Why we’re incubating exploration projects in Ontario…
Stick around the exploration and mining sectors long enough, and the chances are you’ll come across the Lassonde Curve.
There’s a reason for this – it’s really useful.
So today, in the spirit of it being the first issue of the New Year, I’d like to discuss the Lassonde Curve in terms of how it relates to our long-term plans at First Class Metals.
I think it will offer great insight into how we plan to generate significant ongoing shareholder value.
Generating value from discoveries
In case you haven’t seen the Lassonde Curve before, it looks like this…
It maps out the lifecycle of a mineral discovery in six stages.
You can read about each of these in thorough detail here. But I’ve also summarised them below:
Concept: Creating the initial idea for a potential mineral resource in an area;
Pre-discovery: Surveying and testing the likelihood of finding resources;
Discovery: Successfully identifying an economically viable mineral deposit;
Feasibility: Assessing the economic/technical viability of mining a discovery;
Development: Permitting/construction of infrastructure/facilities for mining; and
Startup/production: Commencing the commercial extraction of mineral.
Most useful of all, the Lassonde Curve also plots out how a mineral discovery’s value typically changes over time
There are typically two major periods of value growth here – each lasting several years.
The first occurs in the lead up to the discovery itself. Excitement grows in the face of positive preliminary findings and development potential before peaking when a discovery is made.
The second occurs in the lead up to production. Excitement again grows as investment and regulatory progress increase the chances of the discovery actually seeing the light of day. It then reaches a fever pitch throughout construction and the commencement of operations.
This journey is, by now, an established one. We plan to use it to the benefit of our investors.
Incubating value
First Class Metals is what you would describe as a project incubator.
We don’t intend to hold our projects through the entire cycle of a mineral discovery because the expense and time needed to establish a producing mine post-discovery is so large. There’s also considerable risk the discovery won’t actually reach production.
Instead, we’re focused on the period of value creation on the Lassonde Curve centred around making an initial discovery.
Why?
It means that, rather than focusing a large portion of our resources on one project, we can work towards making a discovery at a number of projects – each of which stands to generate considerable value.
In other words, it spreads our risk and gives us multiple bites at the cherry.
This value creation may culminate in a farm-in agreement, a joint venture partnership, or an outright project sale to a larger miner in the wake of a discovery…
But the point is, whatever route we take, we stand to derive early value from a discovery by passing either entire or partial responsibility for its ultimate production on to a third-party.
We can’t guarantee this will happen as we’ve only just begun to drill ourselves.
But there’s no denying the fact that these sorts of discoveries and deals have created enormous amounts of shareholder value in the past.
As we highlighted in our latest report, Greatland Gold skyrocketed in value in the run up to and around its joint venture with Newcrest on the Havieron gold discovery in Australia.
Not just that, but we intend to use the value we create to invest back into in even more greenfield projects with discovery potential. This would extend our potential for value creation even further.
Looking forward
In summary, our business model presents a great number of opportunities for value creation. However, they are dependent largely on exploration success on the ground.
That’s why we’ve picked a range of projects with strong potential for the discovery of metals with positive supply/demand dynamics…
It’s why we’ve settled in Ontario, one of the world’s top mining jurisdictions, hired the best people in the business, and worked hard to meet the needs of local communities….
And it’s why we’ve been so dedicated to reaching drill-ready status at our four flagship projects since listing.
This year will be one of drilling, and we are excited to see what results our work creates.
