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All mines have a life… and it’s finite. Also called life of mine -LOM-.
This implies the industry is always racing to replace production with new reserves. And this is hard work that takes years (and sometimes even decades). Some of the projects I started my career with are still under development.
Thus, the mining lifecycle is a complex, multi-year cycle that involves many steps and activities, ranging from high to low risk, starting with exploration up to engineering and others. Ultimately, the cycle is aimed at producing for as long as possible at the same location to take advantage of the infrastructure (such as the plant and more) that was built originally.
‘Extending the mining life cycle translates to an investment that creates value for much longer than would otherwise be expected.’ —Albert Lu, fmr CEO of Sprott US Media
Understanding the cycle will help you define an investment horizon that matches your investment goals, and gives you the best chances for success.
I believe all mining investors (or those wanting to enter the sector) need at least a basic understanding of the cycle, including:
- The ideal outcomes
- Which activities will be in focus
- The typical duration & sequence of each phase
- The main processing methods available to developers
- The type of information you can expect the company to report
Ultimately, this knowledge will also help reduce the gap between expectations and reality, limiting the frustration that causes so many investors to exit a position prematurely. And a long cycle means your patience will be tested… that’s guaranteed.
For instance, short-term investors may prefer to stay with producers already generating revenue. Mid-term oriented investors can also include developers and mines in construction, plus some advanced exploration, while long-term investors (minimum hold 5-7 years) can venture into pure exploration plays. This is of course a simplification but it can provide a useful guide.
If you enjoyed this, please share it with a friend. The energy transition requires more savvy, committed investors and supporters joining in, to fully enable it.
That’s it for today.
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