Today I want to tell you about a remarkable man a Danish scientist who became a bishop, and who made a discovery upon which the whole business of finding natural resources depends.
His name is Nicolas Steno. And last week, to mark his birthday 374 years ago, he received the dubious honour of a 'Google Doodle' a doodle on the Google homepage.
I think Steno would have regarded a Google Doodle as something that he could happily have foregone. Because his calling was to higher things.
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Moved by the sight of 240 of his school colleagues dying of the plague, Steno studied medicine in Copenhagen. There he made a number of fantastic discoveries. He was the first scientist to give an accurate account of the secretion of tears. And while working in Amsterdam, he later discovered the 'ductus parotideus Stenonianus' a channel that carries saliva to the mouth. From Amsterdam he moved to Italy, where he demonstrated by using geometry that when a muscle contracts, it changes its shape, but not its volume.
Steno did his bit for medicine. But it's the natural resources industry that is the most grateful for this Danish genius. The story starts with a large female shark caught by two fishermen off the coast of Livorno.
The 'tongue stones' that fell from the sky
In October 1666 two fishermen caught a huge female shark off the Tuscan coastline. The Grand Duke of Tuscany ordered that the head of this shark be sent to Steno, who noticed that its teeth bore a striking resemblance to certain stony objects found within rock formations.
Various theories accounted for the presence of these 'tongue stones', as they were known at the time. Pliny the Elder reckoned that they had fallen from the sky possibly all the way from the moon. While Athanasius Kircher attributed all fossils to a "lapidifying virtue diffused through the whole body of the geocosm". Get that!
But Steno realised that not only did certain fossils look very much like sharks' teeth, but that this was exactly what they must be. Their chemical composition had changed turning them to stone but not their form. The question was: how did they get there?
The three founding principles of geology
In 1669 he published his Dissertationis Prodromus, in which he established the three defining principles of stratigraphy the branch of geology concerned with the layering of rocks.
The first principle, the law of superposition, asserts that "at any time when any given stratum was being formed, all the matter resting upon it was fluid and therefore, at the time when the lower stratum was being formed, none of the upper strata existed".
The second principle was horizontality "strata either perpendicular to the horizon or inclined to the horizon were at one time parallel to the horizon".
The third was the principle of lateral continuity. This stated that "material forming any stratum was continuous over the surface of the earth unless some solid bodies stood in the way" and "if a body or discontinuity cuts across a stratum, it must have formed after that stratum".
Steno saw no difficulty in attributing the formation of most rocks to the flood mentioned in the Bible. He suggested that upper layers had formed in the flood, after the creation of life, while the lower ones had formed before life existed.
You might not quite agree with this, but all the same Steno was the first to understand that a study of geology could distinguish different time periods in the Earth's history and this is of course crucial to today's search for minerals and hydrocarbons.
How Steno's discovery could pay off for you in 2012
Having worked all this out, Steno seems to have tired of geology. He returned to medicine for a while, but then veered towards theology and in 1677 was consecrated as a bishop. In pursuit of divine approval, he took a vow of poverty, lived the life of a pauper 'dressing like a poor man in a cloak and lived four days a week on bread and beer', and died aged 48.
Having been beatified by Pope John Paul II in 1988 he is now Blessed Nicolas Steno and things named after him include schools, the Steno Museum in Denmark, and craters on Mars and the Moon.
For penny share investors though it is his work that led to the development of modern geology that matters. Without that shark's head, who knows where we might be now?
Extraction of valuable resources from the earth has been a keen interest of mine for many years. Readers of my Red Hot Penny Shares letter certainly benefited from a few great mining stocks during the 2010 boom.
A year on and share prices across the sector have fallen and in some cases with quite a bump. With costs rising and mounting political risk, the mining sector has lost its gloss. But I believe there is still serious money to be made from this sector in 2012. It just means we need to be more selective. There are certainly a few 'big projects' kicking off in the mining sector this year that I am watching closely.
As I said in this month's Red Hot, "private consumption of diamonds from China and India is expected to be around 10% leading to total demand growth of 6.6% pa to 2020." And there are some very interesting developments in the pipeline for the two Red Hot Penny Shares diamond stocks.
This article is taken from Tom Bulford's free twice-weekly small-cap investment email The Penny Sleuth. Sign up to The Penny Sleuth here.
Information in Penny Sleuth is for general information only and is not intended to be relied upon by individual readers in making (or not making) specific investment decisions. Penny Sleuth is an unregulated product published by MoneyWeek Ltd.
Red Hot Penny Shares is a regulated product issued by MoneyWeek Ltd. Forecasts are not a reliable indicator of future results. Your capital is at risk when you invest in shares, never risk more than you can afford to lose. Penny shares can be volatile, relatively illiquid and hard to trade. There can be a large bid/offer spread so if you need to sell soon after you've bought, you might get less back than you paid. This can make them riskier than other investments. Please seek advice if necessary. 0207 633 3780.
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Tom worked as a fund manager in the City of London and in Hong Kong for over 20 years. As a director with Schroder Investment Management International he was responsible for £2 billion of foreign clients' money, and launched what became Argentina's largest mutual fund.
Now working from his home in Oxfordshire, Tom Bulford helps private investors with his premium tipping newsletter, Red Hot Biotech Alert.
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