An Excerpt from
Visualizing the Life Cycle of a Mineral Discovery:
Almost every one of us is familiar with this type of graphic representation of the junior exploration story to a mining company development. It’s actually an attempt to impose a market valuation onto a “standard development” of a mining business – from early explorer to an operating mine. But it's a generalization, not a hard fast rule. Especially in the Novo case.
https://herostocks.ca/wp-content/uploads/2019/09/mining-life-cycle-e1568401656867.jpg 
Mining legend Pierre Lassonde 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 market investors understand the mining process, and time their investments properly.
In Lassonde’s 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.
Concept
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.
Pre-Discovery
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
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.
Feasibility
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
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.
Startup/Production
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.
Depletion
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.
In case of this particular NVO investment, it’s obvious that the above development profile has no useful applicability at the present time. And even more so when one considers the events of this year. Novo resources is actually a “mish-mash” of all the Lassonde Curve cycle phases mixed in one at any givien moment. Which is likely the reason why the market has so much difficulty placing a value on the company.
As far as I am concerned, it is the Institutional Investor and general public (highlighted in the phases above) that will really drive the stock price. And this is where confusion clearly exists. Confusion created by the non-adherence to the Lassonde Curve at any specific point in time.
Here is a perfect example: You can hear it at the 20 to 21 minute mark:
https://www.voiceamerica.com/episode/126686/preparing-for-a-monetary-reset The release of the Pre-Feasibility Study
AND the start of gold production is actually occurring at approximately the same time – in 2021 Q1. Most of us realize that this type of unconventional development flow may result in some extremely positive results for investors in the very near future.
As I have stated repeatedly,
the acquisition of the Nullagine mill has advanced and compressed Novo’s Lassonde Curve by 5 years. And it has placed Novo Resources as a likely intermediate producer (with its vast exploration potential), near the front end of the upcoming secular Bull Market in gold. You simply can’t put a price on such timing.
As investors, we can witness all these things converging. The point where the speculative investors, Institutional Investors, and general public all come together in 2021 Q1 under a great synergy:
A convergence of the following factors:
- The continuing ascension of the price of gold in a secular bull market.
- Speculative investors (interested in Novo’s exploration prospects) becoming increasingly aware of the positive Risk/Reward ratio in a company that has staked14,000 sq-kms, and has demonstrated it can explore and mine.
- Institutional Investors attracted to the Startup/Production phase of the Lassonde Curve, and the revenue they want to see as investors in a gold mine.
2021 Q1 may be the point where the ascending Lassonde Curve phases (Speculation / Discovery / Start-Up) also converge and actually overlay, beginning their upward trajectory at the same point in time.
That would be something to see.
Tx