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24-MMP-A4 Mine Valuation and Mineral Resource Estimation · December 2018

Question 20 of 29: The 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, 2018-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 1.1–1.8); 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, anisotropy); Hustrulid, Kuchta & Martin, Open Pit Mine Planning and Design (mine valuation, NPV/IRR and cut-off grade methodology); Gentry & O'Neil, Mine Investment Analysis (smelter/refining contract terms, net smelter return, taxation and risk); Guilbert & Park, The Geology of Ore Deposits, and Evans, Ore Geology and Industrial Minerals (VMS/SEDEX and porphyry deposit models); 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 5.2: The McKelvey Diagram (7 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 (Measured at left)Increasing degree offeasibility of recoveryMeasuredIndicatedInferred / Hypothetical–SpeculativeEconomicSub-economicProvenReserveProbableReserveInferred Resource(never a reserve)MeasuredResourceIndicatedResourceInferredResource
McKelvey diagram: geological assurance increases to the LEFT along the x-axis (columns Measured | Indicated | Inferred/Hypothetical–Speculative, the authentic USGS layout), the y-axis is increasing economic feasibility (economic at top, sub-economic below); the upper-left/upper-middle cells (high assurance, economic) are RESERVES, the lower row (any assurance, sub-economic/undetermined economics) and the right column (low assurance) are RESOURCES only.

The McKelvey diagram is a two-axis classification box: the horizontal axis is GEOLOGICAL ASSURANCE (how well the tonnage/grade is actually known), increasing from right to left — Measured at the left, then Indicated, Inferred and finally Hypothetical/Speculative at the right; note the economic Inferred cell, since even economic Inferred material stays an Inferred RESOURCE and is never reported as a reserve, and the vertical axis is increasing ECONOMIC FEASIBILITY of recovery (from clearly sub-economic at the bottom to clearly economic at the top). A material's position in the box is set independently by these two orthogonal questions — "how well do we know it geologically" and "is it economic to extract" — and only material that is BOTH well-known (Measured/Indicated) AND economic becomes a RESERVE (Proven/Probable); material that is well-known but not (yet) economic, or economic but not well-known, remains a RESOURCE only. The diagram's core lesson is that reserves are a SUBSET of resources, not a separate inventory, and that a resource can migrate into the reserve category by improving EITHER its geological confidence (more drilling) OR its economics (higher price, lower cost, better technology) without any change in the other. This framework underlies the modern CIM/NI 43-101 resource-reserve terminology used today (Measured/Indicated/Inferred Resources; Proven/Probable Reserves), which is a direct descendant of McKelvey's original USGS box.