SAMREC Code

The SAMREC Code (full name: South African Code for the Reporting of Exploration Results, Mineral Resources and Mineral Reserves) is a public reporting standard that governs how mining companies in South Africa describe their mineral deposits. It’s essentially a rulebook that forces companies listed on the `Johannesburg Stock Exchange` (JSE) to report information about their assets using a common set of definitions. The primary goal is to protect investors from misleading or overly optimistic statements. Before codes like SAMREC, a company could shout about a “massive gold discovery” with little substance to back it up. SAMREC ensures that all claims are classified according to strict geological and economic criteria, verified by a qualified professional. This creates a transparent and consistent environment, allowing investors to compare different projects and companies on a like-for-like basis, which is fundamental for sound investment analysis.

For a `value investor`, the game is about understanding what an asset is truly worth, not what the market hypes it to be. The mining industry is a minefield (pun intended) of speculation and geological jargon. The SAMREC Code is your secret weapon and BS-detector. It forces a company to be brutally honest about the quality and economic viability of its mineral deposits. By enforcing a clear distinction between what might be in the ground and what can be profitably extracted, the code allows you to perform meaningful `due diligence`. It helps you cut through the promotional fog and focus on the tangible assets that generate real value. A company's adherence to the SAMREC Code is a non-negotiable first step in assessing its long-term potential and avoiding costly mistakes based on unverified claims. It turns a potential gamble into a calculated investment.

This is the most important concept in the SAMREC Code that every investor must understand. Confusing the two is a classic beginner's error.

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. It’s an educated guess, a statement of potential. Resources are always reported in order of increasing geological confidence:

• Inferred: The lowest level of confidence. It’s an estimate based on limited geological evidence and sampling. Think of this as the “we think something is over there” category.
• Indicated: Confidence is high enough to allow for preliminary mine planning. More drilling and sampling have been done.
• Measured: The highest level of confidence. The deposit’s size, shape, and grade are well-established through detailed and reliable exploration.

A `Mineral Reserve` is the economically mineable part of a Measured or Indicated Mineral Resource. This is the portion that a company has demonstrated it can extract, process, and sell at a profit, after considering all modifying factors like cost, technology, regulations, and environmental impact. This is what actually matters for a company's bottom line. Reserves are also split into two categories:

• Probable Reserve: The economically mineable part of an Indicated Resource. There's a reasonable level of confidence in the economic viability.
• Proved Reserve: The economically mineable part of a Measured Resource. This is the highest level of confidence—as close to a sure thing as you get in mining.

In short: Resources are about discovery and potential, while Reserves are about proven, profitable business.

SAMREC reports are not just put together by the marketing department. Every report must be based on work that is overseen and signed off by a `Competent Person` (CP). A CP is a highly experienced and qualified geologist or engineer who is a member of a recognized professional organization. They are personally and professionally accountable for the report's findings. The CP's involvement provides a crucial layer of independent verification and accountability, ensuring the integrity of the data presented to investors.

The good news for global investors is that SAMREC isn't a lone wolf. It is part of a family of internationally recognized reporting codes that fall under the umbrella of `CRIRSCO` (Committee for Mineral Reserves International Reporting Standards). These codes share the same core principles, making it easy to compare companies across the globe. Key members of this family include:

• The `JORC Code`: Used in Australia and is perhaps the most well-known globally.
• `NI 43-101`: The standard used for companies listed on Canadian stock exchanges.
• The `SME Guide`: The equivalent used in the United States.

If you understand the principles of one, you can easily navigate the others.

• No Code, No Deal: If a mining company you’re looking at doesn't report to a CRIRSCO-aligned standard like SAMREC, JORC, or NI 43-101, walk away. It's a massive red flag.
• Reserves Pay the Bills: When reading a company report, zoom in on the Mineral Reserves. A company with vast “Inferred Resources” but zero “Proved Reserves” is a highly speculative bet.
• Base Your Valuation on Reality: Your valuation of a mining company should be heavily weighted towards its Proved and Probable Reserves. These are the assets most likely to be turned into cash flow, which is the ultimate source of value for shareholders.