DEFINITION of Proved Reserves
Proved reserves is a classification used in mining sectors that denotes the amount of hydrocarbon resources that can be recovered from the deposit with a reasonable level of certainty. Proved reserves is a common metric quoted by companies such as oil, natural gas, coal and other commodity-based companies. Proved reserves is used in valuing the mining company, as the ability of the company to generate future revenue is partly dependent upon how much of their discovered resources they will be able to reliably extract from the ground.
Also known as proven reserves.
BREAKING DOWN Proved Reserves
Proved reserves are the part of the mining company's deposits that can be recovered with a reasonable level of certainty. Proved reserves are usually determined through extensive geologic and engineering studies. It can take mining companies several years to complete a study to determine the amount of proven resources. A company that increases its level of proven resources over time generally sees a favorable response in the price of its shares.
The other type of reserve is an unproven reserve, which has been discovered but the company cannot be certain to a reasonable degree that they will be able to extract the resources. Unproven reserves are not used by the company as an official part of their valuation.