Resource or Reserve? Critical Role of Terminology in Mining

Every term used in mining has a technical meaning in the field and in reports. However, some concepts can cause serious confusion when used incorrectly or incompletely in everyday language. “Resource” and “reserve” are two concepts that lead to this confusion. The economic benefit of a license for investors, the feasibility of a project for public authorities, and feasibility and production studies for engineers underline the importance of the difference between these two frequently used words in reporting and communication. In this article, we clarify the difference between resource and reserve, and technically address the difference between the concepts through visuals.

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1. Resource or Reserve?

The meanings carried by these two often-misused words are critical. Anyone involved in mining must understand this distinction—it is essential for both technical and economic evaluations. Misuse can lead to overestimation or underestimation of a mining license’s true potential. Therefore, the subject must be approached with both scientific understanding and investor perspective.

We can summarize mineral enrichments as a resource, and the portion that can be economically extracted as a reserve.
Finding a mineral through exploration in a given area does not necessarily mean it will be mined. While a resource refers to the mineralization identified in the Earth’s crust, a reserve is the part of that resource which can be economically extracted. The difference is not just about quantity underground—it also depends on economic, technical, and environmental conditions. That’s why the terms resource and reserve cannot be used interchangeably.

2. Mineral enrichments can be summarized as "resource" and the profitable extractable part as "reserve".

The discovery of a mineral as a result of exploration in a region does not necessarily mean that the mineral will be extracted. While resource refers to the mineral wealth detected in the earth’s crust, reserve is the part of this wealth that can be evaluated economically. The difference is not only related to the amount underground, but also to economic, technical and environmental conditions. Therefore, the concepts of resource and reserve cannot be used interchangeably.

3. In other words, profitable production may not be possible from every resource, on the contrary, the whole or a certain part of the same resource may have economic value at tomorrow's prices.

A mineral resource that seems unproducible today may become a reserve tomorrow thanks to technological developments or increases in prices. This shows that the relationship between resource and reserve changes depending on time and conditions. Economic value is not fixed, it is dynamic. This dynamic structure plays an important role in investment decisions and license valuation.

4. So how is the part of this resource that is a reserve decided?

This is where internationally accepted resource reporting codes come into play. Systems such as JORC in Australia, NI 43-101 in Canada or PERC in Europe provide criteria for classifying resources as reserves. These systems take into account geology, grade, economic analysis and engineering parameters. Therefore, the decision is based not only on the observation of a geologist but also on detailed interdisciplinary studies.

5. Resource codes summarize this distinction with a group of criteria under the heading of “modifying factors” in the well-known “Figure 1”.

These criteria cover not only scientific but also economic and technical dimensions. Modifying factors include metal prices, operating costs, infrastructure status, environmental impacts and social permitting processes. Whether a resource will be a reserve or not is determined by the combined evaluation of these factors. Therefore, the phrase “modifying factors” in reports carries a critical warning.

6. Modifying factors…

These factors, which are sometimes overlooked, can determine the fate of a project. For example, even a high-grade ore may not be economical in a remote location or in a region devoid of water resources. For investors and technical teams, the details of these factors are of great importance in terms of questioning the sustainability of the project. Not only geological data, but also the correct interpretation of transformative factors is an indicator of professionalism.

7. With the feasibility study conducted on these criteria, the section of the resource that is economical under current conditions, namely the reserve, is prepared for operation (open pit / underground) plans.

Feasibility studies evaluate the project with a holistic approach in technical, economic and environmental terms. The outputs of these studies reveal whether the reserve is really producible. Decisions such as whether open pit is more suitable or underground mining is required are made at this stage. These decisions directly affect the economic life and investment return period of the project.

8. The operation is designed for the section that is thought to provide satisfactory economic returns and the production lower limit (cut-off) grade is determined.

The cut-off grade defines at what level an ore will be considered economical. This value is determined according to both price expectations and operating costs. The mineral below the cut-off value remains in the resource but is not considered a reserve. This calculation is one of the basic elements affecting the feasibility of the investment.

9. At this stage, the reserve mass that constitutes the economic section on the resource according to the current and budgeted prices has been revealed.

When the definition of the reserve is completed, a clearer economic expectation is now formed for the project. At this point, the reserve amount, production period, operating methods and possible cash flows can be calculated. All this information allows the real value of the project to be revealed. In other words, there is now not only a “resource” but a real “mining project”.

10. Knowing this difference in reporting, evaluating reports and talking about mining is a starting point for making economic predictions.

Incorrect evaluations can lead to major financial losses in license acquisitions or investment decisions. A professional who knows this difference can analyze the project not only according to today’s conditions but also according to the future conditions. For investors, this means managing risk. For technical experts, it is important in terms of correct modeling and correct guidance.

11. Before commenting on metal, natural stone and industrial raw material resources, mastering these concepts will help you understand the real value of the license in question.

Not every mining license has the same potential; however, it is necessary to master the correct terminology to understand this difference. Someone who does not know the resource-reserve distinction may make misleading comments by just looking at the numbers. Those who have this knowledge can evaluate the project from a more holistic perspective. As a result, correct information is the basis for correct decisions.

Conclusion

Speaking with the correct concepts in mining projects is not only technical accuracy, but also a strategic necessity. “Resource” represents potential, while “reserve” represents economic reality. Understanding this difference between them allows you to take the right steps in investment decisions. Remember, if there is something as important as the ore in the field, it is how that ore is defined. A healthy mining plan starts with understanding the correct terms.

Subjects discussed in this article may overlap with your mineral exploration, modeling, mining operation and business development issues and may provide solutions for those. However, remember that various factors specific to your business may bring about different challenges. Therefore, seek support from expert consultants to evaluate all data together in order to convert potential into profit most efficiently.

Should you have any questions regarding the articles or consulting services, please don’t hesitate to get in touch with us.

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