Part 1 of a closer look at prospect/project generators
By James Kwantes
Once upon a time in Nevada, a prospect generator and a royalty generator executed a grubstake agreement on greenfields gold prospects in the Beatty district.
It was Oct. 24, 2013. The Nevada deal had a low entry price, just US$150,000. It was a longshot.
The town of Beatty had been a shortlived gold boomtown, circa the early 1900s, with sporadic gold production at various mines over the next century. By 2013, there was little going on, aside from some exploration at scattered brownfield projects.
Prospect generators dilute only at the project level, giving investors exposure to potential discoveries and embedded options while minimizing typical Venture-style stock dilution. When a project generator makes an economic discovery and retains a royalty and/or project stake, that company can become a shareholder value creation machine.
In this case, the juniors were Renaissance Gold and Callinan Royalties. Callinan agreed to fund US$150,000 initially in generative exploration on Renaissance’s Silicon ground in exchange for a 0.5% NSR royalty, with an option to fund an additional $150,000 for a total 1.5% NSR royalty (which they exercised). Renaissance later optioned Silicon to AngloGold Ashanti for cash and a separate 1% royalty.
Altius Minerals (ALS-T) bought Callinan Royalties in 2015 and Renaissance Gold merged with Evrim in 2020 to form Orogen Royalties (OGN-V). Along the way, AngloGold Ashanti quietly made major gold discoveries and rapidly consolidated the district, swallowing Corvus Gold (2021), Coeur’s Crown Sterling assets (2022) and Richard Warke's Augusta Gold (July 2025).
A BIG SCORE IN THE DESERT
Callinan’s 1.5% NSR royalty became Altius’s Silicon-Merlin (now Arthur) royalty on AngloGold Ashanti’s deposits, which host 16.3 million ounces of oxide gold. And counting.
World-Class, Under-the-Radar Gold. How to Play It - Feb. 28, 2024
In July, Altius sold a 1% NSR royalty on the Arthur gold project to Franco-Nevada for US$275 million and retained a 0.5% NSR for its own royalty portfolio. That works out to an implied value of US$412 million, or $562M Canadian, for the entire original 1.5% royalty. For perspective, Altius’s current market cap is about $1.4 billion.
For junior mining investors, a 10X return constitutes a “big score.” The Altius/Franco-Nevada deal works out to a 1,400X return on the initial investment of US$300,000, in just under 12 years.
That’s a remarkable score, in a junior mining sector where the majority of companies fail. It also validates the project generator business model, which many retail investors still shun.
Altius shares have worked out alright too. The stock IPOed at 20 cents in 1997; it’s now a dividend-paying royalty company that trades over $30. Revenues on potash, base and battery metals, iron ore and renewable energy projects generated revenues of about $64 million in 2024.
Altius’s corporate history demonstrates that project generation can be an effective capital rationing strategy with several valuable embedded options. And project generators have other tools and strategies that can help minimize stock dilution in the absence of a “big score.”
These include:
operator fees (the optionee pays the PG to run the exploration program on the project);
optioning to other juniors for cash, equity stakes and/or royalties (both of which can become meaningful); and
pivoting to sole-risk exploration or running both models simultaneously.
FROM EUPHORIA TO ‘THERE IS NO MONEY.’ THEN, A BREAK
For Altius, the project generation business was born out of necessity, CEO Brian Dalton told me in an interview. In the 1990s, Dalton and his friend Roland Butler were paying their way through geology classes at Memorial University by prospecting and staking claims in Newfoundland and Labrador. The duo would then head to Vancouver to drum up interest at the city’s mining and exploration shows.
Fortune smiled on the prospectors in 1993 when the rich Voisey’s Bay nickel discovery was made in their backyard, making Labrador claims a hot commodity (regardless of quality). Right place, right time: bankers and junior mining promoters descended on the province.
With business booming in the mid-1990s, Dalton, Butler and a third partner, Geoff Thurlow, found themselves at a crossroads – join larger mining companies or go into business for themselves. They decided to formalize their partnership and launch their own junior mining company. Altius Minerals was born.
By the time Altius was trading in late 1997, however, Bre-X geologist Michael de Guzman had plunged from a helicopter and the Bre-X gold had vapourized – along with capital for the junior exploration sector.
“From easy money, euphoria, to ‘there is no money,’ ” Dalton recalled. “The idea of just raising money to drill holes and be a junior mining company was not looking so hot all of a sudden.”
The young entrepreneurs decided to go back to their roots in prospect generation. They optioned projects initially to majors for cash and a royalty, and later on to high-quality juniors for cash, equity and royalties.
“We said, we’re going to try to find partners to come in and fund these programs,” he said. “It was born, truly, of desperation.”
Opportunity knocked when Voisey’s Bay co-discoverer Chris Verbiski phoned Dalton up one day. He and co-discoverer Al Chislett owned a valuable 3% prospector royalty, the fruits of their discovery. But there was no cash flow and Voisey’s Bay was still years away from producing. Verbiski wanted to monetize part of it.
The idea of securing a near-term cash-flowing royalty was appealing to Dalton and his partners at Altius, which was still running financings to pay for corporate G&A. While the price tag – $10 million for a 0.3% royalty – was a big bite for the small company, Altius pulled the trigger on the deal in 2003.
“We didn’t decide to become a royalty company that day,” Dalton said. “It was purely to fund the prospect generation business. The idea was, why don’t we buy that, it’s 10 million bucks and it’ll generate a million bucks a year. That will basically fund our G&A and exploration burn in perpetuity.”
That 0.3% Voisey’s Bay NVR (net value royalty) did considerably better – by 2023, it had spit out $46 million in revenue.
Altius also later put into play Doug Silver’s International Royalty Corp. (IRC), which had purchased the rest (2.7%) of the Voisey’s Bay prospector royalty. Altius and large IRC shareholder Chris Verbiski proposed a merger with the much-larger IRC, with the goal of separating the base metals royalties from the precious metals royalties. Franco Nevada then went hostile with an offer, and Royal Gold joined the fray. The latter won the bidding war in late 2009 with a $7.45/share offer, generating a return of more than $66 million for Altius and its 8.9 million shares.
While the Voisey’s Bay royalty purchase pushed Altius further towards becoming a royalty company, the company had retained royalties on all of its prospects from the beginning. “It’s project generation 101,” Dalton said.
RISING TIDES, VALUABLE EQUITIES AND CASH PILES
Altius has also advanced the business by selling equities and using the proceeds to buy royalties. One option deal that became quite lucrative was the Michelin uranium project in Labrador, developed by Aurora Energy. Aurora was later bought by Paladin Energy, but not before Altius monetized its Aurora equity to the tune of $200 million.
Altius opportunistically deployed that capital into royalty acquisitions including the purchase of Sherritt International’s potash and coal assets (which it teamed up with Liberty Mutual to bid on).
Buying up Orogen stock was another example. As AngloGold Ashanti quietly turned the Silicon property into a pin cushion, Altius spent millions to up its already 10%-plus stake in the company.
By the time Triple Flag swooped in, Altius owned about 19% of Orogen shares (and now holds 16.4% of successor Orogen 2.0).
KAMI IRON ORE ROYALTY A CHAMPION IN THE MAKING?
And if the Voisey’s Bay royalty was key to laying the foundation, Altius’s 3% Kami iron ore royalty could be key to its future. Altius generated the Kamistiatusset (Kami) iron ore prospect in western Labrador in the 2000s and vended it into Alderon Iron Ore in 2009. Alderon went bust in 2020 and was bought out of bankruptcy by Champion Iron Mines (CIA-T), whose chairman Michael O’Keeffe is an Australian mining entrepreneur of some renown (see below).
Forward-looking: Execs Who Make a Statement
Altius retained its 3% gross smelter return royalty and also picked up 600,000 Champion shares, which trade above $4. Champion is advancing Kami as a high-purity iron ore development project, a category that has been added to Canada’s critical minerals list. Champion recently announced a 51/49% JV agreement to develop Kami with steel producer Nippon Steel and Sojitz Corporation, a trading company. Upon production, Kami would be Altius’s single largest royalty.
Before Altius’s sale of the 1% Silicon-Arthur royalty, there were rumours on the street of Franco Nevada buying Altius outright – in what could have been a kind of echo of Royal Gold’s takeover of IRC. After opting to sell only the 1% NSR royalty to Franco and monetizing its Orogen stake to the tune of $81 million, Altius is sitting on a cash pile of about $360 million (with total liquidity of $540 million).
It’s a familiar situation for Altius, whose CEO preaches patient capital management and discipline during bull markets.
“We had to choose to essentially do nothing,” Dalton said of periods where Altius has been flush with cash while it patiently evaluates opportunities. “There’s going to be a day for our money and it’s not now.”
More recently, on Altius’s Aug. 12 quarterly conference call, Dalton told analysts: “We have within our history a track record of patiently sitting on large cash positions for extended periods, until the right opportunities emerge.”
The project generation landscape has thinned out a bit of late. EMX Royalty Corp. (EMX-V) was another project generator that followed a similar playbook of accumulating valuable royalties and equity stakes. On September 4 EMX announced a merger with royalty player Elemental Altus to create a new mid-tier gold royalty company.
Altius Minerals (ALS-T)
Price: $30.58
Shares outstanding: 46.32 million
Market cap: $1.42 billion
DEJA VU FOR ‘OROGEN 2’
As for Renaissance Gold, successor company Orogen Royalties (OGN-V) retained the 1% NSR covering the Silicon-Merlin deposits. On April 22, Orogen sold that to Triple Flag Precious Metals (TFPM-T) for $421 million, in a deal that gave shareholders cash, TFPM shares and stock in Orogen 2.0. The spinco holds all the non-Silicon assets including the producing Ermitano royalty.
In baseball terms, the sale of the Silicon-Arthur royalties can be considered triples for Altius and Orogen, even if ALS and OGN shareholders have yet to fully reap the rewards. For Orogen, that triple came after a solid single: its producing 2% NSR royalty on First Majestic Silver’s Ermitaño mine in Sonora, Mexico.
The Ermitaño royalty emerged out of a property option to First Majestic back in 2014 (Orogen also optioned Cumobabi to First Majestic for a 1.5% NSR royalty). Ermitaño spit out $7.9 million in revenue last year.
Both of those royalties are in Orogen 2.0, the Orogen “stub,” which has $17 million in cash and has already grown its market cap from $78 million to more than $118 million since re-listing. Today, on Sept. 10, Orogen 2.0 closed at $2.00 -- the same price as the Orogen deal (Orogen shareholders received one Orogen 2.0 sharefor every 4 Orogen shares held.
Not visible on the balance sheet is the intellectual capital that Orogen (and other successful PG groups) bring to exploration, which they can leverage in deals with exploration partners.
Orogen recently formed a generative alliance with South32 focusing on base metals exploration in the western United States. South32 will bear all costs of the alliance; Orogen will retain a 2% NSR royalty (can be bought down by 0.5% for $5 million) on each project South32 elects to advance.
It’s the fourth such generative exploration alliance Orogen has entered into. The other partners are Altius (Nevada, gold, silver and copper), BHP Explor 2025 (Wyoming, copper) and Triple Flag (Utah, gold). These alliances cost Orogen little to nothing and will yield valuable royalties in the event of exploration success.
One sleeper in the Orogen portfolio is its 1% royalty on the La Rica copper-gold project in northern Colombia, which is being drilled by private company MCC Mining. MCC has a large copper exploration portfolio in Colombia, including a partnership with Rio Tinto, and raised US$50 million in 2024.
Orogen Royalties (OGN-V)
Price: $2.00
Shares out: 59.36 million
Market cap: $118.7 million
POWER OF PATIENCE
A key detail: it took a dozen years for the Silicon-Merlin-Arthur prospect to turn into a project, then deposits, then a world-class district. When it comes to project generators, fortune favours both the bold AND the patient, in an era of instantaneous stock quotes and rapid money flow.
Royalty generation has become a popular strategy, especially with capital flowing into the junior sector again. In the modern era, it was pioneered by André Gaumond, whose successes with Virginia Gold and Virginia Mines have been well-documented in this space. Gaumond sold his Virginia Gold and later, spinco Virginia Mines (which held a sliding-scale 2-3.5% royalty on Eleonore), for a combined $1 billion.
Follow the Leaders (André Gaumond Edition)
Great Bear Resources (GBR) executed a similar strategy, spinning out a 2% NSR royalty on Dixie into Great Bear Royalties (GBRR), which sold for $200 million to Royal Gold (following Great Bear Resources' $1.8-billion sale to Kinross).
Other royalty spinouts have included Vizsla Royalties (VROY-V), carved out of Vizsla Silver (VZLA-T), and most recently NGEx Minerals (NGEX-T). The Lundin company, which has already created billions in shareholder value, owns 69% of the Los Helados copper-gold porphyry deposit and is reporting world-class hits at its Lunahuasi discovery on the regular. On July 22, NGEx announced it plans to spin out to shareholders a new royalty company holding a 1% NSR royalty on the Lunahuasi project and a 1.38% royalty on Los Helados.
As demonstrated by Gaumond, an Altius director, and lately by Altius, Orogen and NGEx, project generation teams that “figure out the formula” tend to become serial shareholder value creators. Identifying these teams and investing alongside them can be beneficial to your financial health.
SMALLER BUT GROWING AUDIENCE
The investment audience for prospect generators is growing, but remains a small subset of the capital available to resource issuers. However, PG investors tend to be seasoned, well-informed and patient: think Rick Rule, Adrian Day and Paul Stephens.
The total amount of capital required both to fund and make a secondary market for these stocks is also lower, given that much of the money comes from the company that has optioned the properties.
On a cautionary note, watch out for second-rate project generators that are a kind of “boiling frog” – unmotivated management never fails, but also never adds real value. Shareholders find themselves, one day, with the same dilution they would have gotten from an exploration or development play.
In my next article, I’ll take a closer look at project generators with lower market capitalizations that are earlier in the shareholder value creation cycle.
Disclosure: I own shares of Altius Minerals, Orogen Royalties and NGEx Minerals. No business relationship with any company mentioned. This article is not financial advice and all investors need to do their own due diligence.
