Imagine you are reading an announcement from a mining company. Somewhere in the third paragraph it says the project contains a measured and indicated resource of several hundred million tonnes, and then, in quieter language, a proved and probable reserve of rather less. The company does not explain the difference. Most readers skip past both figures. That is a mistake, because the gap between those two numbers tells you almost everything about how much confidence anyone should place in the project.
Why two codes exist
Most technical reports you will encounter are written under one of two frameworks: the Australasian JORC Code, which stands for the Joint Ore Reserves Committee, or Canada's NI 43-101, a National Instrument published by the Canadian Securities Administrators. Both exist for the same reason: securities regulators needed a way to stop mining companies making up numbers and presenting them to investors as fact. Before these codes existed, a company could quote any tonnage it liked. After them, a qualified person — a credentialled geologist or engineer who accepts personal liability for the estimate — must sign off on every figure. The two codes use slightly different language and administrative machinery, but their underlying logic is identical, and a reader who understands one can follow the other with only modest adjustment.
The resource hierarchy
Both codes organise geological knowledge into three resource categories, ranked by how well the deposit is understood. An inferred resource is based on limited sampling — enough to suggest a deposit exists and to make a rough estimate of its size and grade, but not enough to be confident about continuity. The geology might behave differently between the drill holes, and it probably has not been tested closely enough to rule that out. An indicated resource requires closer-spaced data: the qualified person has enough information to assume geological and grade continuity with reasonable confidence, though gaps remain. A measured resource demands the highest data density; the qualified person is sufficiently confident in continuity that the estimate can support detailed mine planning.
The movement from inferred to indicated to measured is not automatic with time — it requires additional drilling, sampling and assaying, all of which cost money and take years. A deposit can sit in the inferred category indefinitely if no one funds the work to upgrade it.
The reserve conversion
Resources become reserves only after a separate assessment confirms that they can be mined economically under stated assumptions. This conversion step is where much of the project risk is either resolved or exposed. A probable reserve is derived from an indicated (or in some cases measured) resource after applying modifying factors — mining method, dilution, recovery, processing performance, infrastructure costs, and so on. A proved reserve requires a measured resource as its starting point and the highest level of confidence in those modifying factors. The reserve is always smaller than the resource it came from, sometimes dramatically so, because low-grade zones that look attractive in the ground may not pay their way once you add the cost of getting the ore to surface and through a processing plant.
A worked illustrative example
Suppose, for illustration, that a project reports a measured and indicated resource of 100 million tonnes at a grade of 1.2% copper. At that grade the contained copper in the resource would be 1.2 million tonnes of metal. Now suppose the prefeasibility study converts 60 million of those tonnes into a probable reserve at 1.0% copper — a lower grade because the mining engineer has excluded the higher-grade but geometrically awkward zones that cannot be mined economically, and has applied a dilution allowance for waste rock that inevitably enters the ore stream. The contained copper in the reserve is now 600,000 tonnes. The company might emphasise the resource figure in its headline; the reserve figure is what the mine plan is actually built around. Neither number is the amount of copper that will ever reach a smelter — processing recoveries will reduce it further still. This example is entirely illustrative and the arithmetic is here only to show the logic, not to represent any real project.
What the categories do not tell you
A large measured resource is not the same as a good project. A high-grade inferred resource is not the same as a mine. Resources and reserves are geological and engineering statements made at a point in time, under assumptions about costs and commodity prices that the qualified person is required to state but that may not hold in the future. When those assumptions change — because energy costs rise, or the processing route turns out to be more expensive than modelled — a company can and does restate its reserves downward. This happens regularly across the industry and is a normal consequence of improving knowledge, not necessarily of fraud.
It is also worth noting that both JORC and NI 43-101 require disclosure of the assumptions used, but they do not standardise those assumptions. Two qualified persons estimating the same deposit under the same code can reach different reserve figures if they apply different cut-off grades. The cut-off grade — the minimum grade below which ore is treated as waste — is itself a function of assumed metal prices and costs. Reading the assumptions section of a technical report carefully is as informative as reading the resource table.
Reading across the two codes
The main practical difference for someone working near the industry is jurisdictional. A project listed on the ASX or operating in Australasia will almost always report under JORC. A project listed on the TSX or involving Canadian-registered securities will report under NI 43-101. Both require a qualified person, though the specific credential requirements differ slightly. Some major projects produce reports that comply with both simultaneously, which is straightforward because the category definitions are close enough that a single dataset can be presented under either framework. The SEC's S-K 1300 rules, which govern US-listed companies, introduced similar resource and reserve categories in 2018 and are broadly consistent with the international framework, so readers who understand JORC or NI 43-101 will find S-K 1300 reports navigable with little additional effort.
For the more advanced reader
The treatment above covers the classification logic but skips the geostatistical methods — kriging, nearest-neighbour estimation, multiple indicator kriging — that qualified persons use to actually construct a resource model from drill-hole data. Understanding those methods, and how the choice of estimation technique affects reported grade and tonnage, is the next layer of rigour. The JORC Code's guidelines for estimation and the CIM Estimation of Mineral Resources and Mineral Reserves Best Practice Guidelines are the primary technical references for that work.