are estimated with a price assumption; so are impairment tests and stockpile values. If the reserves use a higher price than the impairment model, the mine plan and the accounts tell different stories, and regulators and auditors look for that. Companies should explain any differences, for example where reserves use a long-term consensus price required by the code while the impairment model uses the company's own price deck.

What do US rules require?

Subpart 1300 of Regulation S-K requires SEC registrants with material mining operations to disclose mineral resources and reserves, prepared by a qualified person and supported by technical report summaries, and requires the price assumptions to be justified. US GAAP itself, like IFRS, contains no reserve disclosure requirement for mining, unlike oil and gas, where ASC 932 requires reserve quantities in the financial statement notes. See exploration and evaluation in mining and mining accounting.

This guide is general information. It is not tax or legal advice for your situation.