COAL RESOURCE BASE IN POLAND FROM THE PERSPECTIVE OF USING THE JORC CODE

COAL RESOURCE BASE IN POLAND FROM THE PERSPECTIVE OF USING THE JORC CODE * E. J. Sobczyk, and P.W. Saluga Mineral and Energy Economy Research Institute of the Polish Academy of Sciences ul. Wybickiego 7 PL 31-261 Kraków (*Corresponding author: jsobczyk@meeri.eu) 1

COAL RESOURCE BASE IN POLAND FROM THE PERSPECTIVE OF USING THE JORC CODE ABSTRACT The article will present a comparison of classifications of resources according to the JORC Code System with Polish classification, basing on system used in Eastern Europe. The differences between these classifications are significant. The information about mineral resources in Poland is not comparable to the main international system of reporting reserves like JORC, SAMREC, PERC etc. Although comparisons between these systems are used, the transfer of particular categories of resources from the Polish system into a JORC category is not simple. Basing on the examples of privatization of Polish coal companies through initial public offering on the Warsaw Stock Exchange, the current practices providing guidelines how to convert resources from the Polish classification to the JORC system are described. Such independent assessment of resources is necessary for development of Mineral Expert s Report (MER or CPR) which is an integral attachment to the prospectus. KEYWORDS Resources and reserves, classification systems, JORC, CRIRSCO INTRODUCTION In the complex and changing world the same understanding of notions is of crucial importance. It is one of the challenges of the global community misunderstanding leads to various conflicts. This insight is also applied to the mining industry and reporting of mineral reserves and resources. From exploration to production, the development of a mineral property can cost millions of dollars. One needs reserves and resources statements for different purposes: raising funds either through the industry or the market, supporting any public accounts to the stock exchanges, negotiating a concession or a mining licence, maintaining licences or permits, settling the level of state or private royalty payable on mine production, etc. Regulation of the reporting of reserves and resources of mineral properties has increased substantially in the last decades and is constantly evolving mostly due to frauds, litigation and other problems. Australia has been a pioneer country in the development of standards for disclosure of reserves and resources. In 1979 the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy (AusIMM), the Australian Institute of Geoscientists (AIG), and Minerals Council of Australia introduced a strong code for estimating resources and reserves the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (commonly known as the JORC Code). The JORC Code provides a uniform set of reserve and resource definitions. Since the date of publication the code has undergone several revisions (the current version was issued in 2012). The JORC Code has strong enforcement provisions and has been incorporated in its entirety into the listing rules of the Australian Stock Exchange, as has been the case since its introduction. Since the date of publication one can observe growing international acceptance of the JORC Code the code has been become an international standard and many countries have been studying it in order to see if they can improve their corporate governance regime and assure adequate public revealing in the assessment of mineral properties. JORC-type regulations are embodied in the similar codes, guidelines and standards published and adopted by the relevant professional bodies in other countries. 2

In 1994 CRIRSCO was formed Committee for Mineral Reserves International Reporting Standards (CRIRSCO). It is recognised by global organisations such as the International Accounting Standards Board (IASB), the United Nations Economic Commission for Europe (UNECE) and the International Council on Mining and Metals (ICMM), as the key international organisation representing the mining industry on issues relating to the classification and reporting of mineral assets. The current members represent Australia, Canada, Chile, South Africa, Western Europe including the United Kingdom and USA, with the prospect of other regions and countries joining in the future. The CRIRSCO template is a set of standard definitions and principles which are incorporated in a group of standards developed nationally by the affiliated reporting organisations: the JORC Code (Australia), CIM Standards (Canada), SAMREC Code (South Africa), PERC Code (Europe), SME Guidelines (United States), Certification Code (Chile). Definitions of resources and reserves constitute for some of the most important parts in the CRIRSCO template... Before any further comments are made, it is important to distinguish between meanings of resources and reserves in the common and mining understanding in the first case resources mean volumes available for the current use and reserves saved for the future. In the international mining community these notions have quite opposite meanings reserves are mineral quantities that may be available for current exploitation net of dilution, deletion, and processing losses, whilst resources include ore volumes that may be available in the future (Niec, 2008). It is important to note that CRIRSCO template recognizes resources and reserves in the mining sense. Poland and some other post-communist countries (e.g. Russia, Ukraine) have used mineral quantities assessment and classification systems developed in the Soviet Union in the 1960s. These governmental standards are derived by following strict rules and procedures and fully meet the requirements for which they were defined: reliable State accounting, efficient use of mineral resources, development of strategic planning and replenishment of mineral resources. The Soviet-rooted classifications are well understood in the West but they are much different from the international codes for resources and reserves. Under the post-soviet reporting systems all assessed mineral volumes are classified as different categories of resources ; a term of reserves is not being used. Whilst general comparisons are used between both systems it is not accurate to simply transfer categories of resources from the post-soviet systems into the resources/reserves categories of the CRIRSCO template. Despite the strengths of Soviet-rooted reporting systems one needs efforts to harmonize these systems with CRIRSCO platform. This is mostly due to the fact, that in many cases the data and information reported under any post-soviet classification system is not acceptable on international capital markets and assessments quoted within these systems are liable to misunderstanding by foreign investors.moreovermoreover, estimates obtained by the two systems are often difficult to conciliate. Soviet-rooted and international resource reporting systems differ and require further clarification. The needs of mutual understanding and speaking the same language forced Russian representatives to develop CRIRSCO-aligned reporting standard called NAEN Code. Cooperation between the Russians and CRIRSCO has been maintained since 2008 and followed the stages of founding working group, signing protocols of intent, developing rules for harmonization of reporting standards and developing Russian code for public reporting exploration results, resources and reserves. Russia, then, the mother-country of originate Soviet classification system is also the first one which adjusted it to the international standards. In Poland transferring worldwide ideas into specific domestic rules is the initiative of the Polish Association of Mineral Asset Valuators (PAMAV), founded in 2006. In 2008 Polish Code for Mineral Asset Valuation (POLVAL Code) was published. The Code introduces the international notion of reserves, identifying a corresponding term in Polish classification. In recent years a number of significant privatizations in the Polish coal mining industry have occurred (LW Bogdanka, JSW, KWB Konin and Adamow) and PAMAV experts have taken part in the JORC reporting processes with Wardell Amstrong s competent persons. Unfortunately, Polish experiences did not find expression in development of any domestic reporting standards which would be compliant with CRIRSCO template. 3

The paper sets guidelines and ways for transferring Polish resource classification classes into international categories of resources and reserves. Conversion is made on the example of an underground hard coal deposit. INTERNATIONAL RESOURCE & RESERVE REPORTING PATTERN As it was stated previously, regulations set of the Australasian JORC Code have become a pattern for other national mineral resource and ore reserves codes. The JORC Code sets minimum standards for public reporting (in Australia & New Zealand) of Exploration Results, Mineral Resources and Ore Reserves. The Code provides a mandatory system for classification of tonnage/grade estimates according to geological confidence and technical/economic considerations. The Australasian standard requires that the documentation on which such report is based must be prepared by, or under the direction of, and signed by, a Competent Person or Persons (CP); it describes the qualifications and type of experience required to be a CP. Finally, the document provides extensive guidelines on the criteria to be considered when preparing reports on Exploration Results, Mineral Resources and Ore Reserves. The Code was incorporated into the ASX Listing Rules in 1989. Under the JORC Code, the fundamentally important definitions are as follows: Resource is that portion of the deposit for which there is a reasonable prospect of economic extraction. This is divided into Measured, Indicated and Inferred, with decreasing levels of geological assurance. For coal deposits that have been explored, but for which there are no reasonable prospects for economic recovery at the time of estimating, or in the foreseeable future, the JORC Coal Guidelines introduce a new term: Inventory Coal, though this term is not accepted by the JORC Code. Inventory Coal can also be classified as Measured, Indicated or Inferred. Reserve is the economically mineable part of the Measured and Indicated Resource, allowing for dilution and modifying factors such as mining methods, legal, environmental and government factors. In this case, the economic mineability is based on a techno-economic study, such as a Feasibility Study. Reserves are classified as Proved, when originating from Measured Resources, and Probable, when originating from Indicated Resources, but in some circumstances from Measured. Reserves should normally have extant licenses/concessions. The JORC Code can be applied to all mineral deposits, and for coal there is a JORC Guidelines document for the estimation and reporting of coal resources and reserves (Australian Guidelines for Estimating and Reporting of Inventory Coal, Coal Resources and Coal Reserves, 2003). These guidelines contain definitions of various categories of Resources and Reserves, Points of Observation (PoOs), such as drill holes, underground proving etc., as well as recommendations for minimum spacings of PoOs for various categories of geological confidence (e.g. Measured, Indicated and Inferred). The fundamentals of the JORC Code for Coal, as set out in the JORC Coal Guidelines (2003), are presented in the Figure 1. As stated before, the assessment is carried out and signed off by a CP of proven experience and professional standing. Depending on the geological complexity of the deposit, the CP can vary the spacings of PoOs for various categories, but it is not as prescriptive as the Polish system using the 3 State determined levels of complexity. Recommended spacings of PoOs for different categories of Resources are as follows: Measured: a maximum spacing of 500 m; Indicated: spacings between 500 m and 1000 m; Inferred: spacings greater than 1000 m and up to 3000 m. However, the CP may vary these, according to the geological complexity, in line with his experience. 4

The JORC Code has served also as a model for CRIRSCO international reporting template. One may may notice that since introduction of the JORC Code considerable progress has been made towards widespread adoption of consistent reporting standards throughout the world. Further developments in resource/reserve reporting issues is underway. But the problem with any so-called International System is that individual Governments will often adopt their own system for reasons such as granting of mining concessions, calculation of State royalty levels etc. Figure 1 Framework for classifying of Inventory Coal, Coal Resources and Coal Reserves (Coalfield Geology Council..., 2003) POLISH RESOURCE CLASSIFICATION Under the Polish system (Fig. 2), all coal is assessed initially on thickness, as determined from boreholes, surface exposures etc, within certain limits of ash and sulphur content, and calorific value. Coal seams with an average thickness above 0.6 m and a minimum calorific value of 15MJ/kg and a maximum depth of 1,250 m is considered to be Balanced Resources (Balanced Resources are considered to be approximately equivalent to JORC s term Resources ). This is essentially an inventory of coal which is registered with the State, and the mine may treat these reserves as allocated for future mining. In reality, mines have their own mineable thickness cut-off of 1.2-1.3 m, which means that the thinnest seams of Balanced Resources are not always mined (Sobczyk, 2009). Prior to 2001, some coal was classified as Out-of-Balance Resources when it was actually assessed to be greater than 1 m thick, but where other factors, such as tectonic disturbances, prevented it being from considered as Balanced. This was classified as Out-of-Balance Group B. Under amendments to the mining legislation (2005) some of these resources are now allowed to be reclassified as Balanced Resources. At the next stage of classification, economic and modifying factors are considered, and areas of coal allocated for mining are chosen. Those volumes, depending on certain modifying factors, are classified as Industrial Resources and the rest of Balanced Resources as Non-Industrial Resources. As it was mentioned earlier, in post-soviet system there is no notion of reserves but, in fact to be understood internationally the mineable parts of Balance Resources should be rather called Industrial Reserves. Because these don t strictly correspondent with JORC Reserves we will call them in this paper Industrial Reserve Base. For the Industrial tonnages, mining layouts and dilution factors are applied, and the coal estimated to be recoverable from the coal faces is termed Operational Resources (or better understood in the international manner Operational Reserves ). Conventionally, such coal is estimated on a net basis, that is the tonnage and quality of clean coal excluding any in-seam waste bands greater than 5 cm thick, 5

GEOLOGICAL RESOURCES BALANCED RESOURCES INDUSTRIAL RESOURCES/RESERVES EXPLOITATION RESERVES OPERATIONAL RESERVES R E S E R V E S and not on a gross run-of-mine basis. In-seam waste bands up to 5 cm are included in the net coal reserves and included in net seam coal quality data. OUT-OF-BALANCE RESOURCES NON-INDUSTRIAL RESOURCES losses dillution Figure 2 Polish resource classification system (Saluga, 2011) (Exploitation Resources and Operational Resources refer to international category of Reserves the first term is used in ore mining whilst the second in the coal industry) Under the Polish system, resources/reserves (Balanced, Industrial and Operational) are only estimated at critical times, for example when documentation on new or revised concessions has to be submitted to the State. Balanced Resources and Industrial Reserve Base are not generally estimated by the mine, but by panels of experts appointed by the mine on behalf of the State. As the systems were introduced in the 1960s before computers were routinely used for such purposes, even today the estimations are often by traditional block-estimating methods, rather than using 3D geological resource modelling software. The results of such evaluations, comprising plans of coal areas (showing areas of Balanced coal Resources and Industrial coal Reserve Base) and the quality and tonnage of those resources/reserves are submitted to and approved by the State, in this case the Ministry of the Environment. This way, the mine does not have a direct involvement with the estimation or classification of Balanced Resources and Industrial Reserve Base, and under the centrally-planned economy, the mine was simply the agent that mined the evaluated coal on behalf of the State. A situation therefore arises commonly where resources are estimated at a date in the past, based on information which is superseded. For example, areas of resources may now contain additional boreholes, or underground proving/samplings, but the resources are not routinely updated and reclassified as the new information becomes available. Operational Reserves are estimated by the mines based on mine layouts, and registered with the State annually. Updated assessments of the remaining Operational Reserves are made by making deductions from previous, state registered, assessments to take account of coal mined since the last formal assessment. These updates to the Operational Reserves are usually made annually and are linked to the annual returns to the State of statistics on the coal mined in that year. However, the historic values of Balanced Resources and Industrial Reserve Base are not always adjusted. This is the fundamental difference between the traditional resource assessment methods of former Soviet countries and those applied by modern western mining companies, who constantly update resource and reserve assessments in real time using new information as it becomes available, usually using thirdparty s or in-house geological and geostatistical software, according to international codes of reporting. Under Polish systems, mining areas are classified by the State into three categories of geological complexity, from I to III, and resources/reserves are classified into categories of geological knowledge and reliability. These include the four principal categories of A, B, C 1 and C 2, plus in Poland a lesser category, 6

D, which was not used in the original Russian system. In general, these are the resources/reserves which can be aligned to CRIRSCO systems. Resources of category D are delimited when geologists can estimate borders and geological structure of deposit and possible volumes of coal, especially relied on data from separated mine workings, natural outcrops and/or based on extrapolation geological interpretation of geophysical data. The stated accuracy limit can be greater than 40%. The range of the deposit of resources/reserves of category C 2 is identified from reconnaissance workings, coalbed outcrops or geophysical survey based on interpolation or substantiated extrapolation. The main characteristics of the coalbody, its structure and tectonics are known. Preliminary conditions of mining are preliminarily conceptualized, coal quality is recognized based on systematic sampling in reference its possible use. The stated accuracy limit may not extend 40%. The incidence of the deposit of resources/reserves of category C 1 is identified from reconnaissance workings, coalbed outcrops or geophysical survey based on interpolation or to a limited extent on extrapolation. The recognition data of the body is sufficient for preparing the pre-feasibility study especially a detailed form, internal structure and tectonics of deposit and mining conditions are determined and environmental impacts assessments made. The size and characteristic form of the mineral body and main particularities of the conditions of formation and internal structure are explained; variability and possible discontinuity of the mineral body are estimated. The stated accuracy limit may not extend 30%. The outline of resources/reserves of category B is precisely identified based onn data from dedicated workings or appropriate geological surveys. The form, internal structure, layer correlation and tectonics of the deposit are definitely known; quality and technical properties of coal are industrially confirmed. The stated accuracy limit may not extend 20%. Resources/reserves of category A are recognized at the level enabling current planning, mining and possibly optimal exploitation. The form, internal structure and tectonics of the deposit and volumes of resources/reserves are deduced from mine development workings, gate roads and faces, quality of coal, its technical properties based on systematic sampling of mine workings and data from current exploitation. The stated accuracy limit of mean resource parameters in the individual panels may not extend 10%. Principle of deposit complexity is well understood. The problem is formally recognised in the Polish resource classification system therere are specific exploration rules for every complexity group. The guidelines on borehole and datapoint spacings for each level of geological complexity are given in Table 1. Table 1 Geological complexity guidelines on borehole spacings Group* Spacings between boreholes and/or underground roadways (m) A B C 1 C 2 I With roadways 1,500-1,000 3,000-1,500 4,000-3,000 up to 500 II With roadways 1,000-500, including 1,500-1,000 3,000-1,500 up to 300 at least one roadway III With roadways up to 200 500-250, including at least one roadway 1,000-500 1,500-1,000 * Group of geological complexity HARMONIZATION BETWEEN POLISH & INTERNATIONAL RESOURCE CATEGORIES It has been suggested by international committees and by common practice that there is broad equivalence between JORC and the systems of the former Soviet centrally planned economies. They are depicted in Table 2 and on Figure 3. 7

Increasing level of geological knowledge and confidence Table 2 Harmonisation between Polish resource classification system and the JORC / CRIRSCO Polish JORC / CRIRSCO Resources D Inferred C 2 Indicated or Inferred C 1 Indicated A & B Measured Reserves C 2 Probable (indicated Resources), or not Reserves (if Inferred) C 1 Probable A & B Proved This broad equivalence is often used as a guide to how Resources and Reserves in the Polish system might relate to JORC, but it cannot be relied upon. The only reliable way of estimating to JORC standards is to revert to base data and for a CP to carry out a new, independent estimation, usually using modern 3D geological modelling and geostatistical software. This is not a mechanical translation but must be conducted by a professional with relevant knowledge and experience. Exploration Results C o a l R e s o u r c e s C o a l R e s e r v e s Inferred Balanced Resources (category C 2 and D) Indicated Balanced Resources (category C 1 and sometimes C 2 ) Measured Balanced Resources (category A + B) Probable Operational Reserves in estimated and fully explored deposits (category C 1 + C 2 ) Proved Operational Reserves in fully explored deposits (category A + B) Impact of geologic and mining, working, economic, marketing, legal, environment, social and administrative factors (so called modification factors ) Figure 3 Translation of Polish resource classification system into JORC / CRIRSCO template In the case of C 2 resources, all of them can be aligned with the JORC category of Indicated Resources or Probable Reserves. In general, C 2 resources in ex-soviet reporting systems are often allineated with JORC Inferred Resources, based on wide drilling spacings, and limited data. But in some cases (better geological reconnaissance) C 2 areas can be classified as JORC Indicated Resources. In some seams, Balanced Resources are not considered for mining, due to constraints on thickness, quality, consistency, accessibility, etc. These Balanced Resources, are considered to be Inventory Coal, as defined by the JORC Guidelines, as the company currently has no reasonable prospects for their economic recovery. One fundamental part of a JORC assessment is in the reliability of the base data. For example, the JORC Guidelines specify that core recovery for a seam in a borehole has to be at least 95% of core length; otherwise the PoO should be rejected for thickness, and also for not having a representative analysis. The CP can relax this, and often does, to say 90%, in cases where there is good supporting data such as downhole geophysical logs, which allow the seam thickness to be estimated quite accurately from 8

boreholes. However, seams with core recoveries less than this have to be rejected from the coal quality and density databases, meaning that they cannot be used for Resource/Reserve estimation and classification. This is a fundamental problem when dealing with historic Polish borehole data. Prior to recent times, drilling techniques in Poland were not capable always of achieving these requirements and it is common for Polish resources to rely on, and be classified from, borehole coal seam intersections with core recoveries in the range 50-80%. In some cases the CP examines a number of historic deep boreholes from the surface to find some poor core recoveries. It is common for later, more modern, underground boreholes from the mines, and direct measurements and channel samples in underground boreholes, to prove thicknesses in excess of those recorded in historic surface boreholes. Therefore reserve assessments based on old drilling data might be more often underestimated than overestimated. As it was stated before, the Polish estimation process defines certain levels of accuracy (e.g. +/- 30% for C 1, +/- 40% for Class C 2 ). Errors in recorded seam thicknesses in historical boreholes are unlikely to put estimates of coal reserve volumes (and similarly tonnes and qualities) outside these tolerances. Finally, with regard to JORC requirements for Marketable Reserves, taking into account coal beneficiation and yields from run-of-mine reserves (one of the modifying factors ), it is very often hard to have accurate data for converting the net reserve tonnes per seam or coal face to Marketable or Saleable Reserves. This is because in-seam waste bands greater than 5 cm are not sampled, whereas waste bands up to 5cm are included. But in general, it is understood that a 95% recovery factor to convert Net Operational Reserves to Marketable Reserves is generally applicable. RESULTS The rules for comparison of Polish resource classification with the JORC Code presented above have been used for verification of amount of resources/reserves in a particular hard coal mine X and for presenting total resource/reserve base of hard coal in Poland. The resources/reserves in mine X, accordingly to the classification system used in Poland, have been presented in Table 3. One has to emphasise that these resources/reserves include only the seams planned for mining, upon which the future production plans of the mine are based. According to the production schedule a division has been made: for the reserves planned for mining before the current mining permit expires in 2020 and for those planned for mining during the period of the next mining concession. Table 3 Resources/reserves accordingly to the classification system used in Poland (Mt) Operational Reserves Balanced Resources* Industrial Reserve Base* until 2020 after 2020 A+B C 1 +C 2 Total A+B C 1 +C 2 Total A+B C 1 +C 2 Total Total 83.5 177.1 260.6 131.3 25.7 18.2 43.9 4.2 40.2 44.4 * only in seams planned for mining The Balanced Resources in the deposit of the X mine amount for 260.6 Mt. In this amount the Industrial Reserve Base may be distinguished which may be the subject of profitable exploitation. These amount for 131.3 Mt. The remaining part, 129.3 Mt in total, account for the Non-Industrial Resources. The Industrial Reserve Base needs to be deducted by the losses which in result produces the amount of reserves planned for mining, namely the Operational Reserves. These reserves in total, until 2020 and after this date, are estimated at 88.4 Mt. The amounts of Resources and Reserves estimated accordingly to the JORC Code have been compared in Table 4. The total amount of 88.4 Mt of operational reserves is located within the area covered by the mining concession currently in force. However, the reserves of only 43.9 Mt are covered by the current 9

concession, therefore only these reserves are in compliance with the Reserves category defined by the JORC system. The remaining part of the operational reserves, planned for mining after 2020 will be classified to the Reserves category in compliance with the JORC system definition only when the period of concession s is extended. Table 4 Resources and reserves according to the JORC Code (Mt) Resources Reserves Measured Indicated Total Concession period Proved Probable Total Until 2020 25.7 18.2 43.9 83.5 177.1 260.7 After 2020 4.2 40.2 44.5 Total 29.9 58.4 88.4 * Reserves after the year 2020 depend on the renewal of the concession Because of the fact that 129.3 Mt of Balanced Resources are qualified as Non-Industrial Resources and at the moment the possibilities to mine these volumes are non-existent, accordingly to the guidelines applicable to the JORC system, one may consider them only as inventory coal and not as resources. If the economic or technological conditions will change in the future and a part of the Non-Industrial Resources will be qualified as mineable, they will potentially be included into the resources category. In the resource/reserve report of X mine the Non-Balanced Resources of B group are also mentioned. In the new documentation they will be qualified as Balanced Resources before the concession is renewed in 2020. These resources, potentially totaling ca. 335 Mt, have been presented in Table 5. They can also be qualified as resources accordingly to the JORC classification. A part of these resources may be re-qualified in the future and may potentially become the Industrial Reserve Base or the Operational Reserves. Potential resources Table 5 The Non-Balanced Resources of Group B (Mt) A+B C 1 +C 2 total 63.6 271.7 335.3 The X mine undertakes attempts to obtain concession for mining of the PI deposit. The area of this deposit is adjacent to the mining area of the mine. The potential resources/reserves possible to obtain in the future have been presented in Table 6. Table 6 The potential resources/reserves possible to obtain in the future, accordingly to the classification system used in Poland (Mt) Concession potentially Balanced Resources potential Industrial potentially Operational Reserves A+B C 1 +C 2 total Reserve Base A+B C 1 +C 2 total PI deposit - 304.3 304.3 80.0-54.2 54.2 Accordingly to the JORC Code system the potential Resources and Reserves have been presented as estimates in Table 7. Because of the fact that X mine currently does not hold a concession for this area, these tonnages cannot be considered, accordingly to the methodology of the JORC system or the JORC system guidelines. Table 7 Resources and Reserves for the concession of the PI deposit, accordingly to the JORC Code (Mt) Potential Resources Potential Reserves Concession Indicated Inferred Total Proved Probable Total PI 304.3-304.3-54.2 54.2 10

Using analogous method of comparison of Polish resource classification standards with their equivalents in the JORC Code system, Tables 8 and 9 present the size of resource volume of hard coal in the deposits of operating mines. Table 8 Hard coal resources/reserves in the deposits of the operating mines accordingly to the classification system used in Poland (Gt) Operational Reserves Balanced Resources Industrial (in the period of concession s (after the period of Reserve Base validity) concession s validity) A+B C 1 +C 2 Total A+B C 1 +C 2 Total A+B C 1 +C 2 Total 3.6 7.9 11.5 3.8 0.8 1.3 2.1 0.1 0.6 0.7 Table 9 Resources and reserves in the deposits of the operating mines according to the JORC Code system (Gt) Resources Reserves Measured Indicated Total Licence period Proved Probable Total Within the concession s validity 0.8 1.3 2.1 3.6 7.9 11.5 After the concession s validity 0.1 0.6 0.7 Total 0.9 1.9 2.8 CONCLUSIONS In the last years one can observe an increasing involvement of international mining companies, consultants, and investors in the Polish mining industry. On the other hand, some Polish enterprises (e.g. KGHM Polska Miedz or ZGH Boleslaw) invest in foreign mineral projects. That is why mutual understanding of different national resource classification standards is necessary. In Poland all mineral resources that can be mined using the underground system are owned by the State. These resources may not be the subject of trade the State grants a right to exploit them in the form of a mining licence. The mining licence regulates the scope and period of mining. The resource reporting system in Poland is rule-based and prescriptive, and very different from the principal international reporting codes for Resources and Reserves, such as JORC, SAMREC, PERC etc. Whilst general comparisons are used between domestic system and international ones, it is incorrect to simply transfer categories of resources/reserves from the Polish system into the Resources and Reserves categories of the JORC Code. In the Polish classification system resources/reserves volumes depending on reliability and geological knowledge are classified into five categories: A, B, C 1, C 2 and D; in addition to that mining fields are classified by the State into three categories of geological complexity: I, II and III. The Polish resource reporting standard fully meets the requirements for which it was assigned: reliable State accounting, efficient use of resources, development of strategic plans for management and discoveries of new resources. This paper has confirmed this statement. Unfortunately, the Polish system has displayed some shortcomings firstly the Polish and international classifications differ slightly they require further interpretation, otherwise the resource/reserve assessments can be difficult to reconcile. Secondly, resource estimates presented under the Polish system are not acceptable on major international capital markets which can lead to misunderstanding by foreign investors. And finally, the need for reporting resources in the international manner involves duplication of reporting efforts. Therefore, applying the same terminology is fundamental and mutual understanding of terminology is critical. 11

As it has been stated above, in 2011 Russian CRIRSCO aligned Code for public reporting exploration results, resources, and reserves. A need of similar or corresponding ventures should be negotiated by Polish mining industry representatives. The idea of Polish Code for public reporting of exploration results, reserves and resources should be implemented. Such Code should be based on the CRIRSCO template with guidelines from the Polish resource reporting system. The new standard should be designed for use in international markets, in parallel with the Polish classification used for State purposes. REFERENCES Coalfield Geology Council of New South Wales and the Queensland Mining Council (2003). Australian Guidelines for Estimating and Reporting of Inventory Coal, Coal Resources and Coal Reserves. Retrived from http://www.resources.nsw.gov.au King, H.F., McMahon, D.W. and Bujtor, G.J., (1982). A Guide to the Understanding of Ore Reserve Estimation (21 pp). Melbourne, NSW: Australasian Institute of Mining and Metallurgy. Niec, M., (2008). International Classifications of Mineral Resources And Reserves. Problems of harmonization (in Polish: Miedzynarodowe klasyfikacje zasobów zloz kopalin. Problemy unifikacji). Gospodarka Surowcami Mineralnymi, 24, 2/4, 267-274. Saluga, P.W. (2011). Managerial Flexibility in Mineral Project Valuation (in Polish: Elastycznosc decyzyjna w procesach wyceny projektow geologiczno-gorniczych). Studia, Rozprawy, Monografie, no 167 (pp. 269). Cracow, Poland: IGSMiE PAN Publishing House. Sobczyk, E.J. (2009). Arduousness of Hard Coal Mining and Geologic Conditions and Their Influence on Resources Management (in Polish: Uciazliwosc geologiczno-gorniczych warunkow eksploatacji wegla kamiennego i jej wplyw na gospodarke zlozem). Studia, Rozprawy, Monografie, no 150. Cracow, Poland: IGSMiE PAN Publishing House. 12