NI 43-101 and the metallurgist: The role metallurgists play in the disclosure process

Greg Gosson and Tony Lipiec - May 2010

When it comes to new mines being developed, there is a general industry consensus that most low-hanging fruit has been picked and eaten. Many projects currently in the mine development pipeline have been around for decades, but were held back because of technical challenges. The future development of these deposits will likely require access to public capital markets, and in Canada that means providing scientific and technical disclosure on these deposits in compliance with National Instrument 43-101. As many of these “challenged” projects have metallurgical issues, the companies that are developing these projects must provide appropriate disclosure regarding proposed solutions to those issues.

The metallurgically Qualified Person

Under Section 2.1 of NI 43-101, all disclosure of scientific or technical information concerning a mineral project on a property material to the issuer must be based upon information prepared by, or under the supervision of, a Qualified Person (QP). To be considered a Qualified Person on metallurgical issues, the individual must:

  • Be an engineer with at least five years of experience in mineral exploration, mine development or operation, mineral project assessment or any combination of these, and have at least a bachelor’s degree in chemical engineering, metallurgy, mineral processing, or the equivalent.
  • Have experience relevant to the subject matter of the mineral project. The metallurgist must decide whether they would be judged by their peers as having sufficient expertise in the mineral processing methods being considered for the project, and under the circumstances in question. For example, a process engineer may have extensive experience with heap-leachable copper oxide deposits, and consider themselves a QP on the metallurgy of these deposits. However, they may have little experience in metallurgical recovery of nickel laterite deposits, in which case they would not be able to serve as the QP for these types of nickel deposits.
  • Be in good standing with one of the Canadian provincial or territorial professional associations, or one of the designations in a foreign association listed in Appendix A in NI 43-101.

Rules and tools

NI 43-101 has specific rules regarding exploration information that would apply to the disclosure of metallurgical test results. These include data verification, sample information, analytical or testing procedures, and information on the testing laboratory used.

Guidance on the technical and economic factors that must be considered by the resource estimator is provided in the CIM Estimation of Mineral Resource and Mineral Reserve Best Practice Guidelines (2003), which are referenced in the Companion Policy of NI 43-101. The following are the relevant sections of that guideline.

Mineral resource estimation: A resource estimator requires input from the metallurgist on the appropriate assumptions to be used in the mineral resource estimate. Under CIM Mineral Resource and Mineral Reserve Estimation Best Practice Guidelines, the cut-off grade, or economic limit, used to define a mineral resource must provide “reasonable prospects for economic extraction.” In establishing the cut- off grade, it must realistically reflect the location, deposit scale, continuity, assumed mining method, metallurgical processes, costs and reasonable long-term metal prices appropriate for the deposit.

Variations within the resource model (rock characteristics, metallurgy, mining methods, etc.) that may necessitate more than one cut-off grade or economic limit in different parts of the deposit model must be an ongoing consideration.

The resource confidence categories (Measured, Indicated and Inferred) are based on the level of confidence in the continuity of geology and grade of the deposit. Because recovered grade, not in situ grade, is what determines prospects for economic recovery, the confidence in the metallurgical recoveries should be a consideration when determining the appropriate confidence category of a mineral resource.

Mineral reserves: Metallurgists or process engineers should always be involved in the technical considerations applied to mineral reserves. An effective method of mineral processing must have been selected, and the level of detail and engineering must meet or exceed that required by a preliminary feasibility study. Proven and Probable Mineral Reserves are a modified sub-set of the Measured and Indicated Mineral Resources. The conversion requires the consideration of factors affecting profitable extraction — including mining, processing, metallurgical, economic, marketing, legal, environmental, socio-economic and governmental factors — and should be estimated with input from a range of disciplines. In certain situations, Measured Mineral Resources could convert to Probable Mineral Reserves because of uncertainties associated with the modifying factors such as the metallurgical characteristics of that part of the mineral deposit.

Contents of the technical report related to metallurgy

The following items of the technical report Form 43-101F1 are specifically identified as requiring input from a process engineer or metallurgist.

Item 18: Mineral processing and metallurgical testing: If mineral processing or metallurgical testing analyses have been carried out, include the results of the testing, details of the testing and analytical procedures, and discuss whether the samples are representative.

Item 25: Additional requirements for technical reports on development properties and production properties:

  • Mining operations — information and assumptions concerning mining method, metallurgical processes and production
  • Recoverability — information concerning all test and operating results relating to the recoverability of the valuable component or commodity and amenability of the mineralization to the proposed processing
  • Capital and operating cost estimates — capital and operating cost estimates, with the major components being set out in tabular

Personal inspection of the mineral property

Section 6.2 of NI 43-101 requires that at least one QP who is responsible for preparing or supervising the preparation of all or part of the technical report to complete a current inspection of the property that is the subject of the technical report.

Up to the challenge

The successful development of technically challenged mineral projects will require smart engineering. Investor confidence in those engineering solutions will require transparent disclosure by suitably qualified mining professionals. NI 43-101 has set the standard for both.

About the authors

Greg Gosson is technical director, geology and geostatistics, and Tony Lipiec, is senior process engineer for AMEC Americas Limited. Gosson is a frequent speaker on mining technical disclosure standards at mining industry forums. Lipiec, a mineral processing engineer, is frequently involved in the preparation of NI 43-101 technical reports.