Visualizing the Life Cycle of a Mineral Discovery - Visual Capitalist
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Visualizing the Life Cycle of a Mineral Discovery

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Visualizing the Life Cycle of a Mineral Discovery

Visualizing the Life Cycle of a Mineral Discovery

Mining legend Pierre Lassonde knows a little bit about mineral exploration, discovery, and development. Drawing from decades of his experience, he created the chart above that has become a staple in the mining industry—the Lassonde Curve.

Today’s chart of the Lassonde Curve outlines the life of mining companies from exploration to production, and highlights the work and market value associated with each stage. This helps speculative investors understand the mining process, and time their investments properly.

Making Cents of Miners: The Stages of a Mineral Discovery

In the life cycle of a mineral deposit, there are seven stages that each offer specific risks and rewards. As a company proves there is a mineable deposit in the ground, more value is created for shareholders along the way.

  1. Concept

    This stage carries the most risk which accounts for its low value. In the beginning, there is little knowledge of what actually lies beneath the Earth’s surface.

    At this stage, geologists are putting to the test a theory about where metal deposits are. They will survey the land using geochemical and sampling techniques to improve the confidence of this theory. Once this is complete, they can move onto more extensive exploration.

  2. Pre-Discovery

    There is still plenty of risk, but this is where speculation hype begins. As the drill bit meets the ground, mineral exploration geologists develop their knowledge of what lies beneath the Earth’s crust to assess mineral potential.

    Mineral exploration involves retrieving a cross-section (drill core) of the crust, and then analyzing it for mineral content. A drill core containing sufficient amounts of metals can encourage further exploration, which may lead to the discovery of a mineable deposit.

  3. Discovery

    Discovery is the reward stage for early speculators. Exploration has revealed that there is a significant amount of material to be mined, and it warrants further study to prove that mining would be feasible. Most speculators exit here, as the next stage creates a new set of risks, such as profitability, construction, and financing.

  4. Feasibility

    This is an important milestone for a mineral discovery. Studies conducted during this stage may demonstrate the deposit’s potential to become a profitable mine.

    Institutional and strategic investors can then use these studies to evaluate whether they want to advance this project. Speculators often invest during this time, known as the “Orphan Period”, while uncertainty about the project lingers.

  5. Development

    Development is a rare moment, and most mineral deposits never make it to this stage. At this point, the company puts together a production plan for the mine.

    First, they must secure funding and build an operational team. If a company can secure funding for development, investors can see the potential of revenue from mining. However, risks still persist in the form of construction, budget, and timelines.

  6. Startup/Production

    Investors who have held their investment until this point can pat themselves on the back—this is a rare moment for a mineral discovery. The company is now processing ore and generating revenue.

    Investment analysts will re-rate this deposit, to help it attract more attention from institutional investors and the general public. Meanwhile, existing investors can choose to exit here or wait for potential increases in revenues and dividends.

  7. Depletion

    Nothing lasts forever, especially scarce mineral resources. Unless, there are more deposits nearby, most mines are eventually depleted. With it, so does the value of the company. Investors should be looking for an exit as operations wind down.

Case Study: The Oyu Tolgoi Copper-Gold Discovery, Mongolia

So now that you know the theoretical value cycle of a mineral discovery, how does it pan out in reality? The Oyu Tolgoi copper deposit is one recent discovery that has gone through this value cycle. It exemplifies some of these events and their effects on the share price of a company.

  1. Concept: 15+ Years

    Prospectors conducted early exploration work in the 1980s near where Oyu Tolgoi would be discovered. It was not until 1996 that Australian miner BHP conducted further exploration.

    But after 21 drill holes, the company lost interest and optioned the property to mining entrepreneur Robert Friedland and his company Ivanhoe Mines. At this point in 1999, shares in Ivanhoe were a gamble.

  2. Pre-Discovery/Discovery: ~3 years

    Ivanhoe Mines and BHP entered into an earn-in agreement, in which Ivanhoe gained ownership by completing work to explore Oyu Tolgoi. A year later, the first drill results came out of drill hole 150 with a headline result of 508 meters of 1.1 g/t Au and 0.8%. To get a sense of how large this is, imagine the height a 45-story building, of which a third of story is copper. This was just one intersection of an area that could stretch for miles.

    Wild speculation began at this stage, as steadily improving drill results proved a massive copper-gold deposit in Mongolia and drove up the share price of Ivanhoe.

  3. Feasibility/Orphan Period: ~2 years

    In 2004, the drilling results contributed to the development of the first scoping study. This study offered a preliminary understanding of the project’s economics.

    Using this study, the company needed to secure enough money to build a mine to extract the valuable ore. It was not until two years later, when Ivanhoe Mines entered into an agreement with major mining company Rio Tinto, that a production decision was finalized.

  4. Development: 7 years

    By 2006, the Oyu Tolgoi mineral deposit was in the development phase with the first shaft headframe, hoisting frame, and associated infrastructure completed. It took another two years for the shaft to reach a depth of 1,385 feet.

    Further development work delineated a resource of 1.2 billion pounds of copper, 650,000 ounces of gold, and 3 million ounces of silver. This first stage of development for Oyu Tolgoi made Mongolia the world’s fastest growing economy from 2009 to 2011.

  5. Startup/Production: Ongoing

    On January 31, 2013, the company announced it had produced the first copper-gold concentrate from Oyu Tolgoi. Six months later, the company stated that it was processing up to 70,000 tonnes of ore daily.

  6. Depletion: Into the Future

    The Oyu Tolgoi deposit will last generations, so we have yet to see how this will affect the value of the mine from an investment perspective.

    It’s also worth noting there are still other risks ahead. These risks can include labor disruptions, mining method problems, or commodity price movement. Investors will have to consider these additional conditions as they pan out.

  7. The More You Know

    Mining is one of the riskiest investments with many risks to consider at every stage.

    While most mineral discoveries do not match it perfectly, the Lassonde Curve guides an investor through what to expect at each stage, and empowers them to time their investments right.

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Energy

The Periodic Table of Commodity Returns (2012-2021)

Energy fuels led the way as commodity prices surged in 2021, with only precious metals providing negative returns.

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commodity returns 2021 preview

The Periodic Table of Commodity Returns (2022 Edition)

For investors, 2021 was a year in which nearly every asset class finished in the green, with commodities providing some of the best returns.

The S&P Goldman Sachs Commodity Index (GSCI) was the third best-performing asset class in 2021, returning 37.1% and beating out real estate and all major equity indices.

This graphic from U.S. Global Investors tracks individual commodity returns over the past decade, ranking them based on their individual performance each year.

Commodity Prices Surge in 2021

After a strong performance from commodities (metals especially) in the year prior, 2021 was all about energy commodities.

The top three performers for 2021 were energy fuels, with coal providing the single best annual return of any commodity over the past 10 years at 160.6%. According to U.S. Global Investors, coal was also the least volatile commodity of 2021, meaning investors had a smooth ride as the fossil fuel surged in price.

Commodity2021 Returns
Coal160.61%
Crude Oil55.01%
Gas46.91%
Aluminum42.18%
Zinc31.53%
Nickel26.14%
Copper25.70%
Corn22.57%
Wheat20.34%
Lead18.32%
Gold-3.64%
Platinum-9.64%
Silver-11.72%
Palladium-22.21%

Source: U.S. Global Investors

The only commodities in the red this year were precious metals, which failed to stay positive despite rising inflation across goods and asset prices. Gold and silver had returns of -3.6% and -11.7% respectively, with platinum returning -9.6% and palladium, the worst performing commodity of 2021, at -22.2%.

Aside from the precious metals, every other commodity managed double-digit positive returns, with four commodities (crude oil, coal, aluminum, and wheat) having their best single-year performances of the past decade.

Energy Commodities Outperform as the World Reopens

The partial resumption of travel and the reopening of businesses in 2021 were both powerful catalysts that fueled the price rise of energy commodities.

After crude oil’s dip into negative prices in April 2020, black gold had a strong comeback in 2021 as it returned 55.01% while being the most volatile commodity of the year.

Natural gas prices also rose significantly (46.91%), with the UK and Europe’s natural gas prices rising even more as supply constraints came up against the winter demand surge.

Energy commodity returns 2021

Despite being the second worst performer of 2020 with the clean energy transition on the horizon, coal was 2021’s best commodity.

High electricity demand saw coal return in style, especially in China which accounts for one-third of global coal consumption.

Base Metals Beat out Precious Metals

2021 was a tale of two metals, as precious metals and base metals had opposing returns.

Copper, nickel, zinc, aluminum, and lead, all essential for the clean energy transition, kept up last year’s positive returns as the EV batteries and renewable energy technologies caught investors’ attention.

Demand for these energy metals looks set to continue in 2022, with Tesla having already signed a $1.5 billion deal for 75,000 tonnes of nickel with Talon Metals.

Metals price performance 2021

On the other end of the spectrum, precious metals simply sunk like a rock last year.

Investors turned to equities, real estate, and even cryptocurrencies to preserve and grow their investments, rather than the traditionally favorable gold (-3.64%) and silver (-11.72%). Platinum and palladium also lagged behind other commodities, only returning -9.64% and -22.21% respectively.

Grains Bring Steady Gains

In a year of over and underperformers, grains kept up their steady track record and notched their fifth year in a row of positive returns.

Both corn and wheat provided double-digit returns, with corn reaching eight-year highs and wheat reaching prices not seen in over nine years. Overall, these two grains followed 2021’s trend of increasing food prices, as the UN Food and Agriculture Organization’s food price index reached a 10-year high, rising by 17.8% over the course of the year.

Grains price performance 2021

As inflation across commodities, assets, and consumer goods surged in 2021, investors will now be keeping a sharp eye for a pullback in 2022. We’ll have to wait and see whether or not the Fed’s plans to increase rates and taper asset purchases will manage to provide price stability in commodities.

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Mining

Visualizing the Scale and Composition of the Earth’s Crust

This animation shows the handful of minerals and elements that constitute the Earth’s crust.

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Visualizing the Scale and Composition of the Earth’s Crust

For as long as humans have been wandering the top of Earth’s crust, we’ve been fascinated with what’s inside.

And Earth’s composition has been vital for our advancement. From finding the right kinds of rocks to make tools, all the way to making efficient batteries and circuit boards, we rely on minerals in Earth’s crust to fuel innovation and technology.

This animation by Dr. James O’Donoghue, a planetary researcher at the Japan Aerospace Exploration Agency (JAXA) and NASA, is a visual comparison of Earth’s outer layers and their major constituents by mass.

What is the Composition of Earth’s Crust?

The combined mass of Earth’s surface water and crust, the stiff outermost layer of our planet, is less than half a percent of the total mass of the Earth.

There are over 90 elements found in Earth’s crust. But only a small handful make up the majority of rocks, minerals, soil, and water we interact with daily.

1. Silicon

Most abundant in the crust is silicon dioxide (SiO2), found in pure form as the mineral quartz. We use quartz in the manufacturing of glass, electronics, and abrasives.

Why is silicon dioxide so abundant? It can easily combine with other elements to form “silicates,” a group of minerals that make up over 90% of Earth’s crust.

Clay is one of the better-known silicates and micas are silicate minerals used in paints and cosmetics to make them sparkle and shimmer.

MineralMajor ElementsPercentage of Crust
Plagioclase FeldsparO, Si, Al, Ca, Na39%
Alkali FeldsparO, Si, Al, Na, K12%
QuartzO, Si12%
PyroxeneO, Si, Mg, Fe11%
AmphiboleO, Si, Mg, Fe5%
Non-silicatesVariable8%
MicasO, Si, Al, Mg, Fe, Ca, Na, K5%
Clay MineralsO, Si, Al, Mg, Fe, Ca, Na, K5%
Other SilicatesO, Si3%

2. Aluminum and Calcium

SiO2 bonds very easily with aluminum and calcium, our next most abundant constituents. Together with some sodium and potassium, they form feldspar, a mineral that makes up 41% of rocks on Earth’s surface.

While you may not have heard of feldspar, you use it every day; it’s an important ingredient in ceramics and it lowers the melting point of glass, making it cheaper and easier to produce screens, windows, and drinking glasses.

3. Iron and Magnesium

Iron and magnesium each make up just under 5% of the crust’s mass, but they combine with SiO2 and other elements to form pyroxenes and amphiboles. These two important mineral groups constitute around 16% of crustal rocks.

Maybe the best known of these minerals are the two varieties of jade, jadeite (pyroxene) and nephrite (amphibole). Jade minerals have been prized for their beauty for centuries, and are commonly used in counter-tops, construction, and landscaping.

Some asbestos minerals, now largely banned for their cancer-causing properties, belong to the amphibole mineral group. They were once in high demand for their insulating and fire-retardant properties and were even used in brake pads, cigarette filters, and as artificial snow.

4. Water

Surprisingly, even though it covers almost three quarters of Earth’s surface, water (H2O) makes up less than 5% of the crust’s mass. This is partly because water is significantly less dense than other crustal constituents, meaning it has less mass per volume.

Breaking Earth’s Crust Down by Element

Though there are many different components that form the Earth’s crust, all of the above notably include oxygen.

When breaking down the crust by element, oxygen is indeed the most abundant element at just under half the mass of Earth’s crust. It is followed by silicon, aluminum, iron, calcium, and sodium.

All other remaining elements make up just over 5% of the crust’s mass. But that small section includes all the metals and rare earth elements that we use in construction and technology, which is why discovering and economically extracting them is so crucial.

What Lies Below?

As the crust is only the outermost layer of Earth, there are other layers left to contemplate and discover. While we have never directly interacted with the Earth’s mantle or core, we do know quite a bit about their structure and composition thanks to seismic tomography.

The Upper Mantle

At a few specific spots on Earth, volcanic eruptions and earthquakes have been strong enough to expose pieces of the upper mantle, which are also made of mostly silicates.

The mineral olivine makes up about 55% of the upper mantle composition and causes its greenish color. Pyroxene comes in second at 35%, and calcium-rich feldspar and other calcium and aluminum silicates make up between 5–10%.

Going Even Deeper

Beyond the upper mantle, Earth’s composition is not as well known.

Deep-mantle minerals have only been found on Earth’s surface as components of extra-terrestrial meteorites and as part of diamonds brought up from the deep mantle.

One thing the lower mantle is thought to contain is the silicate mineral bridgmanite, at an abundance of up to 75%. Earth’s core, meanwhile, is believed to be made up of iron and nickel with small amounts of oxygen, silicon, and sulphur.

As technology improves, we will be able to discover more about the mineral and elemental makeup of the Earth and have an even better understanding of the place we all call home.

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