Property Valuation 

Resource and Reserve Gradient Icon

Resource and Reserve

Property Valuation Image 1

For all property types, asset value is a joint product of any potentially extractable mineral resources located under the earth’s surface and any invested capital that is used to extract this mineral resource. In order to perform a fundamental valuation of a mining company the amount of mineral reserves must be estimated. Given the importance to the mining industry to distinguish the definitions of Mineral Reserve and Mineral Resource, definitions are given here in full.

Mineral Resource is a concentration or occurrence of material of intrinsic economic interest in or on the Earth’s crust in such form and quantity that there are reasonable prospects for eventual economic extraction. Portions of a deposit that do not have reasonable prospects for eventual economic extraction should not be included in a Mineral Resource. The location, quantity, grade, geological characteristics, and continuity of a Mineral Resource are known, estimated, or interpreted from specific geological evidence and knowledge. Mineral Resources are sub-divided in order of increasing geological confidence, into inferred, indicated, and measured categories as it is shown in Figure 4:

Resource and Reserve Graphic 1

(33) See the text definitions of resources and reserves in Appendix 2.

(34) The JORC Code and Guidelines, found at, accessed date 12.06.2010.

Mineral Reserves are subdivided into Probable and Proven Mineral Reserves. The definitions of them are given in the Figure 5:

Mineral reserves, which are a modified sub-set of the indicated and Measured Mineral Resources (shown with the dashed outline in Figure 5), require consideration of factors affecting extraction, including mining, metallurgical, economic, marketing, legal, environmental, social, and governmental factors, and should in most instances be estimated with input from a range of disciplines. (35)

Figure 6 is reflecting the relationship between Mineral Resources and Mineral Reserves.

(35) South African Mineral Resource Committee, found at>, accessed date 13.03.2010

In general, before an extraction program can begin, Resources and Probable Reserves must be “proven up” to the category of Proven Reserves, the most geologically certain category. This requires additional cost – expenditure on drilling (information gathering) at the site, which will make assets in the category of Resources and Probable Reserves less valuable than Proven Reserves. There is a significant premium paid for operating mines, where reserve and cost uncertainty has been reduced. According to major gold property acquisitions during the 1990s, Proven and Probable Reserves are valued at a 44% discount, Measured and Indicated Resources at an 83% discount, with no value being attributed to Inferred Resources. The uncertainty surrounding the estimate of extractable reserve is called reserve risk. (36)

Mining companies may also commence production from a deposit with only a small amount of reserves, in the hope that additional reserves will be discovered as mining proceeds. The Dome mine, owned by Placer Dome (and now Goldcorp) is a good example: it has now been mined continuously for 88 years and it has never had more than about 3 years mine life. As the mine has progressed underground, more of the vein has been opened up for mining; consequently, the life of the mine has been extended. (37)

1 Valuation of Metals and Mining Companies
Author: Svetlana Baurens in collaboration with the University of Zürich, Swiss Banking Institute and Prof. Dr. T. Hens 7.11.2010

Content source for this page: basinvest 1

36 See Ludeman, 2000
37 See Kernot, 2006, p.69-81

The Property

Fundamentals Icon


NIEVES is located in the Famed Mexican Silver Belt — the Faja de Plata. The Faja de Plata is the most prolific silver province in the world. Since its discovery in the 16th century, more than 10 billion ounces of silver and 70 million ounces of gold have been produced.


The history of the area is rich. The first discovery in the area covered by the Nieves Property was the Santa Rita Vein in 1560 by Spanish explorers (Turner, 1999; Cavey, 1999).


Silver mineralization on the Nieves property is classified as low-sulphidation epidermal and is the primary target. Epidermal silver veins are dominant in the Altiplano Region of Mexico that include world-class examples such as Pachuca, Zacatecas, Fresnillo, and Guanajuato.

Scroll to Top