Replies to post #1808 on Mining Company research board

[1manband]

In which publication does it specifically prohibit the use of visual observation to classify resources?

For US Issuers, it is in Industry Guide 7. The exact text of the Guide is:

"(1) Reserve. That part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination.

Note: Reserves are customarily stated in terms of ore when dealing with metalliferous minerals; when other materials such as coal, oil shale, tar, sands, limestone, etc. are involved, an appropriate term such as recoverable coal may be substituted.

(2) Proven (Measured) Reserves. Reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes, grade and/or quality are computed from the results of detailed sampling and (b) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well- established.

(3) Probable (Indicated) Reserves. Reserves for which quantity and grade and/or quality are computed from information similar to that used for proven (measured) reserves, but the sites for inspection, sampling, and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven (measured) reserves, is high enough to assume continuity between points of observation.

Every mineral code is essentially the same on this point. Classification of resources or reserves must be based on scientific sampling and testing. Visual observation is not scientific.

In addition, established industry "best practices" also prohibit professionals from either depending upon, or even using, visual observation to estimate or classify mineral resources. There is also a substantial body of regulatory decisions and comments from multiple regulators that visual estimations are prohibited.