Resource estimate. What I look for:
1. Competent Person. "five years relevant experience" (JORC). This does not mean five years' post graduate experience. A competent Resource CP will have perhaps ten years' hanging around mines and maybe another five years in Exploration and another five years or so estimating Resources in head office or for a reputable consultancy. Ideally a postgrad qualification in geostatistics. The Resource estimated by the 10-year experience MD with an MBA or the 30-year veteran grizzled exploration geo probably won't stand up in court.
2. Significant figures. A dead giveaway. There's not 1,285,282.56t @ 1.865% Cu - it's 1.29Mt @ 1.87% Cu. JORC obliges this.
3. Estimation technique. There's a really good reason why Kriging or its derivatives are industry standard techniques at the moment - they are statistically supported, until something better comes along. The 30-year veteran grizzled exploration geo or Hiram C Cheeseburger P Geo, of Tucson AZ, is going to use nearest neighbor, because that's all they know. Wong Foo or Ivan The Terrible is going to use polygonal estimates, because that's all that's taught under the Chinese or Russian systems (there's a whole separate topic in this). There's nothing wrong with these techniques, provided that the data supports their use. And I rarely see such orebodies. So, when you look at Blue Sky Mines' Maiden Resource estimate, look for commentary on variography and geostatistics. You don't have to know what it means, but if it's there and sounds plausible, then it's probably OK. Look for "variance". There's no hard and fast rules, but numbers > say 2 or 3 are not good.
4. Classification. Measured? Really? the geo must demonstrate not only geological continuity (look, pa! I can measure this in three dimensions!) but grade continuity - which means geostatistics. I get suspicious of big Measured numbers.
5. Unconstrained estimates. If the glossy ASX release shows lots of tennis balls of mineralisation in the sections, then run or start shorting. The geo has simply pushed the default button on the software and estimated blocks around drill intercepts. There's no geology gone into this sort of rubbish. There's a software out there (Cane Toad anyone?) that has its place, but in the hands of a monkey, is really dangerous. A competent Resource geo will carefully construct an electronic model of the shape of the mineralisation and the faults and lithology that confines it and then carefully model the geostatistics of the samples within this shape. Takes time. Costs money. Do it.
6. The database. Look for commentary on the database. If it is described as a commercial, industry standard database, then all's probably well. If it's a bunch of spreadsheets, then start shorting.
7. QAQC. Look for coherent commentary on QAQC. A good Resource estimate will have at least 5% of samples as blanks, certified standards or duplicates and there will be warts and all analysis and commentary on just how crap the resultant data is. If the geo is relying on the laboratory for this sort of stuff, then immediately start shorting.
8. Downhole survey. If it ain't been surveyed, it ain't real.
And here's my lift to the mine. I'm unburdening myself after ten years of reading the worst of the worst. . . I feel validated. . .
