Ways to invest in a mining project
Listed shares, placements with warrants, project stakes, royalties, streams and loans: what each one gives an investor, how and when it pays, and what it is exposed to.
4 min read
On this page
The same project can be owned in several ways. Each one decides when you get paid, what you are exposed to, and what happens if the company, the project or its owner changes.
The main instruments
| Instrument | What you own | How it pays | Typical stage |
|---|---|---|---|
| Listed shares | A share of the company, bought on the market | A rising share price or a takeover | Any |
| shares and warrants | New shares at a discount, usually with | As listed shares, plus the warrants' upside | Any, most often stages 1–4 |
| Flow-through shares (Canada) | Shares with tax deductions for exploration spending | Tax benefit plus share upside | Stages 1–3 |
| Project stake or | A direct share of the project, not the company | A share of project value or cash flow | Stages 2–5 |
| A percentage of revenue for the life of the mine | Cash once the mine produces | Any | |
| The right to buy part of the output at a low price | Margin on each unit delivered | Mostly stages 5–6 | |
| Loans and convertibles | A debt claim, sometimes convertible into shares | Interest, repayment, or conversion | Mostly stages 5–6 |
How they compare
| Shares | Royalty | Stream | Loan | |
|---|---|---|---|---|
| Ranks | Last | Ahead of shareholders | Ahead of shareholders | First, usually secured |
| Exposed to cost overruns | Yes | No | Mostly no | Through default risk |
| Exposed to dilution | Yes | No | No | No |
| Upside from price and mine expansions | Most | Yes | Yes | None |
| Paid before production | Only by selling or a takeover | No | No | Interest, sometimes |
| Survives a sale of the project | Converted into the buyer's offer | Yes: attached to the ground | Yes, usually | Usually repaid |
| Liquidity | Daily, but often thin | Low | Low | Low |
The marketplace this site is building will focus on project-level deals: royalties, project stakes and direct financings for projects at stages 2–4.
A worked example
An invented junior at the maiden resource stage needs money. An investor has $2M and two offers:
- A placement: $2M buys about 6% of the company, with warrants.
- A royalty: $2M buys a 1% NSR royalty over the project.
Three outcomes:
| Outcome | Placement shares | 1% royalty |
|---|---|---|
| Project fails | Shares near zero | Worth near zero, unless the project is revived |
| Sold to a major at the PFS for $200M | After later dilution to about 4%: about $8M, paid at the sale | Stays on the project; worth more now, but still pays nothing until production |
| Mine built: $300M a year of net smelter return for 12 years | Already sold at the takeover | $3M a year: $36M in total before discounting |
The shares pay at the sale and are exposed to every financing before it. The royalty pays only if the mine is built, but it keeps paying for decades and survives the change of owner. Neither is better in general: they are different bets on the same rock.
Questions to ask before choosing
- What do I need to be true to make money? A discovery, a sale, or a built mine?
- Where do I rank if things go wrong, and who ranks ahead of me?
- What dilutes me? Future placements dilute shares; nothing dilutes a royalty, but new royalties can reduce the project's financeability.
- When can I get out? Listed shares trade; royalties, project stakes and placement shares in their hold period often do not.
- What rights come with it? Information rights, a board seat, participation in future raises, a right of first refusal.
What to take away
Pick the instrument that matches the outcome you are betting on. Shares are a bet on the company and its next re-rating; royalties and streams are bets on the mine being built and run; project stakes sit in between.
All figures are invented for illustration. This is educational material, not investment advice.
Key terms
Next in this track
Valuing a junior at each stageBefore a study there is no cash flow to discount, so the market uses other yardsticks: cash and comparables, value per resource ounce, then price to NAV and risked NAV. Which method fits which stage, and the traps in each.Related articles
- How juniors are listed and tradedWhere junior miners list, how to read a share structure and a cash position, how financings dilute shareholders, and why junior shares trade the way they do.The junior mining world3 min read
- EquitySelling shares is the main way exploration is funded. It needs no repayment, but every raise dilutes existing shareholders.Mining finance2 min read
- StreamsA stream is an upfront payment for the right to buy a share of a mine's future metal at a low price. Streams help fund construction, usually on by-product metals.Mining finance2 min read
Educational material only. Nothing here is investment advice or an offer to buy or sell any security or mineral interest.