Why are Tier One mineral deposits so important?

Attributes

  • Life-of-mine (LoM) is measured in decades rather than years so you can catch multiple metal price cycles.
  • Concept of option value – In the case of Irish zinc deposits, the deposit that is not drilled off pre mining, at least for the most part, like Lisheen (low option value) but keeps on giving through an extended life of mine like Navan (high option value).  Particularly when there the Company has little or no debt.
  • See the image above with considering option value with Irish zinc deposits in mind.
  • Only 15 Tier 1 deposits found in the last ten years.
  • They are big and often largest in their class. 
  • For the Juniors they are company-makers with superior grade and metallurgy.
  • Tier 1 deposits account globally for only 14% of total projects but…..
    • 32% of contained metal,
    • 60% of total tax paid.
    • 67% of total NPV.

In 1980’s Juniors made 15% to 30% of all gold discoveries. Juniors found an even smaller proportion of discovered ounces of gold. Since 2000 Juniors are responsible for 65% to 75% of all gold discoveries and 60% to 70% of discovered ounces. That does not mean the Juniors have to build the mines. Exploration involves a whole different expertise to building mines. The Majors are not interested if the deposit is not Tier 1. Why? Because such deposits will not noticeably impact their business. 

Explorers have only discovered a handful of Tier 1 gold discoveries since 2006. Tier one in this context would be resources and reserves of greater than six million ounces of gold. Junior explorers are becoming more and more important in the search. This is counter-intuitive . Discoveries are becoming deeper and more concept-driven. Majors have big budgets, sophisticated technology and large integrated multi-disciplinary teams. All Juniors have to compete is talent, creativity and intuition. As another Irishman once said: “Nothing to declare but my genius”.  But most of all, founders of Juniors participate in success and have skin in the game and that is what motivates them to discover. Majors can take a long-term view but Juniors are always on a short-fuse.