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.
- Concept: 15+ Years
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.
Charted: 30 Years of Central Bank Gold Demand
Globally, central banks bought a record 1,136 tonnes of gold in 2022. How has central bank gold demand changed over the last three decades?
30 Years of Central Bank Gold Demand
Did you know that nearly one-fifth of all the gold ever mined is held by central banks?
Besides investors and jewelry consumers, central banks are a major source of gold demand. In fact, in 2022, central banks snapped up gold at the fastest pace since 1967.
However, the record gold purchases of 2022 are in stark contrast to the 1990s and early 2000s, when central banks were net sellers of gold.
The above infographic uses data from the World Gold Council to show 30 years of central bank gold demand, highlighting how official attitudes toward gold have changed in the last 30 years.
Why Do Central Banks Buy Gold?
Gold plays an important role in the financial reserves of numerous nations. Here are three of the reasons why central banks hold gold:
- Balancing foreign exchange reserves
Central banks have long held gold as part of their reserves to manage risk from currency holdings and to promote stability during economic turmoil.
- Hedging against fiat currencies
Gold offers a hedge against the eroding purchasing power of currencies (mainly the U.S. dollar) due to inflation.
- Diversifying portfolios
Gold has an inverse correlation with the U.S. dollar. When the dollar falls in value, gold prices tend to rise, protecting central banks from volatility.
The Switch from Selling to Buying
In the 1990s and early 2000s, central banks were net sellers of gold.
There were several reasons behind the selling, including good macroeconomic conditions and a downward trend in gold prices. Due to strong economic growth, gold’s safe-haven properties were less valuable, and low returns made it unattractive as an investment.
Central bank attitudes toward gold started changing following the 1997 Asian financial crisis and then later, the 2007–08 financial crisis. Since 2010, central banks have been net buyers of gold on an annual basis.
Here’s a look at the 10 largest official buyers of gold from the end of 1999 to end of 2021:
|Rank||Country||Amount of |
Gold Bought (tonnes)
|#7||🇸🇦 Saudi Arabia||180||3%|
The top 10 official buyers of gold between end-1999 and end-2021 represent 84% of all the gold bought by central banks during this period.
Russia and China—arguably the United States’ top geopolitical rivals—have been the largest gold buyers over the last two decades. Russia, in particular, accelerated its gold purchases after being hit by Western sanctions following its annexation of Crimea in 2014.
Interestingly, the majority of nations on the above list are emerging economies. These countries have likely been stockpiling gold to hedge against financial and geopolitical risks affecting currencies, primarily the U.S. dollar.
Meanwhile, European nations including Switzerland, France, Netherlands, and the UK were the largest sellers of gold between 1999 and 2021, under the Central Bank Gold Agreement (CBGA) framework.
Which Central Banks Bought Gold in 2022?
In 2022, central banks bought a record 1,136 tonnes of gold, worth around $70 billion.
|Country||2022 Gold Purchases (tonnes)||% of Total|
Türkiye, experiencing 86% year-over-year inflation as of October 2022, was the largest buyer, adding 148 tonnes to its reserves. China continued its gold-buying spree with 62 tonnes added in the months of November and December, amid rising geopolitical tensions with the United States.
Overall, emerging markets continued the trend that started in the 2000s, accounting for the bulk of gold purchases. Meanwhile, a significant two-thirds, or 741 tonnes of official gold purchases were unreported in 2022.
According to analysts, unreported gold purchases are likely to have come from countries like China and Russia, who are looking to de-dollarize global trade to circumvent Western sanctions.
Which Countries Have the Lowest Inflation?
Just four economies around the world had inflation below 2% in 2022.
Which Countries Have the Lowest Inflation?
Investors are bracing for longer inflation.
The Federal Reserve indicated that more restrictive monetary policy is in the cards amid strong employment gains. In Europe, while inflation has fallen, it is still far above the 2% target. Across the Euro area inflation is estimated to have reached 8.5% in January.
At the same time, some countries have managed to tamp down inflation. Slower growth, cheaper import costs, and foreign exchange policy are some of the factors keeping inflation subdued.
As price pressures rattle global markets, the above infographic maps inflation rates globally using data from Trading Economics, focusing in on the countries with the lowest inflation levels.
World’s Lowest Inflation Rates
Many of the lowest inflation rates around the world are located in Asia, including Macau, China, Hong Kong, and Taiwan. In this region, widespread lockdowns strained growth and consumer spending, lessening inflationary pressures. Last year, Chinese consumers saved $2.2 trillion in bank deposits during these restrictions which were lifted earlier this year.
Inflation in the region was impacted by several other factors. Earlier on in the pandemic, Asian countries including China were less impacted by rising food costs, services inflation, and supply-chain disruptions, unlike what was seen in North America and Europe.
But now as China has reopened, some signs of inflation are beginning to appear. Food prices are up 4.8% annually in December, and hotel rates are rising.
|Rank||Country / Region||Inflation Rate, Year-Over-Year||Date|
|1||🇸🇸 South Sudan||-11.6%||Dec 2022|
|2||🇲🇴 Macau||0.8%||Nov 2022|
|3||🇨🇳 China||1.8%||Dec 2022|
|4||🇭🇰 Hong Kong SAR||1.8%||Nov 2022|
|5||🇴🇲 Oman||2.1%||Nov 2022|
|6||🇵🇦 Panama||2.1%||Dec 2022|
|7||🇸🇨 Seychelles||2.5%||Dec 2022|
|8||🇻🇺 Vanuatu||2.7%||Mar 2022|
|9||🇹🇼 Taiwan||2.7%||Dec 2022|
|10||🇨🇭 Switzerland||2.8%||Dec 2022|
|11||🇱🇮 Liechtenstein||2.8%||Dec 2022|
|12||🇧🇯 Benin||2.8%||Dec 2022|
|13||🇲🇻 Maldives||2.8%||Nov 2022|
|14||🇳🇪 Niger||3.1%||Dec 2022|
|15||🇧🇳 Brunei||3.1%||Nov 2022|
|16||🇧🇴 Bolivia||3.2%||Nov 2022|
|17||🇰🇼 Kuwait||3.2%||Nov 2022|
|18||🇸🇦 Saudi Arabia||3.3%||Dec 2022|
|19||🇰🇭 Cambodia||3.6%||Oct 2022|
|20||🇫🇯 Fiji||3.6%||Dec 2022|
|21||🇪🇨 Ecuador||3.7%||Dec 2022|
|22||🇯🇵 Japan||3.8%||Nov 2022|
|23||🇱🇾 Libya||3.8%||Nov 2022|
|24||🇧🇲 Bermuda||3.8%||Oct 2022|
|25||🇧🇭 Bahrain||3.9%||Nov 2022|
|26||🇲🇾 Malaysia||4.0%||Nov 2022|
|27||🇵🇸 Palestine||4.1%||Dec 2022|
|28||🇮🇶 Iraq||4.2%||Nov 2022|
|29||🇯🇴 Jordan||4.4%||Dec 2022|
|30||🇹🇯 Tajikistan||4.5%||Nov 2022|
|31||🇻🇳 Vietnam||4.6%||Dec 2022|
|32||🇧🇹 Bhutan||4.6%||Nov 2022|
|33||🇹🇿 Tanzania||4.8%||Dec 2022|
|34||🇳🇨 New Caledonia||4.9%||Dec 2022|
|35||🇰🇷 South Korea||5.0%||Dec 2022|
|36||🇮🇱 Israel||5.3%||Dec 2022|
|37||🇱🇺 Luxembourg||5.4%||Dec 2022|
|38||🇸🇿 Swaziland||5.5%||Oct 2022|
|39||🇮🇩 Indonesia||5.5%||Dec 2022|
|40||🇬🇦 Gabon||5.7%||Oct 2022|
|41||🇨🇮 Ivory Coast||5.7%||Nov 2022|
|42||🇪🇸 Spain||5.7%||Dec 2022|
|43||🇮🇳 India||5.7%||Dec 2022|
|44||🇧🇷 Brazil||5.8%||Dec 2022|
|45||🇹🇭 Thailand||5.9%||Dec 2022|
|46||🇫🇷 France||5.9%||Dec 2022|
|47||🇳🇴 Norway||5.9%||Dec 2022|
|48||🇶🇦 Qatar||5.9%||Dec 2022|
|49||🇩🇯 Djibouti||6.1%||Sep 2022|
|50||🇸🇴 Somalia||6.1%||Dec 2022|
|51||🇹🇹 Trinidad and Tobago||6.2%||Sep 2022|
|52||🇵🇬 Papua New Guinea||6.3%||Sep 2022|
|53||🇵🇷 Puerto Rico||6.3%||Nov 2022|
|54||🇨🇦 Canada||6.3%||Dec 2022|
|56||🇧🇿 Belize||6.5%||Nov 2022|
|57||🇺🇸 U.S.||6.5%||Dec 2022|
|58||🇦🇼 Aruba||6.6%||Nov 2022|
|59||🇸🇬 Singapore||6.7%||Nov 2022|
|60||🇹🇱 East Timor||6.7%||Nov 2022|
|61||🇦🇪 UAE||6.8%||Jun 2022|
|62||🇳🇦 Namibia||6.9%||Dec 2022|
|63||🇬🇾 Guyana||6.9%||Nov 2022|
|64||🇳🇿 New Zealand||7.2%||Sep 2022|
|65||🇿🇦 South Africa||7.2%||Dec 2022|
|66||🇬🇷 Greece||7.2%||Dec 2022|
|67||🇱🇷 Liberia||7.2%||Sep 2022|
|68||🇦🇺 Australia||7.3%||Sep 2022|
|69||🇲🇹 Malta||7.3%||Dec 2022|
|70||🇸🇻 El Salvador||7.3%||Dec 2022|
|71||🇦🇱 Albania||7.4%||Dec 2022|
|72||🇨🇻 Cape Verde||7.6%||Dec 2022|
|73||🇨🇲 Cameroon||7.7%||Sep 2022|
|74||🇨🇫 Central African Republic||7.7%||Nov 2022|
|75||🇹🇬 Togo||7.7%||Dec 2022|
|76||🇲🇽 Mexico||7.8%||Dec 2022|
|77||🇩🇴 Dominican Republic||7.8%||Dec 2022|
|78||🇨🇷 Costa Rica||7.9%||Dec 2022|
|79||🇨🇾 Cyprus||7.9%||Dec 2022|
|80||🇲🇱 Mali||8.0%||Nov 2022|
|81||🇳🇵 Nepal||8.1%||Nov 2022|
|82||🇵🇭 Philippines||8.1%||Dec 2022|
|83||🇵🇾 Paraguay||8.1%||Dec 2022|
|84||🇧🇧 Barbados||8.2%||Oct 2022|
|85||🇮🇪 Ireland||8.2%||Dec 2022|
|86||🇺🇾 Uruguay||8.3%||Dec 2022|
|87||🇲🇦 Morocco||8.3%||Nov 2022|
|88||🇦🇲 Armenia||8.3%||Dec 2022|
|89||🇵🇪 Peru||8.5%||Dec 2022|
|90||🇱🇸 Lesotho||8.5%||Oct 2022|
|91||🇩🇿 Algeria||8.6%||Nov 2022|
|92||🇩🇪 Germany||8.6%||Dec 2022|
|93||🇩🇰 Denmark||8.7%||Dec 2022|
|94||🇧🇩 Bangladesh||8.7%||Dec 2022|
|95||🇫🇴 Faroe Islands||8.8%||Sep 2022|
|96||🇫🇮 Finland||9.1%||Dec 2022|
|97||🇰🇪 Kenya||9.1%||Dec 2022|
|98||🇰🇾 Cayman Islands||9.2%||Sep 2022|
|99||🇬🇹 Guatemala||9.2%||Dec 2022|
|100||🇬🇼 Guinea Bissau||9.4%||Nov 2022|
*Inflation rates based on latest available data.
Globally, one outlier is South Sudan. Political instability and violence have depressed growth and inflation, which stood at -11.6% in December. As it faces a severe humanitarian crisis, the country has the lowest inflation rate worldwide.
Oil-producing nation Oman has also seen low inflation, at 2.1%. One reason for this is that the Omani rial is pegged to the U.S. dollar, keeping the currency anchored. Inflation has remained moderate over the last decade in the country.
The Country With the Lowest Inflation, by Region
In Europe, Switzerland has the lowest inflation rate, at 2.8%, or roughly one-third of the Euro area’s. It is also the lowest rate in the OECD. The country’s strong currency has shielded it from inflationary pressures and high import prices.
Meanwhile, Swiss production prices have risen marginally above inflation, to 4.1% annually in mid-2022. Last year, the Swiss central bank raised interest rates for the first time since 2007 from -0.75% to -0.25% following 20 years of deflation.
Panama has the lowest rate in Latin America. The dollarization of the Panamanian balboa has helped quash price pressures. In July, the government regulated the price of 72 items to keep the cost of living from rising after three weeks of protests as inflation climbed as high as 5.2% during the course of 2022.
With the lowest inflation in Asia, Macau witnessed the tourism industry fall off a cliff given lockdown measures, and the economy saw both its GDP and inflation collapse in 2022. Its real GDP is projected to have fallen close to 30% for the year.
The IMF estimates that 84% of countries around the world will have lower inflation than last year. By 2024, both headline and core inflation are projected to remain above pre-pandemic levels at 4.1%.
Opposing forces of China’s reopening and weaker global growth could offset inflationary pressures, yet this interplay—among a host of other factors—remains to be seen.
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