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24-MMP-A4 Mine Valuation and Mineral Resource Estimation · December 2014

Question 21 of 27: McKelvey Diagram

Nivaar worked solution (AI-drafted; not reviewed by a licensed engineer)

Notes on this paper

EGBC National Exam — Mining and Mineral Processing Engineering, 09-Mmp-A4 Mine Valuation and Mineral Resource Estimation, 2014-Dec. 3 hours duration; one handwritten 8.5×11 in reference sheet permitted (not an open-book exam); only approved Sharp or Casio calculators allowed. Question 1 is compulsory (40 marks, parts 1.1–1.7); candidates then select FOUR of the six optional Questions 2–7 (15 marks each) to complete the paper.

Reference texts: Isaaks & Srivastava, An Introduction to Applied Geostatistics (variogram modelling, kriging estimators, volume–variance relations); Hustrulid, Kuchta & Martin, Open Pit Mine Planning and Design (mine valuation, NPV and cut-off grade methodology, mineable reserves); Gentry & O'Neil, Mine Investment Analysis (Canadian mining taxation, smelter/refining contract terms, net smelter return); SME Mining Engineering Handbook, 3rd ed. (mineral exploration/evaluation stages, ore reserve classification); CIM Best Practice Guidelines and NI 43-101 (Canadian Securities Administrators).

Question 5.1: McKelvey Diagram (4 marks)

Question text not reproduced: the examination questions are © Engineers and Geoscientists BC. Open the official past paper (linked at the top of this page) to read the question, then follow the worked solution below.

Increasing degree of geological assurance →Increasing degree of economic feasibility ↑MeasuredIndicatedInferredHypothetical/SpeculativeReserves(Proven / Probable)Resources(Measured/Indicated/Inferred)
McKelvey (1972 USGS) box classification: economic feasibility (vertical) vs. geological assurance (horizontal). The economically feasible, high-assurance corner (green) is Reserves; the broader, lower-assurance/lower-feasibility field (amber) is Resources; the far right column (grey) is sub-economic or too speculative to classify at all.

The McKelvey diagram (often attributed to the USGS's V.E. McKelvey and published as a formal USGS classification scheme in the early 1970s, with a widely cited 1972/1976 refinement) plots two independent axes — increasing geological assurance (identified/measured → indicated → inferred → hypothetical/speculative) against increasing economic feasibility (economic → marginally economic → sub-economic) — producing a matrix of cells whose intersection defines each resource/reserve category. Its lasting contribution was to formally separate the geological confidence question from the economic viability question, rather than blending them into a single ambiguous "reserve" label, which had previously allowed considerable inconsistency (and occasional abuse) in how companies reported their mineral inventories.

NI 43-101's CIM Definition Standards adopt essentially the same two-axis logic: Measured/Indicated/Inferred Mineral Resources correspond to McKelvey's geological-assurance categories at (or above) the economic-interest threshold, while Proven/Probable Mineral Reserves correspond to the cells that are both high-assurance and demonstrated economically feasible (through a PFS/FS). NI 43-101 formalizes McKelvey's conceptual box into an enforceable Canadian securities-disclosure regime — requiring a named, accountable Qualified Person to certify which cell of the diagram a given tonnage actually occupies — precisely the discipline that prevents the "fraudulent reserves" problem referenced later in this exam (Question 5, introduction).