When ore is mined it is either mixed with barren material (the bad bits) when it is taken out of the ground or else some of it is left behind in order to not take any barren material. It is recommended that you hire a dumb engineer to decide whether it makes more sense to leave some of the good bits behind (recovery) or bring some of the bad bits along (dilution). Often people will make the mistake of forgetting about recovery and dilution especially if they are trying to raise money from their brother-in-law. If the good bits occur in layers or veins that are very thin then it will be hard to keep the bad bits out which leads to dilution. This means that the grade of ore that is sent to the plant will be lower - sometimes by a lot. More than one mining company has spent itself into oblivion because they were one calculation short of a study.

Considerations of dilution and recovery generally take into account the size of mine and type of equipment to be used in mining. Think of a layered deposit in which layers of good stuff are separated by layers of not so good stuff. If the layers of good stuff are quite thin then you likely have a dilution problem because you have to get as much of the good stuff as you can. However, if the layers of good stuff are much thicker than the layers of not so good stuff then you probably have a recovery problem because you will be willing to leave some of the good stuff behind in order to please the cranky people running the plant.

If the mine is designed to leave some good stuff behind (recovery issue) then the equipment selected for mining is of less importance in terms of its ability to discriminate between good and not so good stuff. If the mine is designed to reduce dilution, though, it is important to choose equipment that can slice the rock in thin layers. The determination of percent dilution and recovery is a value judgment based on the operating experience of the engineer doing the calculation and it can have a very significant impact on the economics of the final operation. In open pit mines it is relatively easy to come up with workable estimates for dilution and recovery but think of an underground block caving mine where you want the ore to collapse on its own. No one really knows whether just the ore will collapse or whether it will bring a bunch of waste rock with it. The startup of such mines is a very nerve wracking time for the guy who made the estimate of dilution.

So this is important stuff and you will notice that one of the differences in definition between resource and reserve is the estimate of dilution and recovery. Almost always the estimate of reserves is less than that of resources due to less than 100 percent recovery of the ore. And if the mine is designed to incur dilution then the average grade had better be lower for the reserve than for the resource. That is just how it is. So what is the definition of a reserve?