Why Volcanogenic Massive Sulphide Deposits are Not Good Exploration Targets

Volcanogenic massive sulphide deposits (“VMS” deposits) are significant sources of copper, lead, zinc, silver and gold. They can also contain significant quantities of cobalt, tin, selenium, manganese, cadmium, indium, bismuth, tellurium, gallium and germanium. Some also contain substantial quantities of the toxic elements arsenic, antimony and mercury.  See Appendix I below for more tech information.

VMS deposits are often considered an excellent exploration target. However, the fact is that very few large resource companies explore for these types of deposit, they are typically only targeted by the smaller exploration companies. I discuss the pros and cons of targeting VMS deposits below and make specific reference to a United States Geological Survey (“USGS”) database. This database has 868 VMS deposits for which grade and tonnage data are available. Any statistics used below refer to this database, unless otherwise noted.

I will conclude with a brief discussion of the merits of VMS deposits as exploration targets. But first  some statistics from the database. Click charts for better resolution.

SIZE
Most VMS deposits are small. The average deposit size is 11.9 million tonnes, but the median size is only 2.1 million tonnes. The smallest deposit is 0.01 million tonnes and the largest is 469 million tonnes. This variance is due to the existence of a handful of very large deposits, as reflected in Figure 1 below.

Figure 1 –  Logarithmic Tonnage curve for VMS deposits

GRADE
I have used copper equivalent grade to represent the grade of the five common metals found in VMS deposits. This is a practice that I generally disagree with as it can distort economic valuation (read here for more on equivalent grade). However, in this commentary it does allow for a much clearer presentation of the data.

I have used the following USD prices in the weighting: copper $7,500/tonne; zinc $1,800/tonne; lead $1,800/tonne; gold $51/gram ($1590/oz.); silver $0.86/gram ($27/oz.). I do not infer anything from these prices, they were current when I commenced a detailed VMS review, of which this is a part, some time back.

Figure 2 below shows a remarkable consistency of grade over a range of deposit sizes.  Grades are quite good, with most in the 2% to 5% Copper Equivalent range and quite a number above 5%.

Some commentators suggest that the smaller deposits are more metal rich and by inference economic, even though small. This is not borne out by the data in Figure 2.

The handful of high grade outliers are caused by high gold values.

Figure 3 shows that many deposits are copper rich. There are a large number of deposits on or near the base line, which is the point at where there is no contribution to equivalent grade other than copper.

Figure 2  –  Copper Equivalent Grade vs Logarithmic Deposit Size

 Figure 3  –  Copper Equivalent Grade vs Copper Grade

WORLDWIDE DISTRIBUTION
VMS deposits are not uniformly deposited around the earth. There are a number of reasons for this in addition to geology; such as geomorphology and exploration intensity.

I have included  Figure 4 below  to show where most deposits lie and thus what have been the most productive regions to date. It is also a most interesting take on the geography of the world from a geological perspective.

The most productive regions have been eastern Canada (centred on 50 degrees Latitude/-75 degrees Longitude), Norway & Finland (65/20), Kazakhstan & Russia (55/65), Kazakhstan & China (50/85) and  Japan (35/140). Africa, India, and to a large extent South America, are notable by their absence. In the VMS world they do not exist.

It is thought-provoking that most deposits lie above 20 degrees of latitude and are most common above around 35 degrees. The southern hemisphere is relatively barren, other than a sprinkling of deposits around the margin of Australia. Antarctica is invisible, as could be expected, for reasons of politics and climate.

Figure 4  –  Worldwide Distribution of VMS Deposits

DISTRIBUTION OVER TIME
Figure 5 shows tonnage and grade over time. There have been seven major  periods of VMS formation, typically corresponding to periods of ocean-closing and terrane accretion. In geological time these are, from oldest first:   Mid Achaean (around 3200Mya); Late Achaean (2700Mya); Proterozoic (1800-1900Mya); Late Proterozoic (800Mya); Early Palaeozoic (450-500mya); Mid Palaeozoic (340-380Mya); Early Jurassic (180-200Mya). And that’s enough geology.

To my mind, and you must appreciate that I am a geologist, this chart is a beautiful reflection of the Earth’s geological processes. It shows symmetry through time for both tonnage and grade. It builds to a crescendo 450 to 500 million years ago, with the majority of both tonnes and grade (metal content) being deposited since this time.

Figure 5  –  Distribution of VMS Deposits Over Time

VMS DEPOSITS AS EXPLORATION TARGETS

 Size and the Cluster Myth
The biggest negative for VMS deposits as exploration targets is that they are typically small and therefore often of little economic value. There are some very good, large VMS deposits but they are rare and the chance of discovery is low.

Conventional wisdom has it that because VMS deposits occur in clusters, once you find one you will find many. This is only partly so. VMS deposits often do occur in clusters, but the vast majority of metal in a cluster is always contained in the one or two biggest deposits. The biggest deposits, as you would expect, are almost always the first to be discovered.

Grade
Grade is a big positive for VMS deposits. It is often “economic”, even if size is not.

Some contend that the polymetallic nature of VMS deposits allows for hedging against commodity prices. This is a meagre argument as the metals in polymetallic VMS deposits cannot be mined separately, processing costs and smelter charges are higher etc. The exception is where copper is accompanied by significant gold values.

And VMS deposits can also carry significant quantities of penalty, or even toxic, metals that can attract sizeable smelter penalties.

Location
Basins that host VMS deposits only occur only in certain parts of the world and at certain times during the Earth’s evolution. Further, only certain parts of certain horizons within favourable basins are prospective for VMS deposits. For example, a zone of crustal thinning.

Thus it is not sufficient to be in the right area, but in the right part of the right basin, which is an altogether smaller and more difficult target.

Exploration Methodology
VMS deposits are particularly amenable to geophysical and geochemical exploration techniques.

Because VMS deposits are massive sulphide in style, they conduct electricity and are heavier than the surrounding rocks. They are therefore amenable to various electrical geophysical techniques and gravity surveys.

However, because the predominant sulphide in VMS deposits is non-economic pyrite, a geophysical anomaly will not necessarily represent economic mineralisation. In a similar vein, the basins that host VMS deposits often also contain pyritic black shales. These are not of economic interest but can produce rather pleasing geophysical anomalies.

VMS deposits are surrounded by a large envelope of geochemical alteration. This is an excellent exploration target in its own right as an experienced geologist can use it as a vector for targeting any contained VMS deposit.

CONCLUSION
A good VMS deposit is something to behold. Good grade, especially the copper-gold combo, can give very high margins. Mining parameters (such as tonnes per vertical metre) are often excellent and processing straightforward. They can produce clean, valuable concentrates that may even attract a premium from smelters.

Many VMS deposits, though, possess a number of negative characteristics, chiefly that they are too small to be economically significant. Processing can be problematic and concentrates penalised.

The hunt for VMS deposits usually takes place in a basin which already hosts known deposits, or in the vicinity of a new discovery. In either case  it is usual for existing discoveries to represent the majority of the total metal of the basin.

Nonetheless, under certain circumstances, they are a worthwhile target for smaller exploration companies. However this requires a high level of geological expertise and a number of favourable factors, such as the precise geological setting, to be aligned.

But then, serendipity plays a large part in exploration success. So an investor could do a lot worse than backing a company undertaking exploratory drilling (in the appropriate geological setting and with the appropriate geological expertise) near a recently discovered VMS deposit.

 

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APPENDIX 1 – VMS FORMATION
Volcanogenic massive sulphide deposits (“VMS” deposits) typically occur as lenses of polymetallic sulphide at or near the sea floor. They form through the deposition of sulphide from hydrothermal (literally “hot water” in Greek) fluids. In the case of VMS deposits the hydrothermal fluid circulates in the vicinity of hot intrusive rocks and leaches metal sulphides from the rocks surrounding the intrusive body.

The hydrothermal fluids discharge at or near the sea floor, in zones of crustal extension, and being focussed by faults and fractures. This results in deposition of a massive sulphide body which in turn overlies a “stringer zone” of low grade disseminated mineralisation. The hydrothermal fluids also create a distinctive alteration zone or halo around the deposit that can be a useful exploration guide.

Modern day analogues are forming beneath the sea, typically where tectonic plates are moving apart and new crust is forming. These are generally referred to as “black smokers”, so called because the hydrothermal fluids being emitted into the ocean are black because they are rich in dissolved sulphides.

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