Reserves Estimation

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Declaration of Academic Integrity

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SUMMARY

Mineral resource estimation is an important aspect of the exploration-mining phase, evaluating whether or not a reserve presents economic viability to be mined. This report describes methods of resource estimation, focusing on the method of Sectional Analysis. As part of a pre-feasibility study, an estimation of the amount of material in an area of mineralisation as well as calculations of mass, average grade and volumes are approached in this paper. A critique of the Sectional Method and subsequent discussion is presented in addition to an evaluation of other methods of resource estimation such as Polygon and Triangle method.

The results indicated that considering a cut-off grade of 60% this area of mineralisation would be economic viable for exploration by present levels above the cut-off grade.

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CONTENTS

SUMMARY        i

1. INTRODUCTION        1
2. RESULTS AND DISCUSSION        2

2.1        Main Results        2

2.2        Change in cut-off grade        3

2.3      Critique of the sectional method…………………………………………………………….3

2.4     Others methods used in resource and reserves estimation………………………..4

1. CONCLUSIONS        6
2. RECOMMENDATIONS        7
3. REFERENCES        8

APPENDIX

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1. INTRODUCTION

As part of a pre-feasibility study, this report aims to estimate the reserves of a prospective area of mineralisation. An exploration team previously completed a diamond drilling program undertaken from the surface, gathering core samples of fourteen boreholes divided in four parallel sections. The material presented in four types: unconsolidated material, banded iron formation (BIF) and shales, mineralised material and footwall zone.

The objectives of this study are estimate the amount of material in each of three zones, excluding the footwall zone, comment on the effects on change of cut-off grade and describe and evaluate several reserves estimation methods.

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1. results and discussion

1. Main results

                                 TABLE 1

                 Average grade per section

Sections	Average Grade (%)
Section  1	62.2%
Section  2	63.3%
Section  3	63.4%
Section  4	63.7%

                                 TABLE 2

                 Mineralised Material results

Mineralised material	Results
Volume	3796775 m3
Mass	11943200 tonnes
Average grade	63.2% Fe

   

                                 TABLE 3

                 Volume of each material

Material type	Volume (m3)
Unconsolidated material	20346125
Sandstone	2772375
Mineralised material	3732250

                                TABLE 4

                 Volume of waste material

Volume (m3)

23118500

                                TABLE 5

                           Stripping ratio

m3/tonne

2

1. Change in cut-off grade

A cut-off grade assumed for this report was 60,0%.

Cut-off grade is the grade that provides the minimum amount of revenue for a mine being economically recoverable, in other words, being profitable. If a change of -20% happens in the studied situation, the cut-off would be 40,0%, which likely would mean that the price of the ore increased in that economic context. The same principle applies when a change is of +20% (cut-off of 80%): the economic tonnage would be reduced which means that the mine would turn less profitable comparing the same reserve.

1. Critique of the sectional method

The Sectional Method used in this study is a classical method of reserve estimation. This method, as well as other in its class has its limitations but, on the other side, also offer benefits. One of advantages of the sectional method is that it can be used in estimation of reserves in a global scale on early stages of exploration, offering overall results for total ore tonnage, grade and metal content. However, very attention must be paid when using this method for small-scale because the assumptions are not the same. Even when used in the global context, drilling patterns not always are regular making decreasing the reliability of the method.

1. Others methods used in resource and reserves estimation

The estimation of reserves is a crucial factor when it comes to make a decision if whether or not a reserve is economically viable to be explored.  There are several methods of ore reserve calculation, either by hand or computerized. According to Leigh et al. (1998) geostatistical methods are the most reliable providing the best estimation, however is depended on digital computer while hand calculation (classical methods) only utilizes maps and sections and can be useful in early stages of exploration for a global scale estimation.