What this lesson teaches
I can tell renewable from non-renewable resources and explain how reserves are classed and when supply runs out.
Syllabus 9173, Topic 1.1, 2. Environment and Resources. Will our supply of provisioning services ever be depleted?
Make a guess
The world price of copper falls sharply. What happens to a known copper deposit that was profitable to mine?
- The copper disappears from the ground.
- It may stop being a proven reserve.
- It becomes a speculative reserve.
- Nothing changes; prices do not affect reserves.
Show the answer
It may stop being a proven reserve.
Proven reserves can be extracted profitably now. If the price falls, the same ore may become a conditional reserve without any change in the ground.
How much of a resource is available depends on what is known to exist and what can be extracted today.
Resource availability is the part of a resource that people can actually use, not the total amount in the ground. The syllabus uses four categories. Proven reserves are known deposits that can be extracted now, at current prices and with current technology. Conditional reserves are known deposits that could be used if conditions change, such as lower costs, better technology or higher prices.
Hypothetical reserves are undiscovered deposits expected in areas where geology suggests more, such as the unexplored part of a known mining region. Speculative reserves are less certain possibilities in areas where the geology looks promising but no deposits have been found.
Sort these
Which reserve category does each deposit belong to?
Groups: Proven reserve, Conditional reserve, Hypothetical reserve, Speculative reserve.
- Oil expected in rock layers next to a producing field
- Possible minerals in a remote area where the rocks look promising
- A mapped oil field that current wells can drain at a profit
- A surveyed ore body being mined profitably at today's prices
- Undiscovered ore expected in an unexplored part of a known mining region
- A known deposit too deep to mine with today's technology
- A known deposit that would pay only if prices rose
- Deposits that might exist under deep, unexplored ocean floor
Show the answer
Proven reserve
- A mapped oil field that current wells can drain at a profit Known and economic to extract today, so it is proven.
- A surveyed ore body being mined profitably at today's prices It is known and can be extracted now with current technology and prices.
Conditional reserve
- A known deposit too deep to mine with today's technology It is known, but extraction depends on better technology, so it is conditional.
- A known deposit that would pay only if prices rose The deposit exists, but it becomes usable only if economic conditions change.
Hypothetical reserve
- Oil expected in rock layers next to a producing field It is expected from nearby evidence but not yet discovered, so it is hypothetical.
- Undiscovered ore expected in an unexplored part of a known mining region Geology near a known deposit suggests more, but none has been found yet.
Speculative reserve
- Possible minerals in a remote area where the rocks look promising Nothing has been found, and the only clue is promising geology, so it is speculative.
- Deposits that might exist under deep, unexplored ocean floor These are the least certain possibilities, with no known deposits nearby.
Ask two separate questions. How sure is the evidence? Can it be extracted profitably? A survey can raise certainty. A price fall can make a known deposit unprofitable without removing any ore. Better technology can make a conditional deposit usable.
Other systems use different terms. The USGS calls hypothetical and speculative amounts undiscovered resources. A large estimate or a high price does not guarantee extraction will happen or be allowed.
- Proven reserves
- Known and profitable to extract now.
- Conditional reserves
- Known, but need better prices or technology.
- Hypothetical and speculative
- Undiscovered; expected or just possible.
Step by step
Check the evidence
Known, expected or just possible?
Check feasibility
Technology, price and cost.
Explain a change
What condition changed, and how does it move the category?
Worked example: Same ore, different price
A made-up known ore body costs $80 per tonne to extract. At a selling price of $60, it is not profitable. At $100, it may become profitable. The price rise did not create any new ore.
Watch out for this
Speculative reserves are guaranteed future supplies.
They are uncertain possibilities. They must be found and proven workable first.
Check your understanding
A known deposit becomes unprofitable after its price falls. What is the best explanation?
- Its economic availability changes, so it may be a conditional reserve.
- It becomes a speculative resource, like other unused deposits.
- The geological evidence for the deposit is now weaker.
Show the answer
Its economic availability changes, so it may be a conditional reserve.
Yes. The ore is still there, but not profitable now.