03 / Read what remains
Understand what each deal leaves the generator.
“Retaining upside” can mean very different things. Ask who funds the work, what interest remains and what can change. The contract determines the answer.
| Structure | What it means | What to check |
|---|---|---|
| Option / earn-in | A partner can earn an interest by meeting agreed spending, payment or other milestones. | Commitments versus optional spending; deadlines; withdrawal rights; when ownership transfers. |
| Joint venture | Parties share a project under agreed funding and decision rules. | Budgets, control, contribution requirements and dilution or conversion provisions. |
| Sale | Project rights transfer for negotiated consideration. | Cash versus shares; contingent payments; liabilities retained; security and enforceability. |
| Equity | Shares represent ownership in a company, not necessarily a direct project interest. | Share count, future issuance, liquidity, restrictions, company debt and other assets. |
| Royalty | A contractual interest in specified production or revenue, depending on its definition. | Covered land and minerals, deductions, buybacks, caps, reporting and payment triggers. |
| Spin-out | Assets move into a separate company. | Who receives shares; transfer terms; new funding; governance and approvals. |
Royalties are not all the same
A net smelter return (NSR) royalty generally applies to defined sales proceeds after deductions allowed by the contract. A profit-based royalty has a different base. The headline percentage is only part of the agreement.
A royalty may have no production income unless a project reaches production. A project may never reach that stage. Buyback rights can reduce the interest, and enforcement and counterparty risk still matter.
Dilution happens in different places
Project dilution: a participant may lose percentage ownership if it does not fund its share under the JV agreement.
Company dilution: new shares can reduce an existing shareholder’s percentage. A lower percentage does not by itself measure whether economic value has risen or fallen.
A royalty does not dilute in the same way as a shareholding, but its terms may allow reductions or buybacks. Never infer protection without reading the contract.
Try a project scenario