Reserves? Types and categories

Speaking of 43-101 resources, this is usually when a junior mining company jump from a lofty dream of finding precious metals or anything worthwhile in the ground - to something tangible... or as some goldbugs like to refer to it as - pounds in the ground.

Let's review the few categories - which generally increases in quality and accuracy, as more holes are drilled and a better idea of how the deposit is formed underground can be projected.

Reserves

Inferred: Usually only crude, high level ground survey or statistical "sampling" of the area has been performed. Not enough actual testing has been performed. "Gee, it kind of looks like that outcropping way over there has some gold in it too; it looks like it starts here and continues all the way." 

Indicated: Only a "few" drill core samples and assays of those cores may be completed and sufficient to calculate tonnage and grade. Inferred projection of the "goodies in the ground" at a measurable distance away from the drill holes is permissible with limitations. It is very expensive to drill every few feet, so you have to make reasonable assumptions about what is hidden between the drill holes; it may be a bonanza, it may be nothing. 

Measured: The thickness, grade (in grams of gold per ton of host rock), distribution and extent of the deposit is "fully" known, or at least with great statistical confidence. Where the ore starts and stops in every direction should be "known." Many, many drill holes and assays are completed and analyzed. Relative concentrations of gold ore to host rock and overburden are "known."

Reserves

The term "Reserve" is used only for mines that are actually producing or very near that point. Much more is known about the richness, depth and expanse of the ore body. Drilling is complete and assays have been verified. Reserves are classified as proven, probable or possible. 

Proven: The actual entire ore reserves are stated explicitly in terms of the mineable tons. The chemical and metallurgical properties of the mineralization are very well known and documented. The mining method is clearly identified and optimized. The estimate of the "mine life" before resources are exhausted is extrapolated. All of the supporting infrastructure, ancillary requirements and capital costs are identified and indexed to expected price and "net profit" per ounce. This is the most important category and should always be carefully analyzed when picking a potential stock for inclusion in your portfolio.Almost everything else is a "sales pitch." You've been warned.. 

Probable: Only the mineable ore grades and tonnage are stated. The vein thickness is known and the way the gold ore lies in the ground is also known fairly well. Where mineralization starts and stops is reasonably estimated. This is often estimated from following industry accepted and permissible "ethical" procedures after drill results. 
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Possible: This is a big estimate of how much gold might be here; it is sometimes referred to as "potential" How many of us know people that never lived up to their "potential" for one reason or another? Same thing here. It may be no more than some geo-pseudo-scientific guess based on little more than review of earth mapping satellite imagery or surface surveys. 

The ore can migrate from one category to another over time as the deposit is better measured and understood after more drilling and extraction is completed. Any given "zone of occurrence" can have only one classification at any given time. Lodes can turn out to be either richer or leaner than initially "guesstimated." It is NEVER an exact science, errors are inevitable. A simple decimal point higher or lower in any mathematical measurement can be the difference between profit and failure.