Proved Reserves

Reviewed by Apoorva | Updated on Aug 26, 2020

Introduction

Proved reserves, in the mining sector, means the number of hydrocarbon resources that can be recovered from the deposits with certainty. This is a common metric used by companies that deal with natural gas, oil, coal, and other commodities. Proved reserves are used to gauge the value of a mining company in terms of the ability to generate future revenue this is partly dependent upon how much of the discovered resources they will be able to extract from the ground, reliably.

Understanding Proved Reserves

Proved reserves are determined based on extensive geologic and engineering studies companies need several years to estimate the number of proven resources.

Another type is an unproven reserve where reserves are discovered, but the company is unable to estimate the resources recoverable to a reasonable degree. This is not considered as an official part of their valuation. Only companies that increase their level of proven resources over time get a favourable response in the price of their shares.