The expenditures of all EU institutions are captured under this heading, including staff salaries, building rent, information technology and training. This area enables the EU to mobilize funds for unforeseen events, such as natural disasters and major world trade patterns that displace workers. The budget resulted in a surplus of two billion Euros, but will it be balanced in future years?
A proposal for the — budget has already been set forth, and council meetings are ongoing. This could leave member states scrambling to find additional revenue sources and ways to reduce expenditures. Building a mine takes time that poses risks at every stage. This graphic maps a mineral deposit from discovery to mining, showing where value is created. 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. This helps speculative investors understand the mining process, and time their investments properly.
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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. 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. 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. Institutional and strategic investors can then use these studies to evaluate whether they want to advance this project.
Development is a rare moment, and most mineral deposits never make it to this stage.
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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.
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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. 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.
Prospectors conducted early exploration work in the s near where Oyu Tolgoi would be discovered. It was not until 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 , shares in Ivanhoe were a gamble.
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A year later, the first drill results came out of drill hole with a headline result of meters of 1. To get a sense of how large this is, imagine the height a 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. In , the drilling results contributed to the development of the first scoping study. 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.
By , 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, feet. Further development work delineated a resource of 1. On January 31, , 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, tonnes of ore daily.
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.
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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. 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. Email address. Connect with us.
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