Reporting Russian Reserves and Resources for International

MarketsStephen Henley (Resources Computing International)

June 2010

The Russian System

•Reporting of mineral reserves estimates is closely integrated with Russian Federation licensing and exploration/mining permit laws

• Standard exploration procedures and methods are assumed, though no longer mandatory

•Differences in reserve/resource estimate categories and competent person signoff requirements make it difficult to report on international stock exchanges

Russian resource/reserves categories

• “Prognostic resources”

• P3: no explicit supporting evidence

• P2: evidence from geophysics/geochemistry/mapping

• P1: limited drill hole, trench sampling, and outcrop data

• “Reserves”

• C2: systematic sampling, ancillary studies

• C1: closer-spaced sampling, more detailed ancillary studies

• B: close-spaced exploration or partly blocked-out in mine *

• A: generally blocked-out ore in a producing mine *

(* A and B usually only for detailed areas within a C1 reserve)

CRIRSCO standards

• JORC, SAMREC, CIM, PERC, SME, Chilean code…

CRIRSCO-GKZ mapping exercise

•Working Group convened by PERC on behalf of CRIRSCO, started in 2006

•2008: Agreement in principle: Protocol of Intentions signed

•Conversion Guidelines: draft completed end-2009

•Consultation process to mid-2010

•Publication: imminent

•Ultimate intention: a Russian code which is CRIRSCO-aligned, to operate alongside the existing system for governmental reporting requirements

Conversion guidelines

•Purpose: to allow mapping without the need for a parallel deposit modelling exercise

•Starting point: detailed comparison of Russian and CRIRSCO definitions, not subjective views from particular cases

•Differences between the systems mainly in levels of prescription or discretion - BUT

•Competent Person definitions very similar

•Classification categories mappable

Conversion guidelines

•Guidelines document is about HOW to translate. It does NOT address legal questions.

•Conversion requires understanding, not mechanical

•Russian rules are codified, CRIRSCO codes are principle-based, but underlying similarities

• In all cases, Competent Person signoff required

Russian “prognostic resources”

Russian CRIRSCO

P3*, P2*Exploration Results

(data only, NOT grade / tonnage estimates)

P1 Inferred Resources

• JORC (para 18) allows reporting of “exploration targets” which can include information similar to Russian categories P3, P2. • No equivalent in other CRIRSCO standards

The State Balance

•Russian Federation - national mineral inventory

• All Russian reserves must be registered with GKZ before mining is allowed

• Economic reserves are included in the State Balance

•Marginal or sub-economic material is classified as “off-balance”

The State Balance

• The Russian system includes an economic / uneconomic classification

•Material which can be mined profitably is added to the State Balance and known as “Balance” Reserves. If all modifying factors allow, then dilution and loss estimates may be applied, and can map to CRIRSCO reserves categories

•Material which at present cannot be mined profitably for any reason is known as “Off-Balance”. It may be low-grade, or outside designed pit limits, or inaccessible for technical or administrative reasons. If reasonable prospects for eventual economic extraction then can map to CRIRSCO resources categories

Geological Complexity Classes

• The Russian system classifies mineral deposits into 4 geological complexity classes (from simplest=1 to most complex=4) to help define the required exploration grid densities

• The allocated complexity class also determines the levels of resource and reserve category which are allowed to be reported

Russian Mineral Resources

Based on level of geological knowledge. Includes Russian “off-balance” material provided there are reasonable prospects for eventual economic extraction

Russian Mineral Resources

Based on level of geological knowledge. Includes Russian “off-balance” material provided there are reasonable prospects for eventual economic extraction

Russian “Exploitation Reserves”

Russian “Balance Reserves”, with consideration of all MODIFYING FACTORS

Russian “Exploitation Reserves”

Russian “Balance Reserves”, with consideration of all MODIFYING FACTORS, and after any adjustments for MINING LOSSES and DILUTION

Mutual agreement

•Accepted that many will disagree – a wide range from “strict” to “lenient” (or “pessimistic” to “optimistic”) conversions have been published

• Therefore the mapping presented in the conversion handbook is based only upon the published definitions in the Russian system and the CRIRSCO Template, and NOT on any previously published conversion mapping.

The Competent Person decides

•Every deposit is different.

•As always, the conversion in any particular case must be decided by the Competent Person - supported by objective assessment and professional judgement

•The Competent Person is defined by the CRIRSCO standard used. GKZ “Competent Experts” are allowed provided they meet relevant CRIRSCO CP requirements

Publication

•Consultation draft published early 2010.

•Consultation process almost completed

• Publication of final version imminent

BENEFITS

•Short-circuit the full CPR by taking advantage of detailed Russian work already completed

•Assurance of quality by insistence on Competent Person signoff. All relevant factors must be checked.

•Simplifies the process of bringing Russian mineral projects to market

Next steps

• Intended development of a new Russian reporting standard aligned with the CRIRSCO Template

•Russian direct membership of CRIRSCO (currently represented through PERC)

•When ready, this new standard can be used on Russian stock exchanges and internationally for company reporting - in parallel with the existing Russian system for governmental purposes (exploration / exploitation licensing etc.)