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.
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.
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.
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.
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.
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.
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.
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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
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.
Why Copper and Nickel Are the Key Metals for Energy Utopia
With more renewables and EVs plugging into the grid, copper and nickel are essential building blocks for the energy transition.
Copper and Nickel: The Key Metals for Energy Utopia
The raw materials required to transport and store clean energy are critical for the energy transition. Copper and nickel are two such metals.
Copper is essential for the transmission and distribution of clean electricity, while nickel powers lithium-ion batteries for EVs and energy storage systems.
The above infographic sponsored by CanAlaska Uranium explores how copper and nickel are enabling green technologies and highlights why they are essential for a utopian energy future.
Copper: Transporting Clean Energy
When it comes to conducting electricity, copper is second only to silver. This property makes it an indispensable building block for multiple energy technologies, including:
- Electric vehicles: On average, a typical electric car contains 53kg of copper, primarily found in the wirings and car components.
- Solar power: Solar panels use 2.8 tonnes of copper per megawatt (MW) of installed capacity, mainly for heat exchangers, wiring, and cabling.
- Wind energy: Onshore wind turbines contain 2.9 tonnes of copper per MW of capacity. Offshore wind turbines, which typically use copper in undersea cables, use 8 tonnes per MW.
- Power grids: Copper, alongside aluminum, is the preferred choice for electric transmission and distribution networks due to its reliability and efficiency.
BloombergNEF projects that, due to its expansive role in clean energy, the demand for copper from clean energy applications will double by 2030 from 2020 levels. The table below compares annual copper demand from clean energy, in tonnes, in 2020 vs. 2030:
|Year||Power Grids||EV batteries||Wind||Solar||EV charging||Total
Although power grids will account for the largest portion of annual copper demand through 2030, EV batteries are projected to spearhead the growth.
Nickel: Powering Lithium-ion Batteries
Nickel is a key ingredient in lithium-ion batteries for EVs and stationary energy storage systems. For EVs, nickel-based cathodes offer more energy density and longer driving ranges as compared to cathodes with lower nickel content.
According to Wood Mackenzie, batteries could account for 41% of global nickel demand by 2030, up from just 7% in 2021.
|End-use||2021 % of Nickel Demand||2040P % of Nickel Demand|
Nickel-based cathodes for lithium-ion batteries, including NMC (Nickel Manganese Cobalt) and NCA (Nickel Cobalt Aluminum), are prevalent in EVs and make up more than 50% of the battery cathode chemistry market.
A Bright Future for Copper and Nickel
Both copper and nickel are essential building blocks of EVs and other key technologies for the energy transition and ultimately energy utopia.
As more such technologies are deployed, these metals are likely to be in high demand, with clean energy applications supplementing their existing industrial uses.
CanAlaska is a leading exploration company with a strategic portfolio of uranium, nickel, and copper projects in North America. Click here to learn more.
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