Indicated Resource

An Indicated Resource is a term from the mining industry that estimates the quantity and quality of a mineral deposit with a reasonable level of confidence. Think of it as the middle rung on the ladder of geological certainty. At this stage, geologists have gathered enough evidence from drilling, trenching, and sampling to create a decent model of the deposit's size, shape, and mineral content. The sampling points are close enough to assume, but not definitively prove, geological and grade continuity between them. This estimate is solid enough for a company to begin more serious economic analysis, like a `Preliminary Feasibility Study`, to see if a mine could actually be profitable. However, it's not yet certain enough to justify the massive capital investment required to build the mine. It’s a crucial step up from a speculative guess, moving a project from “what if” to “what's next.”

To understand an Indicated Resource, you need to see where it fits in the pecking order of mineral classification. This hierarchy is a globally recognized system, enforced by bodies like Canada's `NI 43-101` and Australia's `JORC Code`, to prevent companies from misleading investors about what they've found. The ladder has two main parts: Resources (what's believed to be in the ground) and Reserves (what can be profitably extracted).

A `Mineral Resource` is a concentration of material in or on the Earth's crust in such form, grade, and quantity that there are reasonable prospects for eventual economic extraction. Confidence is everything, and it's split into three levels:

• `Inferred Resource`: The lowest level of confidence. It's an initial estimate based on limited geological evidence and sampling. It's often called an “educated guess” and is too speculative for any serious economic planning.
• Indicated Resource: The middle ground. As we've seen, sampling is dense enough to reasonably assume the deposit's characteristics. This is the first level that can be converted into a Probable Reserve after economic factors are applied.
• `Measured Resource`: The highest level of confidence. The deposit has been drilled and sampled so extensively that its size, shape, and grade are known with a high degree of certainty.

A `Mineral Reserve` is the economically mineable part of a Measured and/or Indicated Mineral Resource. This is the magic step where geology meets economics. To declare a reserve, a company must prove that it can extract the mineral profitably and legally, considering all costs, metal prices, environmental regulations, and other real-world factors.

• `Probable Reserve`: The economically mineable portion of an Indicated Resource (and sometimes, a Measured Resource). There's a decent level of confidence that it can be mined profitably.
• `Proven Reserve` (or Proved Reserve): The economically mineable portion of a Measured Resource. This is as close to a sure thing as you can get in mining. The company has a detailed mine plan and is highly confident in its economic viability.

For investors, especially those with a value mindset, understanding the difference between these categories is critical. It's the difference between buying a lottery ticket and investing in a business plan. An Indicated Resource sits right at the fascinating intersection of the two.

A company's announcement that it has upgraded a chunk of its deposit from Inferred to Indicated status can be a major share price catalyst. Why? Because it significantly de-risks the project. The geological uncertainty shrinks, and the project becomes more tangible. While it's still a long way from a producing mine, it's a huge milestone. For investors willing to take on calculated risk, companies with large Indicated Resources can offer tremendous upside, as the project moves closer to the much more valuable “Reserve” category through further study.

A savvy investor doesn't just look at the headline resource number. You need to dig deeper.

• Check the Report: Always look for the technical report prepared by a `Qualified Person` (an independent expert). This document contains the details behind the numbers, including the assumptions made about mineral prices and the `Cut-off Grade` used.
• Conversion is Key: The goal is to convert resources into reserves. Does the company have the cash and a clear plan to complete a `Feasibility Study`? A giant Indicated Resource is worthless if the company can't afford the work to prove its economic viability.
• Beware the “Resource Trap”: Some deposits are destined to remain resources forever. They might be in a politically unstable country, contain metallurgical complexities that make processing too expensive, or be of too low a grade to be profitable at foreseeable commodity prices. A big number doesn't automatically equal a good investment.

An Indicated Resource is a sign of a maturing exploration project. It signals that a mining company has moved beyond pure speculation and has a potentially valuable asset on its hands. For a value investor, it represents a point where a project's potential begins to crystallize. However, it is not a finished product. Significant economic and engineering questions remain to be answered before anyone can confidently call it a mine. It's a promise of value, not a guarantee, and requires rigorous due diligence to assess its true worth.