Standards in the public reporting of resources and reserves in Australia have dramatically improved since the implementation of the Australasian Code for Reporting of Mineral Resources and Ore Reserves (The JORC Code) in 1989. Whilst the JORC Code states clearly that Mineral Resources and Ore Reserves are imprecise calculations and should be treated as estimates, there is strong evidence that many people regard them as fact, including some accountants, directors, auditors and investors._x000D_
Mineral Resources and Ore Reserves are key inputs in the valuation of a mining company and the determination of financial performance. Geological knowledge is the foundation upon which Mineral Resources, Ore Reserves and investment decisions are made, however this information carries with it substantial uncertainty. Case studies and company reports have established that errors derived from inadequate geological inputs have led to reduced profitability in operating mines and in extreme cases the premature closure of mine operations. Whilst there are many causes of mine closure and reduced profitability, including commodity prices and exchange rates, the cumulative effect of all geological uncertainty contributes significantly to the erosion of the credibility of mining within the investment community._x000D_
There are a number of methods used to characterise and model uncertainty in Mineral Resource and Ore Reserve estimation. Empirical mining indexes, sensitivity analyses, Monte Carlo simulations and Conditional simulations are used to identify and estimate geological uncertainty, notably the quantification of uncertainty in grade and tonnage estimates. These techniques have not generally been applied to estimating geological uncertainty associated with key Ore Reserve inputs such as appropriate mining technique, equipment selection, production rate, mining dilution, stability requirements, materials handling, metallurgical processing, product quality and waste storage. New software tools are needed to model the entire mining process with all its geological and other interdependencies, enabling all uncertainties to be separately identified and estimated._x000D_
By its very nature, mining involves the assumption of significant technical, financial, political, environmental and social risk. Success comes by understanding and managing these risks and consequently the mining industry will never choose to reduce the level of geological uncertainty to nil. The ultimate aim of improved identification and estimation of geological uncertainty is to quantify inputs into the Ore Reserve process, allowing a company to assess the risks and manage these accordingly. This approach is relevant to feasibility studies for new projects as well as life-of-mine planning through to the weekly schedule at existing mines.