The National Instrument 43-101 (known by industry insiders as NI 43-101) is a protocol for Canadian mineral resource classification that applies to all domestic and foreign mining corporations that are listed on the mineral exchanges of Canada, the largest in the world being the Toronto Stock Exchange.

The Canadian Securities Administration (CSA) polices the filings of NI 43-101 to make sure that they all adhere to the strict guidelines set forth by the mineral resource industry.

During the 1990s the infamous company Bre-X Minerals Ltd. committed fraud by massively inflating their mineral resource estimates by salting ore samples with gold dust. What Bre-X essentially did was contaminate their samples by introducing gold from outside sources. As a result of this international scandal, the industry stepped in to protect investors from future shady mineral stock promoter tactics.

There is an old mining joke that a mine is nothing but a hole in the ground that is owned by a liar. So to fix the tarnished reputation of the industry, new guidelines were implemented that mandate a “qualified person” QP (a geological engineer) with a minimum of five (5) years of experience in the mineral resource industry, specifically mineral exploration must sign off on the final report-essentially staking their credibility for any errors, falsifications, and/or omissions.

This gave birth to the mining industry’s gold standard in reporting, the NI 43-101.

Major investment brokerages, mutual funds, banks and other financial institutions across the globe swear by the NI 43-101, refusing to invest in any mining company without first reviewing these documents. This document is largely unknown to the average amateur investor, and that is why this article aims to enlighten the reader about the NI 43-101. The mining report contains a lot of technical geological terms, but in a nutshell there are essentially three distinct classifications for mineral resources:

Inferred Resource

A mineral resource where the grade, quantity, and quality are estimated from a limited sampling of the geological region in which the sample was extracted. A potential investor has to understand that this is no guarantee that the resource even exists!

Indicated Resource

A mineral resource where the grade, quantity, and quality can be predicted with more confidence than an inferred resource, allowing for enough parameters to be put in place to begin preliminary mine planning.

Measured Resource

A mineral resource where the grade, quantity, and quality are very well established and accounted for.

In addition to the above mentioned resources, we have two types of “reserves”, and these are the “Probable Mineral Reserve” which is the economically mineable component of an indicated resource, as can be outlined by a preliminary feasibility study. The second type is the “Proven Mineral Reserve”, and this is where the economically mineable component of the measured mineral resource is identifiable by a preliminary feasibility study.

The actual NI 43-101 itself is made up of many components and can be downloaded from a Canadian online database called SEDAR. A thorough explanation about how to read an NI 43-101 report is beyond the scope of this article.