Question: how important is the integrity of a tailings dam to the successful operation of a mine?   Very important; so much so that in some jurisdictions regulators may soon be stipulating that mining companies must have third party independent review boards or third party audits done on their tailings dams.  The feeling is that although a team of capable engineers may be doing the dam design, there is still a need for some outside oversight to get another perspective.  Differences in interpretation, experience, and errors of omission are always a possibility regardless of who does the work.  Hence a second set of eyes can be beneficial.
Next question is how important is the integrity of the resource and reserve estimate to the successful operation of a mine?   Very important; the mine life, project economics, and shareholder value all depend on it.     So why aren’t a second set of eyes or third party resource audits commonly done?
In the years prior to 43-101, junior mining companies could produce their own resource estimates and disclose the results.  With the advent of NI 43-101, a second set of eyes was introduced whereby an independent QP  could review the company’s internal resource estimate and/or prepare their own estimate and ultimately take legal responsible for the estimate.
Nowadays most small companies do not produce their own in-house resource estimates and the task is generally awarded directly to an independent QP.   Maybe companies don’t prepare their own in-house resource estimates due to the specialization needed in modelling and geostatistics, and the knowledge needed to use today’s block modeling software.   Maybe they feel doing their own internal resource estimate is a waste of time since an independent QP will be preparing an estimate for them anyway.
Given that, in many cases the project resource estimate is prepared solely by the QP or a team of QP’s.   In many cases this resource gets published without any other oversight, in other words without a second set of eyes taking a look at it.   The assumption is that QP doing the work is a qualified expert, their judgement is without question, and their work is error free.

Exploration Program in Andes

As we have seen recently, some resources estimates have been mishandled and disciplinary actions have been taken against some QP’s.   I guess one can conclude that maybe not all QP’s are perfect.  Just because someone meets the requirements to be a Competent Person or a Qualified Person does not automatically mean that they are competent or qualified. Geological modeling is not an exact science and will be partly based on the person’s experience and what they have seen in the past.
My question is whether it wouldn’t be good practice for companies to have a second set of eyes take a look at their maiden resource estimates produced by independent QP’s?   For example, where I have been involved in mining mergers or takeovers, often one side will tend to rebuild the resource model using their own team.  They don’t put 100% confidence in the original resource model handed over to them.  “Just give me the database” they ask.
One downside to a third party review is the additional cost.  Another downside is that when one consultant reviews another consultant’s work there is a tendency to list numerous concerns that are not really that material, which then can muddle the conclusion of the review.  On the other hand, a third party review may identify serious interpretation or judgement issues that could be fatal if they impact on the viability of the resource.
If tailings dams are so important to require a second set of eyes, why not the resource estimate that is the foundation of the project?

2 thoughts on “41. Resource Estimates – Are Independent Audits A Good Idea?

  1. hardrockminer

    I have mixed feelings on this question. I’ve seen a lot of crap out there and wonder why more people aren’t hauled up in front of a disciplinary board to defend their poo. I’ve learned over time to be wary of reports prepared by certain consulting companies and to be more accepting of those companies that I’ve seen do consistently good work in the past. But even with the latter group I was surprised and disappointed recently with the company that published the Rubicon PEA, who I have considered in the past to be one of the best groups at good resource estimation. (I was also surprised by the directors…two of whom I know fairly well as good mining people who should never have let this get past them.) Interestingly, Rubicon went back to the same company for their most recent update, so I guess they still have confidence in their consultant.

    Then there is the Pretium case where one reputable consultant walked away from the deposit and essentially said there was no resource there, but another one (reputable one) persisted and validated the resource grades with a bulk mining sample. They’re now building the mine, and only time will tell if this is another Rubicon, but so far it all appears to be as predicted by the second consultant.

    Someone has to be held accountable in the end when a deposit turns sour because of the model. If I were the QP I would probably welcome a review prior to publication as long as it focuses on process rather than content.

  2. Louis Fourie

    I have acted as the “second pair of eyes” in the past, having to produce only a model, resource and a memo-style report as per the client request. I have also been in the situation where I had to pass my data to the “second pair of eyes”.

    I think it is good practice. The cost of a review is still minuscule compared to mine development. Of course people might differ on say modelling techniques, confidence limits, interpolation techniques, variography etc – as long as there is broad agreement about the outcome.

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