![\"Three](\"https:\/\/geoconversation.org\/wp-content\/uploads\/2025\/09\/1-1-1024x665.webp\")
<\/a>Why Investors Don’t Trust Numbers in Geological Exploration<\/h2>\n\n
When an investor enters the subsoil use market, they’re not simply buying a plot of land. They’re paying for information: what’s hidden underground, in what volumes, with what quality, and whether it can be extracted profitably. <\/p>\n\n
If the numbers in reports can’t be trusted\u2014this is no longer an investment, but a guessing game. That’s why the main question that arises for any investor is: how reliable and verifiable is this data? Who is responsible for it? And by what rules was it obtained? <\/p>\n\n
In the Soviet reserve estimation<\/a> system (GKZ), this answer is not obvious. Reports are prepared collectively, undergo discussion in commissions, and are signed by regional departments. But no one is personally responsible for the numbers. In the USSR this worked: there was one client\u2014the state. In a market economy, this approach no longer works. The investor is the main client, and they need transparency. <\/p>\n\n The problem is not only in terminology, but also in the process. Today it’s important to understand exactly how the data was obtained: how samples were collected<\/a>, under what conditions, in which laboratories the analysis was conducted, how the results were verified. Without this, any numbers are just an empty set of categories and tables. <\/p>\n\n “If you don’t know how samples were collected\u2014you know nothing” <\/p>\nemphasizes Alexander Kuznetsov<\/cite><\/blockquote>\n\n Hence the need for unified, recognized standards\u2014ones that describe not only what to calculate, but also how to calculate it, who calculates it, and who is responsible for it. These standards allow an investor to understand: can the report be trusted\u2014and if so, why. <\/p>\n\n International reporting standards didn’t arise from a love of bureaucracy. They were created in response to real scandals\u2014when investors were simply deceived. <\/p>\n\n One such case occurred in the 1970s: Australian company Poseidon Nickel announced the discovery of a large nickel deposit, shares soared 40 times, and the deposit didn’t exist. <\/p>\n\n Another was even louder: in 1997, Canadian company Bre-X claimed enormous gold reserves at the Busang deposit in Indonesia. Investors put in hundreds of millions of dollars. It was later revealed: gold shavings had been mixed into the samples. The company went bankrupt, tens of thousands of people lost money. <\/p>\n\n After these incidents, it became clear: without specific, universally accepted rules, the trust market won’t survive. Thus the JORC code emerged\u2014the world’s first standard that prescribed what to consider reserves and resources, who is responsible for it, and how the report is formatted.<\/strong> <\/p>\n\n “JORC isn’t about document format. It’s about language: clear terms, understandable logic, transparent structure. Essentially, it’s a glossary and logical framework that allows a geologist and investor to speak the same language” <\/p>\nexplains Alexander Kuznetsov<\/cite><\/blockquote>\n\n So that countries could develop their own standards while maintaining unified logic and comparability, the CRIRSCO template<\/strong> was created based on JORC. It includes basic terminology and a table of requirements for report structure. Today, more than 15 national codes belong to CRIRSCO\u2014from Canada and Chile to Kazakhstan. And CRIRSCO is precisely what international standards mean in the full sense: universal, comparable, accepted by the market. <\/p>\n\n Until the 2010s, Kazakhstan, like Russia, worked according to GKZ. Reports were prepared for the state, but not for investors. When international companies began entering the country, a problem arose: they needed reports according to JORC, not GKZ.<\/strong> <\/p>\n\n “Investors came to us\u2014and asked to recalculate reserves. Because they simply didn’t understand what C1, C2 meant, by what principles this was calculated, who verified it, and on what basis the conclusion was made” <\/p>\nrecalls Georgy Freiman<\/cite><\/blockquote>\n\n Double work began: Kazakh subsoil users ordered international reporting in parallel, just to somehow explain to investors what they had. At some point it became clear: it’s easier to introduce one standard<\/strong> than to do two. <\/p>\n\n In 2015, Kazakhstan officially announced the transition to the CRIRSCO system. The national code KAZRC was created, built on the CRIRSCO template\u2014with the same principles, terms, and requirements. The key difference from GKZ is personal responsibility of the competent person<\/strong> and transparency of the entire work logic. In 2016, Kazakhstan became a full member of CRIRSCO. <\/p>\n\n “This isn’t a top-down reform. It’s a logical response to market demand: if you want to attract investment\u2014speak an understandable language”<\/p>\nsays Freiman<\/cite><\/blockquote>\n\n Today in Kazakhstan, most new solid mineral projects are calculated according to international standards. And GKZ reports remain only in certain sectors (for example, for water and hydrocarbons). Since 2024, this distinction has been enshrined at the legislative level. <\/p>\n\n Today in Russia, the GKZ system is still used\u2014with Soviet roots and calculation logic oriented toward the state, not the investor. Attempts to harmonize it with international standards have been made, but so far remain at the discussion level. <\/p>\n\n “There was an attempt in 2018 to develop a new classification, but it wasn’t approved. They tried to prepare methodological recommendations\u2014the Ministry of Justice didn’t pass them. Now the topic is back in work”<\/p>\n explains Artem Vasilchenko, expert at FBU “GKZ”<\/cite><\/blockquote>\n\n Active movement is currently toward a new classification for solid minerals<\/a><\/strong>, where criteria for technological feasibility, economic viability, and others have been added. But these are not international standards<\/strong>, but internal attempts to improve the Russian system. <\/p>\n\n For companies that still want to attract investment abroad, the standard path remains: compile a GKZ report \u2192 transfer materials to an international consulting company \u2192 receive a calculation according to CRIRSCO \/ JORC, signed by a competent person \u2192 use it to attract capital.<\/p>\n\n “This path works. Yes, it costs money. But if you want investors to believe you\u2014this is the only understandable format”<\/p>\nsays Artem Vasilchenko<\/cite><\/blockquote>\n\n Russia is not yet planning an official transition to international standards. But harmonization is being discussed<\/strong>, and the demand for clear, transparent reporting with personal responsibility is heard more and more often. <\/p>\n\n Now that we’ve understood how international standards work and why they’re needed, let’s look at exactly how they differ from the familiar GKZ system<\/strong>\u2014and why this transition is becoming not just a fashionable trend, but a necessity. When you compare GKZ and international standards like JORC, CRIRSCO, or KAZRC, the difference is immediately visible. It consists of several key points. <\/p>\n\n The GKZ system and international standards use different approaches to describing subsoil resources\u2014these are essentially two different “languages.” One clear example is the differences in understanding the terms “resources” and “reserves”<\/strong>. <\/p>\n\n In GKZ, categories C2, C1, B, and A<\/a> are used, reflecting the degree of deposit study. Their task is to sequentially transfer data from one category to another, increasing reliability: from inferred to indicated, then to measured and fully explored. In the Soviet system, it was important to record and classify all mineralization\u2014regardless of whether it could be extracted. <\/p>\n\n In international standards, the approach is different. Here, resources<\/strong> (what can potentially be extracted under certain conditions) and reserves<\/strong> (the part of resources that can realistically be mined and processed from an economic and technical standpoint)<\/a> are clearly separated. This is a key distinction: the foundation is not only geology, but also project feasibility<\/strong>. <\/p>\n\n “International codes use more transparent terminology\u2014for example, ‘inferred resources’ and ‘proven reserves.’ Even an investor without geological education understands what this means”<\/p>\n explains Alexander Kuznetsov<\/cite><\/blockquote>\n\n This shift is especially important when it comes to investment: terminology must be intuitively clear\u2014without needing to decipher what stands behind abbreviations like C1 or B.<\/p>\n\n In the Soviet system, for example, “resources” could include any manifestations of mineralization, even if they have no industrial prospects. For instance, Kazakhstan does have diamond deposits<\/a>, but they are of low quality and suitable only for technical purposes. Developing them is unprofitable, but in GKZ they were still counted as resources. In the international system, such objects don’t enter the calculation: here, a resource<\/a> is something that can actually be developed<\/strong>. <\/p>\n\n Similarly with reserves: GKZ reports could include reserves that are physically impossible to extract (for example, due to mine collapse), while the international system recognizes only those reserves that can realistically be mined<\/a> and converted into marketable products<\/strong>.<\/p>\n\n This shift in terminology is not just semantics. It’s a way to establish transparent communication with an investor who doesn’t have to be a geologist, but must understand exactly what they are buying<\/strong>. <\/p>\n\n In the Soviet GKZ system, reports are prepared collectively. They are reviewed by regional departments, expert groups are created, everything goes through collegial meetings and is approved by protocols. But no one is personally responsible<\/strong> for the final numbers\u2014responsibility is spread among departments and commissions. This is logical for a system where the client was the state, not an investor. <\/p>\n\n “In the USSR, there was no need to prove reliability. The state believed its own numbers\u2014the system was closed”<\/p>\nexplains Georgy Freiman<\/cite><\/blockquote>\n\n In international standards, the principle is different: the report is signed by a competent person<\/strong>, who bears personal legal responsibility<\/strong> for the data provided. This is a specialist with confirmed qualifications and experience, included in an official register (in Kazakhstan’s case\u2014PONEN). Such an expert’s signature means they vouch for the methodology, data, interpretation, and conclusions in the report. <\/p>\n\n “You signed\u2014you bear responsibility. And if something’s wrong\u2014it’s your reputation and, in some cases, even criminal liability”<\/p>\nemphasizes Freiman<\/cite><\/blockquote>\n\n This principle is precisely what builds investor trust. They understand who exactly made the calculations<\/strong>, what qualifications<\/a> they have, and what the conclusions are based on. In GKZ, there are no such guarantees\u2014only the general name of an institution. In the 21st century, this is not enough. <\/p>\n\n One of the key problems of the GKZ system is inflexibility<\/strong>. The main technical and economic parameters by which reserves are calculated\u2014so-called cut-off grades<\/strong>\u2014are approved by the state and are practically not subject to revision. If the market situation changes (for example, metal prices fall or new processing technologies appear), this is not automatically reflected in calculations. To change cut-off grades, you need to go through a long approval process that can take up to a year<\/strong>. <\/p>\n\n “In the Soviet system, nothing changed for decades. Cut-off grades were once and for all, under a rigid plan. Now it doesn’t work that way\u2014flexibility is needed”<\/p>\n explains Georgy Freiman<\/cite><\/blockquote>\n\n And if a project goes to expert review, the procedure can last up to three months<\/strong>. Considering that reports are reviewed on weekends, different experts are involved, and there’s no personal responsibility, changes to the project become extremely difficult. <\/p>\n\n In international standards (for example, KAZRC based on the CRIRSCO template), the entire system is structured differently<\/strong>. First, the report is prepared by a competent person<\/strong> who bears personal responsibility. Second, review takes 14 to 30 days. But most importantly\u2014the report can be promptly updated<\/strong> if market or technological conditions change. <\/p>\n\n “If the metal price changed<\/a>\u2014you simply recalculate the project economics, update the cut-off grades, and submit a revised report. Without this, it’s impossible to make decisions quickly in the modern mining industry” <\/p>\nadds Freiman<\/cite><\/blockquote>\n\n Thus, international standards allow adaptation to the market<\/strong>. This is especially important when it comes to investment\u2014no investor will wait a year while outdated data is recalculated. <\/p>\n\n The transition to JORC, CRIRSCO, or KAZRC standards is not just a change in methodology, but a change in mindset<\/strong>.<\/a> The main barrier is mental. Many specialists have worked “the old way” for decades and see no point in changing anything: why retrain, take exams, if the system seems to work? <\/p>\n\n “Our approach is: ‘if it works\u2014don’t touch it.’ Even almost 10 years after KAZRC’s launch, some geologists in Kazakhstan remain skeptical”<\/p>\nnotes Georgy Freiman<\/cite><\/blockquote>\n\n Some passively ignore changes, others actively try to slow down reform. But the process continues. In recent addresses by Kazakhstan’s president, the need to complete the transition to international standards<\/strong> was mentioned as a separate point. And when system change becomes a political priority\u2014it can no longer be stopped. <\/p>\n\n Resistance is emotion. But there are also financial arguments<\/strong> that cannot be ignored. <\/p>\n\n “By our estimates, preparing a KAZRC report can cost approximately 40% less than GKZ,” says Georgy Freiman. “This is likely primarily related to format: the report is submitted electronically, together with a database and model. Paper remains only as a formality for geological funds, whereas previously resources\u2014both money and time\u2014were spent on it.” <\/p>\n\n Under KAZRC, reports are submitted electronically\u2014together with a database and geological model. The paper version is preserved only as a formality for geological funds. This not only speeds up the process but also reduces costs: instead of hundreds of drawings that previously had to be printed in three copies, the model can be visualized on screen, scaled, and, if necessary, only individual elements printed. <\/p>\n\n In digital format, you can create a thousand maps\u2014and it costs nothing, unlike paper printouts, which previously took up to a third of the budget.<\/p>\n\n Electronic submission provides another advantage\u2014simplified access to information<\/strong>. In the GKZ system, reports are stored in geological funds, where they get lost, deteriorate, require storage costs and lengthy approvals. Despite years of promises, digitization of the GKZ archive is still not complete, and this creates a monopoly on data access<\/strong>. <\/p>\n\n “Republican funds complain: they have nowhere to store reports, documents deteriorate in damp premises and become unusable. But we live in the 21st century\u2014it’s time to abandon paper. Everything can be stored electronically, with duplication and necessary protection. It’s elementary”<\/p>\nsays Georgy Freiman<\/cite><\/blockquote>\n\n In KAZRC, everything is structured differently: the electronic report is transferred to the Geology Committee, where it’s registered. The materials themselves remain confidential<\/strong>\u2014they belong to the subsoil user. But a summary table is published in open access: with the deposit name, report acceptance date, and competent person’s name. This is enough to verify: the work was done, and someone is responsible for it. <\/p>\n\n International reserve estimation standards are not a formality or “Western fashion.” This is a response to a real market demand. An investor needs to understand what they’re investing in. They don’t read between the lines and don’t know what’s hidden behind categories “C1” or “A” in a GKZ report. They want to see transparent data, verified methodologies, personal responsibility, and the ability to attract capital. This is precisely why JORC, CRIRSCO, KAZRC, and other standards were created\u2014not as an alternative, but as a new coordinate system built for open market tasks. <\/p>\n\n Today, a geologist cannot remain on the sidelines of these changes. We’re no longer in the USSR, where a planned economy operated and the only client was the state. The times when a geologist was both expert and controller are in the past. Now everything is measured by investment, reputation, and trust. And it’s precisely the specialist\u2014the one who calculates reserves, prepares the report, and puts their signature\u2014who becomes the key figure. A geologist either masters the new system or drops out of the game. <\/p>\n\n Alexander Kuznetsov speaks about this simply and honestly: a geologist cannot stop developing. The profession requires constant forward movement. He gives a personal example: he recently completed a master’s degree and admits that each new consulting project gives him the opportunity to delve into new areas\u2014from geomechanics to geostatistics. Even if it’s not directly required for the current task, the desire to “dig deeper” becomes a habit. <\/p>\n\n\n
![\"Geological](\"https:\/\/geoconversation.org\/wp-content\/uploads\/2025\/09\/p1010982-1024x684.webp\")
<\/a>What These Standards Are\u2014and Why They Emerged<\/h2>\n\n
![\"Los](\"https:\/\/geoconversation.org\/wp-content\/uploads\/2025\/09\/3.1-1024x665.webp\")
<\/a><\/figure>\n\n\n\n![\"Bre-X](\"https:\/\/geoconversation.org\/wp-content\/uploads\/2025\/09\/3.2-1024x683.webp\")
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<\/a>How Kazakhstan Transitioned to the International System<\/h2>\n\n
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<\/a>What About Russia?<\/h2>\n\n
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<\/a>GKZ vs. International Standards: Differences<\/h2>\n\n
Language and Logic: Why GKZ Terms Are Incomprehensible to Investors<\/h3>\n\n
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![\"Drilling](\"https:\/\/geoconversation.org\/wp-content\/uploads\/2025\/09\/7-1-1024x683.webp\")
<\/a>Who Is Responsible for the Numbers: Collective Expertise or Personal Signature<\/h3>\n\n
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![\"PONEN](\"https:\/\/geoconversation.org\/wp-content\/uploads\/2025\/09\/8-1024x683.webp\")
<\/a>Flexibility vs. Inertia: What’s the Difference in Approaches<\/h3>\n\n
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<\/a>Why Geologists Resist International Standards<\/h2>\n\n
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Now Let’s Calculate: Why Should a Company Change Systems<\/h3>\n\n
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![\"Working](\"https:\/\/geoconversation.org\/wp-content\/uploads\/2025\/09\/10-1024x683.webp\")
<\/a>Investor Trust Begins with Geologist Professionalism<\/h2>\n\n