Appraisal of Inferred Mineral Resources in Canada: Need for Clear Communication, Securities Law Risks, and Influence on Capital Markets

 

    

      Canada is a minerals and mining powerhouse, with many different kinds of mineral deposits throughout the vast country. It has developed an effective way to assess and quantify mineral resources on the basis of the provability of their presence. The designations are perhaps similar to oil & gas industry designations like probable reserves and proved reserves.

 

Measured, Indicated, and Inferred Mineral Resources Classifications

     Canada has a designation of mineral resources known as National Instrument 43-101, or NI 43-101, which differentiates three classifications of mineral resources: measured, indicated, and inferred. The three classes are differentiated on the basis of geological confidence, which is based on the density of assay drilling spacing. Just like in oil & gas, drilling provides the best and most direct information. The figures below come from Junior Mining Intelligence.

     One important difference between oil & gas and mineral accumulations is that an oil or gas accumulation generally has uniform value. There may be different products in different parts or locations of the reservoir, such as heavy oil, light oil, condensate, natural gas liquids, or dry gas. These are all valuable products, and the value does vary, but not drastically. On the other hand, mineral resources differ in concentration, which more strongly affects their value. Typically, the outer parts of an ore body have lower concentrations. Thus, those outer parts are typically assessed as inferred resources. They may still be economical to produce since the infrastructure to do so is already in place. Infill drilling is important, and as noted, the density of drilling informs the classification. Since drilling is costly, some parts of ore bodies may be drilled at a looser grid spacing and not eligible to be booked as indicated resources but only inferred resources. Subsequent drilling can either turn inferred resources into indicated resources or measured resources (if the drilling density is high enough), or it can render them non-resources. They suggest that as much as 20-40% of inferred resources can be lost through further drilling. Like oil & gas reserves, mineral reserves can also grow and shrink based on product prices. One thing investors look for is the change in reserves based on new drilling, which, as noted, can grow or shrink based on drilling results.

     The different types of assessments and feasibility studies are given below. Preliminary Economic Assessments (PEAs) allow reserves to be booked as inferred. The Pre-feasibility Study (PFS) is the beginning of quantifying and declaring the reserves. The Definitive Feasibility Study (DFS) is a definitive assessment of measured and indicated reserves. Inferred resources can only be booked via PEAs and are not included in PFSs and DFSs.

     Below, Junior Mining Intelligence shows how to read a category-mixed resource table.

     JNA Resource Advisory notes in an article about appraising inferred mineral resources:

“Inferred mineral resources rarely appear in discounted cash flow models — yet they routinely drive 20–40% of a junior explorer's market capitalisation. This disconnect between financial modelling convention and market pricing creates both opportunity and disclosure risk. Understanding how to bridge that gap is one of the most practically valuable skills a QP can offer a capital-markets-facing client.”

“All three major codes — NI 43-101/CIM, JORC 2012, and SK-1300 — define an Inferred Mineral Resource as a quantity and grade estimated on the basis of limited geological evidence and sampling, sufficient to imply continuity but not to verify it. The CIM Definition Standards (2014) are explicit: the level of confidence is insufficient to apply any modifying factors and must not be converted to a mineral reserve.”

     They note that Inferred inventory is the most tangible proxy for saying that there is a “credible pathway to upgrading the inventory with additional work.” They note that the value of inferred resources on the market is typically 25–50% of measured and indicated resources.

“…it is a market convention that prices the probability of upgrade. The magnitude of the discount reflects the geological complexity, the quality of the historical data, and the amount of work required to achieve Indicated classification.”

     The market is not pricing real resources but the probability that those resources will become resources through further assessment. Thus, there is certainly an element of speculation with inferred resources. The following three factors inform how inferred resources are valued and communicated to investors: 1) geological continuity narrative, 2) upgrade pathway and work programme, and 3) classification sensitivity. They are explained in detail below.

     Below, they explain how companies can run afoul of securities laws. These include implicit economic statements, aggregating classifications without distinction, and converting to metal equivalents without code compliance. Thus, they must be careful to stay within the bounds of the resource classification rules.

     They stipulate that responsible communication is key to proper appraisal of inferred resources and give the following framework of recommendations.

 

 

 

References:

 

Appraising Inferred Resources: Bridging Geological Confidence and Market Reality. James Adu, CPG, RM. JNA Resource Advisory. December 2025. Appraising Inferred Resources: Bridging Geological Confidence and Market Reality — JNA Resource Advisory Blog

Inferred vs Indicated vs Measured Resources: The three NI 43-101 resource categories explained. What drill spacing produces each, why the conversion ladder matters, and how to read a category-mixed resource table. Junior Mining Intelligence. Updated: May 28, 2026. Inferred vs Indicated vs Measured Resources: What's the Difference? | Junior Mining Intelligence