Benefits Of The Model
Because mineral exploration is risky, the project generator model makes good business sense. The model has a number of distinct benefits:
1. Lower Risk
By progressing multiple projects at once, a project generator is able to reduce the risk of any single project failure damaging the company.
2. Increased Opportunities
By using partner-funds to pay for exploration, the project generator is able to complete exploration on multiple projects simultaneously. Each active project increases the opportunity for discovery.
3. Reduced Cost
By using partner-capital to fund exploration, a project generator reduces the amount of shareholder capital it has to spend on exploration.
4. Low Dilution
By reducing the amount of shareholder capital required, a project generator is able to significantly reduce their reliance on the market for financing. This means less dilution for shareholders.
5. Diverse Portfolio
Because a project generator doesn’t have to focus on any single project, it can work to build a diverse portfolio of projects including different commodities in different jurisdictions. The model also allows for project turnover, letting the company remove a project it feels no longer has value without shaking investor confidence.
6. Valuable Industry Partners
Many project generators partner with some of the world’s best mining companies. These partners can share valuable knowledge, lend expertise on the project or market and help move the project forward upon discovery. These partnerships also act as a sign of confidence for investors, as high-quality companies don’t invest in just any project.
7. Longevity and Sustainability
By funding drilling with partner capital, bringing in cash flow from option agreements and having multiple projects progressing at once, a project generator becomes a more sustainable exploration company, able to continue exploring in both good markets and bad.
Successful exploration takes time, good science, and a systematic approach. For most explorers, when one or two projects fail, the whole company fails and investors lose everything.
Project generators avoid this by relying on partner-funding to move projects forward, limiting their reliance on the markets while still exposing shareholders to the upside of mineral discovery.
Ultimately, the model helps hedge against the immense risks of junior exploration and creates a company that has longevity and sustainability.