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24-MMP-A4 Mine Valuation and Mineral Resource Estimation · May 2017

Question 5 of 18: The McKelvey Diagram – Resource/Reserve Classification

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, 2017-May. 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 1.1–1.6); candidates then select THREE of the five optional Questions 2–6 (20 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, transportation logistics); SME Mining Engineering Handbook, 3rd ed. (cost-estimating relationships, mineral exploration/evaluation stages, ore reserve classification); Evans, An Introduction to Ore Geology and Guilbert & Park, The Geology of Ore Deposits (ore deposit models); CIM Best Practice Guidelines and NI 43-101 (Canadian Securities Administrators).

Question 1.5: The McKelvey Diagram – Resource/Reserve Classification (6 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 →MeasuredIndicatedInferredRESERVESProven | ProbableRESOURCES (sub-economic at present)Measured | Indicated | InferredInferredResourcesUndiscovered /prospective
Fig. 1.5 – The McKelvey box diagram (USGS, early 1970s). Columns (x-axis) represent increasing geological assurance, left to right: Measured → Indicated → Inferred → Undiscovered. Rows (y-axis) represent increasing economic feasibility, bottom to top. The green block (Reserves: Proven, Probable) requires BOTH high assurance AND current economic feasibility; the blue block (Resources) covers material that is geologically known but sub-economic at present prices/costs; the reddish sliver (Inferred Resources) sits at low assurance regardless of feasibility.

The diagram's power is that resource CLASSIFICATION (geological assurance, x-axis) and reserve STATUS (economic feasibility, y-axis) are shown as two independent axes, so a body of mineralization can move between boxes along either axis without changing the other: infill drilling moves material rightward (Inferred→Indicated→Measured) without changing its economics, while a metal price rise or a cost-saving process improvement moves material upward (Resource→Reserve) without any new drilling. Reserves (top-left, green) require BOTH sufficient geological confidence (Measured or Indicated) AND demonstrated current economic viability at a stated cut-off – these are the only tonnes reportable as "Proven" or "Probable" Reserves under NI 43-101. Everything below the feasibility line but still geologically defined is a Resource (Measured, Indicated or Inferred, blue) – known but not currently economic, or not yet carried through a full feasibility-level economic study. Material to the right of even Inferred confidence, and everything below the geological-assurance axis entirely, is Undiscovered/prospective mineral endowment – a geological estimate of what might exist regionally, carrying no reportable economic status at all.