By Elyssia Patterson, Special Contributor, MiningIR
Why Some of Mining’s Greatest Value Creation Occurs After the Asset Is Sold
The mining industry traditionally celebrates discoveries, resource growth, feasibility studies, and mine construction. Yet some of the mining industry’s most enduring sources of value creation have come from a different source entirely: retained royalties.
For exploration companies and prospect generators, the objective is often not to build a mine. Instead, it is to identify prospective mineral properties, advance projects, attract partners or acquirers, and retain long-term exposure to future project success.
This strategy is particularly powerful in copper porphyry systems.
Unlike many precious metal deposits, copper porphyries are often large enough to support operations spanning multiple decades. As a result, even a small royalty can evolve into a valuable long-term asset capable of generating meaningful cash flow without requiring additional capital investment.
The royalty holder benefits from production but does not fund:
- Mine construction capital
- Sustaining capital
- Mine operating costs
- Environmental liabilities
As South America continues to be one of the world’s most important sources of future copper supply, the value of retained royalties attached to major copper porphyry projects deserves closer attention.
The Value of Retaining the Royalty
When investors hear that a company retained a 0.5% or 1.0% royalty, the percentage often sounds insignificant.
However, when applied to a mine producing hundreds of thousands of tonnes of copper annually over several decades, the economics become compelling.
The table below illustrates several examples of royalty interests attached to major South American copper porphyry projects.
Illustrative Royalty Economics
| Project | Mine Life | Avg Cu Production | Royalty Interest | Mine-Life Cu Tonnage | Annual Royalty | Gross Mine-Life Royalty |
| Cascabel | 28 yrs | 123,000 t/yr | 1.0% NSR | 3.5 Mt Cu | ~US$12.2M/yr | ~US$342M |
| Taca Taca | 35 yrs | 209,000 t/yr | 1.5% NSR | 8.25 Mt Cu | ~US$31.1M/yr | ~US$1.09B |
| Caserones | 28 yrs | 120,000 t/yr | 0.517% NSR | 3.36 Mt Cu | ~US$6.2M/yr | ~US$172M |
| Los Azules | 21 yrs | 148,000 t/yr | 0.4% NSR | 3.15 Mt Cu | ~US$6.0M/yr | ~US$124M |
Approximate production estimates from published technical studies.
These calculations are illustrative only and are based on published technical studies, an assumed long-term copper price of US$4.50/lb, and simplified royalty assumptions. Actual royalty payments will depend on the specific terms of each royalty agreement, realized metal prices, production rates, operating performance, and other factors.
It is worth noting that copper currently trades close to US$6.20/lb, well above the US$4.50/lb long-term assumption used throughout this analysis. At today’s price, the royalty figures presented above would scale up materially across the board, underscoring how sensitive these long-term royalty valuations are to prevailing copper prices.
Cascabel: A High-Value Royalty
The Cascabel project in Ecuador provides one of the clearest examples of royalty value creation.
A 1% NSR royalty was acquired by Franco-Nevada for approximately US$100 million. However, the acquisition price tells only part of the story.
The 2024 Pre-Feasibility Study outlines average annual production exceeding 123,000 tonnes of copper over a 28-year mine life and peak annual production of 220,000 tonnes.
At US$4.50/lb copper, a 1% royalty could generate approximately US$12.2 million annually based on average life-of-mine production, with annual payments potentially exceeding US$20 million during peak production years.
Over a 28-year mine life, cumulative gross royalty revenue could range from approximately US$342 million, excluding potential contributions from gold, silver and molybdenum by-products.
The transaction illustrates how the long-term economic value of a royalty can ultimately be determined by decades of future production rather than the price paid to acquire it.
Taca Taca: The Power of Scale
Taca Taca is one of Argentina’s largest undeveloped copper projects and highlights how even modest royalty percentages can create substantial value.
Current technical studies outline a 35-year mine life with average life-of-mine copper production of approximately 209,000 tonnes per year, including approximately 291,000 tonnes annually during the first ten years.
At current copper prices, a combined 1.5% royalty interest could generate approximately US$31 million annually.
Over the life of the operation, cumulative royalty revenue could exceed US$1.09 billion.
This illustrates why royalty interests on large copper porphyries are increasingly sought after by royalty companies and institutional investors.
Caserones: A Producing Example
Caserones demonstrates how a relatively small royalty can become a meaningful financial asset once a mine enters production.
A 0.517% NSR royalty attached to a producing mine generating approximately 120,000 tonnes of copper annually could generate roughly US$6 million per year at current copper prices.
While the percentage appears modest, the long life of the asset transforms the royalty into a recurring source of revenue that may continue for decades, with cumulative gross royalty revenue of approximately US$172 million over the life of the mine.
Los Azules: Small Royalty, Large Opportunity
The 0.4% NSR royalty retained on Los Azules may appear insignificant at first glance.
However, feasibility studies outline average annual production approaching 148,000 tonnes of copper.
At those levels, the royalty could generate approximately US$6 million annually.
Over the current mine plan, cumulative royalty revenue could exceed US$125 million, highlighting how even fractional royalty interests on large copper porphyries can evolve into significant long-term assets.
The Royalty Multiplier Effect
One characteristic distinguishes copper porphyry royalties from many other mining royalties: copper porphyry systems frequently expand over time through additional drilling, reserve conversion, pit optimization and throughput expansions.
Resource expansion drilling, pit expansions, higher throughput rates, and new discoveries often increase the size of the operation over time.
Provided the royalty continues to apply to the expanded operation, the royalty holder automatically participates in future resource growth, reserve expansion, pit optimization, throughput increases and mine-life extensions without contributing additional capital.
A royalty originally attached to a two-billion-pound copper deposit may eventually sit atop a deposit containing six or eight billion pounds of copper. The royalty percentage remains unchanged. The underlying value increases.
Rising copper prices provide an additional layer of leverage, as royalty revenues increase directly with metal prices while operating and capital costs remain the responsibility of the mine operator.
This optionality is one of the least appreciated attributes of mining royalties. The royalty holder receives the benefit of resource growth, reserve conversion, throughput expansions and mine-life extensions without contributing additional capital. In many cases, the royalty retained at the time of a discovery becomes significantly more valuable as the underlying deposit is de-risked and expanded over successive development stages.
Why This Matters for Prospect Generators
The prospect generator model has historically focused on creating value through discovery while minimizing shareholder dilution.
One of the most effective ways to achieve this is by retaining royalties when projects are optioned, joint ventured or sold. While a discovery may generate an immediate payment or equity position, the retained royalty can become one of the most valuable long-term assets created by the transaction because it preserves exposure to every future stage of value creation.
A successful royalty provides:
- Exposure to future production
- No capital requirements
- No operating risk
- Long-term leverage to rising copper prices
Most importantly, royalties can continue generating value long after ownership of the underlying project has changed hands.
Mine-life extensions can be equally important. Many of the world’s largest porphyry operations have operated well beyond their original mine plans as additional reserves were defined and processing capacity expanded. Because royalties are generally attached to the property rather than a specific mine plan, the royalty holder often benefits from decades of additional production that was not contemplated when the royalty was first created.
A Current Example: Latin Metals Inc.
One contemporary example of the prospect generator model is Latin Metals Inc., which has assembled a diversified portfolio of copper, gold and silver exploration projects across Argentina and Peru. Rather than funding expensive drilling programs on every property, the Company seeks to attract partners that can earn interests by funding exploration while Latin Metals retains exposure through option payments, equity interests, milestone payments and, importantly, retained royalty interests.
This business model enables shareholders to gain exposure to multiple exploration programs funded by third parties while preserving long-term upside should a project ultimately advance to production. If a significant copper discovery is made, a retained royalty has the potential to become one of the Company’s most valuable long-term assets, illustrating the value creation discussed throughout this article.
Conclusion
The examples of Cascabel, Taca Taca, Caserones and Los Azules illustrate an important principle: the true value of a royalty lies in the long-term cash flow it can generate over the life of a mine.
Even relatively small royalty interests attached to world-class South American copper porphyries have the potential to generate millions of dollars annually and hundreds of millions—or even billions—of dollars over multiple decades. In many cases, the cumulative value of royalty payments may ultimately exceed the capital originally invested to create or retain the royalty.
Using illustrative assumptions based on published production studies and a long-term copper price of US$4.50/lb:
- A 1.0% NSR on Cascabel could generate approximately US$342 million over its mine life, depending on production assumptions.
- A 1.5% NSR on Taca Taca could generate more than US$1.09 billion over a 35-year mine life.
- The 0.517% NSR on Caserones could generate approximately US$170 million over its operating life.
- The 0.4% NSR on Los Azules could generate more than US$124 million over the current mine plan.
Importantly, these estimates consider only copper revenue and exclude potential contributions from gold, silver and molybdenum by-products, which could materially enhance royalty returns.
For prospect generators and exploration companies, retaining a royalty can transform a successful discovery into a long-term asset that continues creating value long after the project has been optioned, sold or developed by a third party. Unlike equity ownership, which may be diluted over time, royalties typically remain attached to the asset for the life of the mine, providing continuing exposure to production growth, mine-life extensions, exploration success and higher commodity prices.
As South America’s next generation of copper porphyries advances toward production, the most enduring value created by a discovery may not be the transaction that transfers ownership of a project, but the royalty that remains attached to it for decades thereafter.
About the Author
Elyssia Patterson, MBA is a Special Contributor at MiningIR and CEO of Lycan Capital Corp., a boutique investor relations and corporate strategy firm. She works closely with private and early-stage public companies to navigate the path to listing on the TSX Venture Exchange (TSXV) and Canadian Securities Exchange (CSE), while also supporting dual listings on the OTC market and preparing companies for potential uplistings to the NYSE or Nasdaq. Her expertise spans capital markets, investor relations, corporate communications, strategic positioning, investor engagement, and public company growth initiatives.
Please connect with Elyssia on LinkedIn to follow her insights on investor relations, capital markets, and the mining industry.
