“THERE’S GLORY FOR YOU”: DEFINITION-RELATED PROBLEMS BETWEEN THE CMMI, SEC, AND USGS MINERAL RESERVE AND RESOURCE CLASSIFICATION SYSTEMS

“There’s glory for you” is the beginning of a famous quotation from Alice in Wonderland in which Humpty Dumpty states that “glory” means “a nice knock-down argument.” Alice objects that “glory” doesn’t mean that and Humpty Dumpty declares that it is all a matter of who’s in charge. Somewhat like Humpty Dumpty, the definitions of “reserves,” “resources,” “measured,” and “indicated” mean different things in the mineral reserve and resource classification systems adopted by the Council of Mining & Metallurgical Institutions (CMMI), which includes the Society for Mining, Metallurgy, & Exploration (SME); the US Securities & Exchange Commission (SEC); and the US Geological Survey (USGS). “Measured resource” in the CMMI system is not the same as “measured resource” in the USGS system because each system is answering a different question about mineral resources. The CMMI focuses on the detailed geologic delineation of specific deposits today while the USGS focuses on mineral resource needs decades into the future. “Proven (measured) reserve” means something else to the SEC, which doesn’t recognize the term “resource” at all. This problem is further complicated because the technical definitions of “reserves” and “resources” are opposite of those used in everyday English. Are “reserves” quantities held for future use or available for current use? Whether mineral reserves are separate from or a subset of mineral resources is another point of confusion within the CMMI system. Mineral resources estimate the in situ deposit while mineral reserves are adjusted for profitable mining including dilution, deletion, and processing losses. Finally, although all classification systems agree that there is a “blue sky line” at the boundary between having sufficient information to reasonably estimate tonnage and grade on the one hand and lacking sufficient information for reasonable estimates on the other, they disagree over the placement of that line. Because these terms are part of securities regulation, failure to appreciate and carefully distinguish the differences between the differing meanings may lead to unwanted litigation.