A practical approach for the management of resources and reserves in Small-Scale Mining

Artisanal (ASM) and Small-Scale Mining (SSM) are well-known sources of environmental, health and safety risk. Nonetheless, due to the massive increase in the price of gold in the last few years, ASM and SSM units have rapidly appeared and are operating in many remote locations around the world. This trend is bound to last, since there are no valid alternative livelihoods for the operators in the sector, and the attractiveness of the profit does not counterpoise any concern about the environment or safety. The most viable solution for such activities is a shift towards responsible operations. This can be done by turning an ASM operation into a sustainable and profitable SSM industrial extractive unit. For doing so capital investment is needed from external investors. The main task, therefore, is to make ASM attractive for investment. The approach proposed in this work is based on a main differential from large-scale mining: the attractiveness for external investment only lies in proving, in the early stages of the business, a minimum mineral reserve that is able to rapidly return the investment committed to upgrade the artisanal operation into a small-scale industrial one, plus an attractive profit. This is done by introducing the concepts of “minimal reserve to be proved” and “replication”. The paper proposes a practical methodology for the evaluation of the minimal reserve to be proved, based on mining and processing CAPEX and OPEX. A portion of the profits of the operation on such minimal reserve is to be shared between the stakeholders of the business, and another is to be re-invested in future exploration. With this last share, the process of proving the reserve can be consequently replicated to the next portion of the mineral resource. This methodology is applied to prove viable a real SSM unit in Ecuador. The results are compared with large-scale reserve estimations: the order of magnitude of the volume that needs to be proved at the start to make the operation viable varies by 1/1000 in favor of SSM.