…or How I Learned to Stop Worrying and Love Uncertainty.

1. THE ROY HILL APPROACH, SOME PROBLEMS WITH SAMPLING… …or How I Learned to Stop Worrying and Love Uncertainty. Greg Almond, Geology Manager RHIO

3. Sampling Sampling is the solution to a Problem… …as in a Scientific Problem, meaning a subject of study that is not known, but with the application of an experiment, can be understood.

4. Sampling Sampling is the cause of a Problem… Sampling is the solution to this problem, but potentially also the cause of other problems. Incorrect sample can cost time, money, even lives if you were involved in Bre-X and had a unfortunate helicopter ride… Recent problem? No. Ask these guys:

5. Sampling – a problem Georgius Agricola: “A careful owner, before buying shares, should visit the mine and carefully examine the nature of the vein, as it is very important that he be on his guard, to avoid being the victim of dishonest sellers of shares seeking to defraud him” Mark Twain: “A gold mine is a hole in the ground with a liar standing next to it”

6. Sampling – a problem Assuming we’ve evolved beyond outright criminality… The remaining problems are generally well known: Do waste piles have ore? Does my ore stockpile contain waste? Is the plant processing waste? Do these errors arise from poor mining practice? – often yes… Do these problems arise from poor sampling? – also often yes… Is the viability of the mine in question? Are the shareholders happy? Could they be happier?

7. Solution How do we solve the problem? We experiment. Generally by taking a series of measurements at points (drill-holes), and collecting a sample from these measurements to represent the lot. From Wikipedia - “sampling is concerned with the selection of a subset of individuals from within a statistical population to estimate characteristics of the whole population”

8. Solution How do we solve the problem? To define the population (the lot): We take what we hope is a representative set of samples, that are accurate and precise, and represent the ore body. The Key? That the sample(s) are representative.

9. Location and Resource What do we do at Roy Hill? First – where are we? Second - what do we have? 2.3Bt > 50% Fe total Resource, with more than 1.2Bt > 55% Fe 750Mt > 55% Reserve (with more potential)

10. Geology – Regional Structure Surface Geology of the Hamersley Basin

11. Geology – Structure RH Mineralisation

12. Geology – Drilling and evaluation RH Deposit – extensively drilled and well-understood

13. Geology – Drilling RH Deposit Drilling Process Fairly industry-standard process: Initial exploration drilling, first pass geostats. Continued infill drilling; reduction of spacing and review of geostats Sample submission and dispatch Assay and reporting Modeling of the results – the “solution” to the problem “What's in the ground?”. How do we ensure the process works, and the result is accurate?

14. Geology – How do we monitor? Drilling Process QA/QC In Brief: Industry Standard QA/QC – independent and audited Twin Holes – RC vs. RC, RC vs. Diamond. Standards, Rig duplicates, Umpire labs. Plus ongoing current and future improvement:

15. Geology – How do we monitor? Drilling Process QA/QC – future improvements

16. Geology – How do we monitor? Drilling Process QA/QC – future improvements

17. Geology – Drilling RH Deposit Drilling Process Understand the Process: Set up contracts appropriately Talk to your drillers Measure QA/QC Encourage understanding of the process MOST IMPORTANT: Measure, and make sure you understand the material!

18. Geology – Drilling RH Deposit Drilling Process Understand the Material: Less of an issue with many parts of a bulk commodity like Iron Ore… But? What other parts of the geology of the deposit can cause issues?

19. Geology – Production RH Deposit - Planned Production process Again, fairly industry-standard: Ongoing RC GC drilling for life of mine. Limited use of blast-hole sampling to delineate block boundaries. Continued use of drill monitoring system for both types of drilling. Limited Stockpile sampling. Continual on-stream sampling at the OPF. Again, how do we ensure the process works, and the result is accurate? Measure! Both the numbers, and their errors

20. Measure and Understand Error “You cant know what you don’t measure From this stern chap: Lord Kelvin. “To measure is to know." "If you can not measure it, you can not improve it."

21. Measure and Understand Error However, the assumption that because something is measured it is understood is obviously incorrect. Need to understand uncertainty, error and risk. Need to quantify it as far as possible for the benefit of managers and other stakeholders. As the good Lord said - “The more you understand what is wrong with a figure, the more valuable that figure becomes” Need to accept what you don’t know, and seek strategies to allow for this – either from more work on the problem or acknowledgement of errors.

22. Measure and Understand Error How do we communicate this? Uncertainty: lack of knowledge - normally as standard deviation. Error: where the measurement differs from the expected value. Risk: the potential that an activity will lead to a loss.

23. Measure and Understand Error Geologists often deal with this. Example:

24. Understand and Communicate Risk Why do we need to communicate this? Because the ore, the resource is the most valuable asset of the company. We need to make sure our systems are as complete and thorough as possible, that all involved are trained in their use, and that all staff engaged in the task consistently (and without constant supervision) do the right thing. Simple, eh?

25. Understand and Communicate Risk How do we control these errors?

26. Understand and Communicate Risk How do we control these issues? And why do we need to? And what should we worry about? ?

27. Measure and Communicate Risk What else should we be talking about? Ore is important… …but there is more to the ore than grade, and often the high risks – the things that will shut the mine – are a result of these. All too often, Geologists focus on the grade, and all the other factors, commercial, physical etc don’t enter their thinking. So the discipline with the best understanding of how their data can affect other parts of the project don’t share their knowledge…

28. Measure and Understand Error From the AusIMM Field Geologist Manual: “…many commercial factors determine whether a mineral occurrence constitutes ore. These include demand …, price…, the size and location of the deposit, cost of treatment, losses incurred in mining and upgrading the material to a saleable product, and the presence of undesirable impurities” Add to these commercial factors all the other factors, such as Metallurgical data, geotechnical information, groundwater… These can be more important to the success of a project than grade.

29. Measure and Understand Error This data is almost always more subjective than assays, less amenable to statistical checking, poorly understood and potentially more problem than issues with grade.

30. Measure and Understand Error This data is almost always more subjective than assays, less amenable to statistical checking, poorly understood and potentially more problem than issues with grade.

31. Brave New World? Make sure Geologists are in charge of everything! “…many commercial factors determine whether a mineral occurrence constitutes ore. These include demand …, price…, the size and location of the deposit, cost of treatment, losses incurred in mining and upgrading the material to a saleable product, and the presence of undesirable impurities” Add to these commercial factors all the other factors, such as Metallurgical data, geotechnical information, groundwater… These can be more important to the success of a project than grade.

32. Understand and Drive Improvement How to improve? How do we: Understand the Errors and Risks, Quantify these, And explain our position and drive change? Reconciliation.

33. Understand and Drive Improvement For this to be successful, you need: Regular and well documented systems, Data (or very good assumptions) for each part of your process – and to the sensible limits of the system Good training and people, Management support – perhaps the most important. This is how you drive the process

34. Measure and Understand Error As I said earlier: As the good Lord said - “The more you understand what is wrong with a figure, the more valuable that figure becomes” Need to accept what you don’t know, and seek strategies to allow for this – either from more work on the problem or acknowledgement of errors.

35. Understand and Drive Improvement Don’t get sidetracked! Don’t focus on a single point to the exclusion of the wider process. Don’t be dictated by what is easy – but do need to be realistic and have wide support. Remember the role of a mining geologist (or indeed any mining professional) is to always provide the best ore to the plant – with “best” being relative to many other concerns. Help management see it as an improvement opportunity…

36. Understand and Drive Improvement Help management see it as an improvement opportunity… …but be realistic. Maintain the discipline to see sampling and the attendant issues as Problems, to be solved with the application of time, money and knowledge (in varying ratios).

37. Understand and Drive Improvement Final Thoughts; Sampling of a lot is the most effective (cost, time etc) way to understand a wider population – but is not perfect. What you don’t know is worse than knowing you are wrong. Knowing the issue will let you solve it. Use whatever language you need to get the point across – learn to speak accountant if you have to!

38. That’s all folks. Questions?

39. Thank You