A Measured Resource is the highest-confidence category of a Mineral Resource. Think of it as the most well-understood and accurately mapped portion of a mineral deposit before a company has confirmed it's profitable to mine. To earn this classification, geologists and engineers must have conducted extensive, detailed exploration, sampling, and testing. This work is so thorough—often involving drilling holes very close to one another—that the size, shape, grade (the concentration of the valuable mineral), and tonnage of the deposit are known with a very high degree of certainty. This confidence allows a “qualified person” under regulatory codes like Canada's NI 43-101 or Australia's JORC Code to create a precise 3D model of the orebody. Essentially, a Measured Resource is as close as you can get to knowing exactly what's in the ground without having actually dug it all up.
Imagine a pyramid representing all the potential minerals a company might have. The wider the base, the less certain you are about what's really there. As you move up the pyramid, the area narrows, but your confidence grows. Measured Resources sit at the very peak of this resource pyramid.
For a value investor, certainty is king. The entire game is about buying assets for less than their intrinsic value. In mining, a company's primary asset is the rock in the ground, and a Measured Resource provides the most reliable information for valuing that asset. A company with a large proportion of its assets classified as Measured Resources is inherently less risky than one built on speculative Inferred Resources. The high confidence reduces the chance of a catastrophic write-down, where it turns out the expected ore simply isn't there or the grade is much lower than hoped. When you're building a DCF (Discounted Cash Flow) model for a miner, the cash flow projections are far more dependable when they are based on a Measured Resource. It provides a solid, defensible foundation for your valuation, minimizing speculation and allowing you to invest with a greater margin of safety.
This is one of the most critical distinctions in mining investment, and getting it wrong can be costly. A resource is an estimate of the mineral in the ground. A reserve is the portion of that resource that is economically profitable to mine. Think of it this way: a Measured Resource is like knowing with high certainty that there are one million ounces of gold in a deposit. A Mineral Reserve is knowing you can extract that gold at a cost of $1,000 per ounce when the price of gold is $1,800, making it a profitable venture. All reserves must first be resources, but not all resources will become reserves.
To convert a resource into a reserve, a company must conduct a feasibility study. This exhaustive report analyzes all the “modifying factors” that determine profitability. These include:
Only after a Measured or Indicated Resource has passed this rigorous economic test can it be upgraded. A Measured Resource that is proven to be economically viable becomes a Proven Mineral Reserve, the highest-confidence asset a mining company can have on its books. An Indicated Resource becomes a Probable Mineral Reserve.
When you see a company touting its massive “resource,” always ask the next question: how much of that is a reserve? A Measured Resource is fantastic because it's the most likely candidate to be converted into a high-quality Proven Reserve. It dramatically de-risks the geological side of the equation, which is the first and most important step toward creating a profitable mine.