Commander Resources CEO Robert Cameron describes the prospect generator model as it’s applied to the resource space.
In the interview below, Cameron outlined the benefits and challenges associated with this model and described the joint venture opportunities the company has developed. He also discussed Commander’s current project portfolio in Canada, which includes joint venture opportunities in the Yukon and British Columbia (BC).
Below is a transcript of our interview with Commander Resources CEO Robert Cameron. It has been edited for clarity and brevity.
Investing News Network: Please tell us about what it means to be a prospect generator in the resource space.
Commander Resources CEO Robert Cameron: Prospect generation is a subset of the exploration field. It’s an attempt to exert discipline on what is naturally a high-risk operation: mine exploration. Mines are rare and difficult to find, and you spread the risk with a prospect generator by bringing in partners.
We have a continual pipeline of approximately a dozen projects at a time. We seek out joint-venture partners that can come in to option the properties and fund the exploration. We preserve our capital that way as other people’s money does the heavy lifting. We could have three or four joint ventures exploring properties concurrently, and we spread the risk. That exercise allows us to focus on generating new projects, which are at the cheap end of the exploration cycle, while our partners focus on the heavy lifting, which is the drilling and discovery work.
INN: You talked about exerting discipline. What do you mean by that, and why is it so important?
RC: I mean discipline within the model. We will not drill a project, but we will take projects up to the drill stage, so we do the early stage exploration, mapping, prospecting, soil sampling and early geophysics. After that, a partner will do the drilling and any subsequent work, which is the expensive part of the exploration cycle.
If we were to focus on one project ourselves, we could drain our treasure just doing the heavy exploration phase at the back-end of the discovery. In this way, we can focus on the front-end, and our partners can do the back-end drilling and definition stages. Through that exercise, we have option payments, which can be in cash and/or shares, and we keep a royalty.
This income offsets our expenditures, making our burn rate much less. We protect our shareholders from excessive dilution, because we’re not financing as much, our burn rate is managed with income, and by focusing on the cheaper front. The royalties eventually build up into a portfolio that, maybe, at the end of the day, will be our value proposition. A portfolio of royalties could probably exceed the value of a company’s properties and that would make it a royalty company.
INN: What does the prospect generator bring to the equation that makes it attractive to joint venture partners?
RC: If you look at the majors, over the years, they’ve slowly shrunk their exploration departments. This means they’re really lacking in the generative part of their internal pipeline. As a result, they look to prospect generators to provide some of these brand new discoveries, concepts or exploration ideas to feed their pipeline. Majors can’t be everywhere at once, so they rely on different prospect generators that have various focus areas.
You could probably create a portfolio of prospect generators and spread your work. We’re Canada-focused. There are others that are South-America-focused. So it serves the major and mid-tier companies perfectly, because they don’t have the manpower in their own exploration departments to do this early stage exploration, so they offload it to prospect generators.
It’s a market niche and it’s sustainable for our shareholders, too. Ultimately, it preserves the share structure a little more strongly than in other companies, and it’s exposed to a lot of different exploration programs, any of which could lead to a discovery. It’s a very worthwhile, and, as I say, disciplined approach to exploration.
INN: How long has your company been in operation?
RC: We’ve been around for 30 years. This is our 30th year. We began in 1989 as a company called Major General Resources. It was built having bought the Canadian assets from a company called Union Miniere. From that, the core group of projects and data were spun out over time.
I myself joined the company about two years ago and we’ve since become Commander Resources. I recognise that the company had the building blocks of a successful prospect generator. However, even though that’s what the company was doing, they weren’t branding themselves specifically as that. We already had a portfolio of royalties and a portfolio of shares from all the joint venture partners we’ve had over the years. We also spun out two assets that formed the basis of other companies over those years. Now we’re just trying to accelerate that exercise under the more formal brand of prospect generator.
INN: What are you working on at the moment?
RC: We have about 10 projects across Canada and one in Mexico. We have one active joint venture, which is a nickel–cobalt project we call South Voisey Bay, because it’s south of the Voisey Bay operations in Labrador. What’s interesting about that joint venture, is that it’s being explored by a company called Fjordland Exploration (TSXV:FEX) and funded by High Power Exploration (HPX), which is Robert Friedland’s private company. HPX is directly funding Fjordland, which is then investing that funding into the joint venture to earn their interest from us on the South Voisey Bay project.
INN: Robert Friedland’s association with Voisey Bay has been a pretty successful venture.
RC: Yes. I call it our Hollywood story, because we have had this asset since 1996. Commander has owned this property since day one, during the initial discovery rush in the region. We maintained the property, kept all the data from the partners that have come and gone. We were sitting on about $25 million-worth of exploration data on a property in a topical area near the Voisey Bay discovery. We optioned it to Fjordland and together attracted funding, which happens to be from Robert Friedland. He is here looking for the next Voisey Bay, which would be quite incredible.
INN: But what makes this attractive now? You’ve been sitting on this property for 22 years.
RC: It comes down to exploration cycles. Nickel is not always hot, so we maintain our properties during those times. This one has been sitting idle. What we did when I joined the company was modernize the database, so to speak. Having survived in a bunch of banker boxes, it is now digital, so that people can come in and quickly evaluate the exploration potential. Once we had that marketable database, we managed to bring in HPX, which recognised the full potential, because they were able to look at the data with modern techniques.
INN: What are other Canadian projects that you are excited about?
RC: We have two that I would call top tier. We have an exciting gold project in the White Gold district up in the Yukon, the Flume project. It’s a project that I personally have been involved with since 1999. I staked it originally with a previous company I worked for, managed to stay involved with it up until now and brought it into Commander. It’s a 10-kilometre-long gold-arsenic soil anomaly, which is the classic signature of those new White Gold discoveries. They start off as kilometric-scale soil anomalies, and then, through exploration, discoveries have been made.
The Coffee project, for example, which was bought by Goldcorp (TSX:G,NYSE:GG) as part of the Kaminak Gold buyout for about $500 million. We also have White Gold Corp. (TSXV:WGO), which has made great discoveries recently, including their new vertical. We’re right in the middle of this exciting new gold belt there and we’re looking for partners on that property.
INN: You also have projects in BC?
RC: We have several projects in BC. We have one called Omineca, which is a copper-gold porphyry that sits in an evolved exploration district of the same name.
We also initiated a new copper program this year, because I wanted to boost up copper exposure in our portfolio. We managed to pick up two new exciting copper projects in Central British Columbia, which we’ll be releasing some information on over the next couple weeks that will illustrate their full potential. And we also have gold projects in BC. BC is our center of gravity, in a sense, because that’s where our neighbourhood and backyard is. But we’re across the country.
INN: You seem excited about the upcoming opportunities for 2019.
RC: I am excited, but I realise the challenges, too. As a prospect generator, there are two ends to the equation. You have to consistently replenish your project portfolio while also making sure you get the projects out the door. Currently we have one out with HPX and Fjordland and we have a couple more that we hope to get off the table this year with some good partnerships. It’s a labour-intensive business model because you have to be constantly marketing your projects, marketing your company to the investment world and also focusing on replenishing your pipeline.
INN: How would you suggest potential investors look at this opportunity versus buying directly into a major?
RC: This opportunity puts you in the exploration space, so you’re still playing for that big risk-reward ratio, which you get with a junior. You don’t get that with majors. WIth majors you might see the rising tide. It’s slow and steady, with a blue-chip-style investment. Meanwhile, you’re still looking for the 10 or 20 times win in a junior. A prospect generator exposes you to more opportunity in that regard, because with the joint venture model, you’re probably exploring a lot more with other people’s money, with more opportunities.
Prospect generators are hard to evaluate for the investor, because you have a rolodex of properties of different calibers at different stages of exploration. You have to know the exploration potential, and there’s no real dollar value you could put on exploration properties. I think the way to measure a prospect generator is in the deal making. Are you executing on your model? Are you finding joint venture partners? Are you finding new properties? Are you building up a valuable royalty portfolio with the fallback position in the company? Are the fundamentals there? So it’s a difficult one for investors to actually invest in.
INN: It’s all about the people as well, no?
RC: Yes. It’s all about people. We have a great team. I’m an exploration geologist, and I have been since I graduated university. I ran a major exploration office here for a number of years in Canada, I was a mining analyst briefly, where I got a bit of a taste of the financial world. Then I came back and I’ve been running juniors ever since. My first junior was called Valley High Ventures. We ended up selling that one out to our partner company in 2011 over a silver discovery made with them in Mexico. The second one was the spinoff from Valley High, and they went off into lithium. Then I came over into Commander, where I’m trying to apply a different model. I like this because it aligns with my background: exploration, finding new targets, bringing them up to speed and then finding partners.
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