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Financial Evaluation of Ore Reserves

To determine the viability of operations, mining companies must analyse the available mineral resources and ore reserves. These are the main sources of cash inflows and are crucial to providing value.

It’s important to distinguish between resources and reserves. The former is a mineral occurrence with extraction potential. The latter is the economically mineable part of that resource.

Before extraction, there are several accounting implications that are considered. For example, for a mine to be developed, the commercial viability of the mineable part must be evaluated. This is done by analysing how many ore reserves there are, what the deposit grades are, testing extraction methods, and so on. This evaluation leads to a feasibility study, which is used to determine whether mine development should commence based on commercial viability and financial availability.

Key fact: For every 500–1000 mineral resources tested, only one deposit with sufficient value to mine is discovered

Estimations of reserves and resources are also used to inform financial reporting. There are many factors a company considers here, including capital and operating costs, the quality of the minerals being extracted, equipment costs, production quantities, and many more.

Benefits

  • Drives value

  • Acquires funding

  • Informs financial reporting


Learn more insights by browsing our resource centre and learn about digital transformation trends among metals and mining companies in the Axora Innovation Forecast, which surveyed 150 senior industry decision makers.

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