Yale is now a project generatorAccording to Matt Badiali, editor of S&A Oil Report, prospect generators represent the best opportunities in the mining sector. Instead of being cash-burning machines that dilute shareholder equity, they put up the initial investment on a property, "do the science," and then turn it over to a partner who puts up the money to drill the projects. He calls the power of the prospect-generating model "astonishing," and names some companies that he considers top-flight in the sector.
So, to contrast that to your standard junior mining company model, the junior miner has a project; they have something they want to drill. They have no income; they’re basically a cash-burning machine. These guys have to go out and raise more money to do the next round of drilling. The only thing they have to sell is part of your stake in the company. So, say their shares are 10 cents, they need to raise a million dollars, they have to double the amount of shares they have out. So your slice of the pie just got smaller by half. That’s the problem with being an early investor in these junior mining companies: you’re going to be diluted and diluted and diluted, as opposed to prospect generators, where they’re actually generating money. They’re not diluting their shareholders
If exploration is 85% funded by its partners. That means for every dollar the company spent looking for gold it only used 15¢ of its own money. Over the life of the company, partners funded 85% of the exploration costs. That is the power of the joint venture model at work—funding exploration with other people's money.