Inferred, indicated, measured

The categories describe not how much metal lies in the ground. They describe how confident one is that it lies there. The difference is drill density, not quantity.

The three resource categories

The governing text is the CIM Definition Standards in the version of 10 May 2014. Through the incorporation by reference in NI 43-101 they are binding on every company listed on a Canadian exchange. They are precisely not a recommendation.

From resource to reserve

A resource is material in the ground. A reserve is the part of it that a robust study shows can be economically mined: after mining losses, dilution, permitting, costs and market conditions. The standard gathers these tests under the term modifying factors.

At this point almost every popular account offers a neat crosswise mapping: measured becomes proven, indicated becomes probable. The second half is right. The first is not.

In the words of the standard: "A Probable Mineral Reserve is the economically mineable part of an Indicated, and in some circumstances, a Measured Mineral Resource." And in the other direction, unmistakably: "An Indicated Mineral Resource … may only be converted to a Probable Mineral Reserve."

The step down from measured to probable is therefore not a drafting slip but the route provided for a common enough case: the geology is confirmed, the economics do not carry the same confidence. An open permitting question, an unresolved water right, an offtake agreement still missing — and a measured resource becomes a probable reserve. The converse holds without exception: proven presupposes a measured resource. Indicated never becomes proven.

Anyone finding a proven reserve in a press release whose resource base is reported as indicated is looking at either a transcription error or a problem.

What is prohibited — and in which instrument it stands

Both prohibitions are routinely attributed to the same text. They sit in different places, and that is more than a footnote: on it hangs what the regulator sanctions and what the professional definition rules out.

The CIM standards exclude the conversion. An inferred resource may not be carried into a reserve, because its level of geological confidence will not support an investment decision. Through the incorporation by reference in NI 43-101, that definition becomes binding on Canadian issuers.

NI 43-101 prohibits two other things:

• No addition. Under section 2.2(c), inferred resources may not be added to the other categories. "M&I" is permitted. "M&I&I" is not.
• No economic analysis. Under section 2.3(1)(b), a disclosure may not contain an economic evaluation that includes inferred resources.
• The one exception sits in section 2.3(3): the preliminary economic assessment. It may include inferred resources — and carries in return the prescribed cautionary statement that the result establishes no economic certainty. See PEA, PFS, FS.

Where it misleads

The total in the headline. "Total resource: 4.2 million ounces" adds everything together. If 3.1 million of those ounces are inferred, the statement is a different one. The breakdown is in the report, often not in the release.

The cut-off grade helps determine the size of the resource. The same deposit yields a considerably larger and poorer resource at a 0.3 g/t cut-off than at 0.8 g/t. Both are correct. The figures are comparable, of course, only at the same cut-off — and the cut-off depends on the assumed commodity price, which is to say on an assumption made by the company.

The category is not a judgement on the quality of the metal. A measured resource at 0.4 g/t is worthless with a high degree of confidence; an inferred one at 8 g/t can change the whole case. Confidence and economics are two axes, not one.

Upgrading is not guaranteed. Between inferred and indicated lies a drill programme that costs money and whose result may equally be that the presumed continuity does not exist. That case is among the most common share price triggers at explorers.

Reserves shrink too. If the commodity price falls below the assumption in the study, material moves back out of the reserve into the resource without a single drilled metre having been disproved. The geology stays, the economics go.

How we treat them in the numbers

We weight the categories on a sliding scale as they enter the NAV, rather than adding them together:

This ladder is not a standard; nothing prescribes it. It follows the weighting EY applied in a formal valuation of a gold project filed with the SEC in 2019, and therefore sits at the conservative end of the 30% to 60% discount on inferred resources customary in analyst research. Which of the two treatments we adopt for inferred is stated expressly in every piece of analysis — together with the cut-off grade and the assumed price.

This is the lever with which a NAV is most easily flattered. Which is why we disclose it.

See also P/NAV and How we value resource companies.

Sources

• CIM Definition Standards for Mineral Resources and Mineral Reserves, Canadian Institute of Mining, Metallurgy and Petroleum, 10 May 2014 — bcsc.bc.ca
• National Instrument 43-101 — Standards of Disclosure for Mineral Projects, consolidated British Columbia version, sections 2.2 and 2.3 — bclaws.gov.bc.ca
• Independent Valuation Report, Ernst & Young LLP, filed with the U.S. Securities and Exchange Commission, 2019 — sec.gov

Version 2 · 11 August 2026