Categories: Base Metals / Precious Metals
Topics: General Base Metals / General Precious Metals

MJG Capital’s Matt Geiger on Prospect Generator Success, Discovery Leverage, and New Portfolio Picks Amid Today’s Surging Metals Market

 

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today from MJG Capital is none other than Mr. Matt Geiger. Matt, it's great to have you on. You are new to our audience. First and foremost, how are you today, sir?

Matt Geiger: I’m doing great, Gerardo. Markets are performing quite well, so I cannot complain. Hope all's well on your end.

Gerardo Del Real: I love that. No, listen, everything is spectacular over on my end of things. Thank you so much for asking. Let's get right into it. 

We chatted a bit off-air, and basically echoed what we just said, that the markets are doing what we hoped they would do, and what we prepared for, and ahead of time for them to be doing. And so I kind of want to start there. 

Tell me a bit about your background and MJG Capital Fund because you and I both know that the big money is made positioning kind of ahead of the herd, as the late, great Mr. Dines used to tell us. And so I'd love to hear kind of your origin story and how you got involved.

Matt Geiger: Sure thing. I've been managing the MJG Capital fund going on 15 years now. So we've seen the good, the bad, and the ugly in terms of market environments. It is a fund with a full natural resource focus, and we are very much skewed to the junior end of the spectrum. 

We hold a concentrated portfolio. We're at 19 different positions currently, so I like to keep it tight so that I can keep a pulse on each and every one of our holdings. And the genesis of this discussion is that we are very heavily weighted towards the prospect generation business model. 

We have been investors and prospect generators going back seven to eight years, but I can say as it stands today, we have a higher weighting towards prospect generators than at any point since the fund's inception. 

So we're at close to 45% of our portfolio is weighted to one of eight different PGs that we've invested in. We’re very excited for the business model, and I think its time has come.

Gerardo Del Real: Well listen, clearly it's a model that you favor. It's a model that some of the heavyweights in our business, I had the pleasure of interviewing Mr. Rick Rule about a month or so ago, and we had a pretty lengthy discussion about what attracted him specifically to that business model. 

And so I'm going to ask you the exact same question. What attracted you to the model there? Why a 45% weighting towards that specific model? And then let's get into, later on, maybe some names, if you don't mind.

Matt Geiger: Sure thing. I think I'll touch on why I think the business model's time has come in the current market environment. And I pointed out a few of these points in the recent MJG investor letter, which came out in July. 

The first is that in a general sense, we have started to see investor capital, and I would pinpoint the start of this to late April or early May. We start to see investor capital venture down cap into exploration stage names. And this level of interest has really only accelerated in the following months. 

And I would say we've not seen this level of excitement and mineral exploration more generally going back to at least 2020. So I do think from a capital flow perspective, we're going to have the wind at our backs for some time here. And that's both for more traditional explorers and for prospect generators specifically.

Second big point that pertains to PGs, we are finally starting to see some of the larger producers actually get serious here about early stage exploration, because they ultimately need to beef up their depleting project pipeline. 

I think one really good example of this is Centerra Gold, which for the past 18 months has had a concerted strategy of funding well-run prospect generators via strategic placements, and in some cases project-level deals as well. 

So examples of this include Kenorland Minerals, which is a long-time holding of the MJG partnership. Centerra has been a strong supporter of Headwater Gold, and we've recently become Headwater shareholders in their most recent private placement. 

And the fund also owns a company called Scout Discoveries, which I wouldn't classify as a prospect generator, perhaps it's a hybrid prospect generator, but Centerra has come in there as well with a project-level deal.

A couple others that we don't own but that have done strategic financing with Centerra include Midland and Azimut. So I really do think it's only a matter of time here before we see some of Centerra's peers follow suit and start getting serious about funding the teams that are exploring for the next generation of mineral discoveries. 

And finally, I'll just point out that we've really had three very recent success stories as it pertains to prospect generation. And I think this really demonstrates to the broader investment audience, or those that are learning about mineral exploration for the first time, just how lucrative this business model can be.

The first example I've already mentioned is Kenorland Minerals. I mean, that's a company that's up 4x from its late 2023 lows, sitting right at all-time highs. Basically anybody that's bought Kenorland shares is well in the money at this point. And it's just a group that is firing on all cylinders, and really demonstrates how this business model should work at scale. 

A second very topical example would be Amarc Resources, which has gone up more than 5x year-to-date with their discovery in conjunction with Freeport. So that's just a really exciting discovery, and for good reason, and it's made a lot of investors money.

And then, the third I'll just mention quickly, would be Origin and Altius, who have both separately sold royalty interests on the Arthur project, formerly known as Expanded Silicon, between Origin and Altius. 

Those royalties were sold for over C$525M if I'm remembering correctly. And this ground was originally staked back 12 years ago for only C$300,000. It's kind of one of those quintessential examples of how prospect generation, when executed properly, can create tremendous wealth. And at least in the case of Altius, they made a 1,400x return on that investment. 

So I think really seeing these visible success stories validates the business model to investors that may not be familiar with it.

Gerardo Del Real: By the way, that's an excellent job of highlighting success stories, bigger success stories in this space. What are the benefits to the companies that employ the PG model because it's one thing for us as shareholders and speculators, our end game is to make money. 

I mean, that is, at the end of the day, people that entrust us with their capital, that's what they're looking for. And so when you talk about that kind of wading into the prospect generator model, what are the benefits to the companies that employ this approach?

Matt Geiger: Yes, I would say that there are three main virtues, and I could drone on about this for a while, but I'll try to be succinct here. The first is that the business model massively limits dilution, which, I would argue, dilution is the bane of existence for your typical junior miner.

And as many of your listeners will know, the act of drilling is the most expensive part of early stage mineral exploration. And your typical single asset explorer will have to go out to the market hat in hand to fund each and every one of their drill programs. Or in the case of prospect generators, you get the benefit of piggybacking off of the deep pockets of your partners to fund what is the most expensive step in early stage exploration. So limit dilution.

The second point is that the business model greatly reduces downside risk in a part of the mining development cycle which is as risky as it gets. We know that the odds in early stage mineral exploration are slim, and really failure should be the expectation for any given drill program. 

And knowing this, betting the farm on a single asset explorer can truly result in a full loss of capital should that geological thesis not pan out. Whereas with a prospect generator, having multiple irons in the fire at any given time dampens the downside should one of those drill programs not pay off.

And then the third point I'll make is it just ultimately increases your chances of actually participating in an economic discovery, which really should be the reason that any of us are investing in early stage mineral exploration in the first place. 

For a traditional explorer, if you bet the farm on a single asset, you're one and done if that geological thesis doesn't pan out, and even if you are able to salvage the company and pivot to a new asset without losing 70% or 80% of your investor capital, it's still going to be a 12, 18, 24-month process to do all the necessary grassroots work to firm up targets at that new project that you've acquired.

Whereas for a properly functioning prospect generator, you're really getting shots on target year in, year out, with third parties shouldering the burden. So those are the three virtues. 

I mean, I should note that the downside of the model is that if a traditional explorer makes a bona fide discovery, they get 100% of the pie, where a prospect generator will typically retain a 20% to 30% project-level stake and/or a royalty. 

So you are sacrificing some upside, but from my experience, this trade-off is very well worth making.

Gerardo Del Real: In a bear market, the prospect generator model is boring, right? Why do you think now is the best time, or is it the best time, to be investing in prospect generators?

Matt Geiger: Yes, I think I highlighted some of those reasons in the previous answer, but it's really the combination of money coming down cap into exploration more generally. I think we're finally starting to see the bigger producers come downstream as well for exploration. 

Neil Adshead recently came out with some good data. He looked at the 30 largest precious metal producers in North America and determined that they're spending nearly six times more on share buybacks and dividends relative to early stage exploration. And I just don't think that that figure is sustainable. 

We're not necessarily going to see a one-to-one ratio, by any means, as the cycle continues. But I think that ratio drops, and we're going to see groups other than Centerra, who have kind of been at the cutting edge of this, get out there and be a lot more willing to write checks, whether that's a strategic equity stake or partnering on a project level.

And then also just a nice little wrinkle here that I don't think many folks have considered, but as we know, the royalty space is really hot right now. A lot of M&A, a lot of deals, a lot of consolidation going on. And many of these prospect generators, not all, but many have hidden royalty portfolios that very few investors know about. 

And so I do think there is an opportunity for some of these prospect generators to do one of a few things. They could sell those royalty portfolios to larger players, or they could go ahead and spin out the portfolios into standalone companies. And we saw that work relatively well with Eagle Plains and their creation of Eagle Royalties. 

So I think there are some things that PGs can do on the corporate level that would really resonate in today's market and create value for shareholders that many shareholders didn't even know were there.

Gerardo Del Real: With better access to capital, and the majors and mid-tiers finally deploying additional cash to exploration budgets, we're seeing prospect generators that are doing some really quality exploration work. Have you added any new positions recently to the MJG portfolio?

Matt Geiger: We have, yes. As a little bit of context, we were really quiet over the course of 2024 and the first half of 2025, only adding three new positions to the entire portfolio over that 18-month period. So a lot of patience there.

But I will say we have been active. Just in the past 60 days, we've done private placements with two different prospect generators which are new to the portfolio. One of those is Kincora Copper, and the other one is Headwater Gold. 

And look, these companies share a business model, but they're very different in a lot of ways. One's listed on the ASX, one's listed in Canada, one's focused on the Macquarie Arc in New South Wales, the other primarily on Nevada and a little bit of Idaho. One has its partners funding exploration for large scale copper or gold porphyries, where Headwater is focused on low-sulfidation epithermal projects.

So there's quite a few differences, but they do share three key characteristics that really appeal to me as an investor. The first is that they have significant insider ownership, and they're the right people for the task at hand. 

So in the case of Headwater, board and management owns almost 30% of that company, which is the second-highest board and management ownership percentage of any of the prospect generators that I'm following currently. 

Kincora's board and management ownership percentage on paper is lower, at just under 10%, but if you include two entities that are associated with two different directors, that number gets closer to 40%. 

So the people behind the vehicles are very well-incentivized to make these work. And then additionally, they're just the right people for the task at hand. In the case of headwater, you have Caleb Stroup, who is a senior geologist at Kinross, and is really widely regarded as perhaps the top geologist working in Nevada today as it pertains to low-sulfidation epithermal deposits. 

And on the Kincora side have John Holliday, the technical committee lead there, who literally discovered Cadia and Marsden in the Macquarie Arc. So these guys are absolutely well-suited for what they're focused on. 

I'll add that another characteristic here is that both have marquee partners. In the case of Kincora, it's AngloGold, who's been aggressively funding drilling at Kincora's large land package in the Northern Junee-Narromine Belt. And Kincora CEO Sam Spring has been pretty vocal publicly that they're getting close to bringing in at least one, if not two new recognizable names to earn in on a couple of their currently 100%-owned projects.

And then on the Headwater front, you really have the who's who of backers. Newmont is a long-term project level partner. Just within the past 60 days, OceanaGold came into the fold and will be working three of Headwater's projects. 

And then you have Centerra as well as mentioned, supporting the company on the corporate level and topping up their 9.9% position in the most recent financing that we participated in. And then, the very final point I'll make here is I really do value both of these groups' insulation from future dilution. 

Now, this doesn't necessarily mean that neither company will ever raise money again, but it does mean that if plus when they do, it will be on advantageous terms, and with parties that really move the needle.

I mean, in the case of Headwater, they were already cash flow neutral even before Oceana came into the fold. So they had their management fees and option payments just about covering their overhead. 

In the case of Kincora, they're not quite there yet, but with the introduction of one or two new marquee partners, they're going to be in a position where they are also fully covered on an overhead perspective by management fees and option payments. 

So that's what I've got for you on Kincora and Headwater. Lots to digest there, very different companies, but they share a few key characteristics that really do appeal to me.

Gerardo Del Real: We were chatting, Matt, and I brought up Almadex and Morgan Poliquin. I've known Morgan for some time, and we've been in this business for 15 or 16 years or what have you, and it was curious to me to learn that that's your single, or at least it was, your single largest position. Is that accurate?

Matt Geiger: That is accurate. Almadex is our single largest holding at present.

Gerardo Del Real: Can you go over the rationale for that from your end of it? I mean, I could give you the hundred reasons why I really like it as well, but I'd love to know your take, being that it is your single largest position in the fund.

Matt Geiger: Yes, it sounds like we're aligned on this one. I mean, as a little context, just winding back the clock, we actually made a 10-bagger with Almadex back in 2015 and 2016, and this is when they made the El Cobre discovery down in Veracruz, Mexico. And we got lucky there. 

We initiated that position when the company's market capitalization was, I believe it was C$7M, and they had C$7M in cash and bullion in the bank. So basically a zero enterprise value.

And within nine months, they'd made a legitimate discovery, and the share price absolutely took off. Fortunately, we sold out of our position when I saw subsequent drill holes not matching up to the discovery hole. But long story short, we had a very good experience investing in the Poliquins previously.

And then you fast-forward to late 2021, early 2022, and I found Almadex in basically the same state. This time they had a C$15M market cap and maybe C$16M in cash and bullion in the bank. 

And we decided to initiate a position and really average into it for a good three and a half years, adding shares as high as the mid 30-cent range to, I think our very lowest purchase was at 16 cents late last year (Canadian).

Gerardo Del Real: Ridiculous.

Matt Geiger: Yes, that was ridiculous in hindsight. They were well below their liquidation value. 

And my conviction the whole time was that Almadex deserved a market capitalization that was well in excess of its cash and marketable securities position because you're getting the IP of the Poliquins, you're getting fixed company-owned drill rates, you're getting a portfolio of royalties. 

Like I touched on earlier, not many folks know about their portfolio of royalties. I think there are 15 in total. You get the Logan Project, which I believe is at least seeing C$10 if not C$20 million in expenditures. That's a zinc silver project up in the Yukon, 100%-owned by Almadex. 

And then, most excitingly, you get the company's portfolio of porphyry lithocap and epithermal prospects that Morgan has been staking in the Southwest United States for a good three years now. And I think we're at 18 different 100%-owned projects at the moment between Nevada, Arizona, and other states.

So we get a lot of goodies. The market has finally caught on here really over the past six months. When I last checked, Almadex was up roughly 250% year to date. And in the process of that rerate, the company has become our single largest position, I should say, for full transparency. 

We've taken 7%-8% of our position off the table, all of this above C$0.60 per share, just because I think the current excitement around the Paradise Drill program has become a little overblown, given that the expectation for pre-discovery drilling should always be failure. 

But look, I'm not in this for discovery at Paradise. I'm in this to participate with the Poliquins as they systematically go through that recently staked portfolio in the Southwest United States and test those projects one by one, in some cases using their 100%-owned drill rig and enviable treasury position, and others hopefully bringing in partners. 

So I think the story is really shaping up well, and yes, it's re-rated, but we're still looking at a company with a C$15 million enterprise value. There are single-asset explorers out there with unproven management teams that in this market are being assigned valuations well in excess of this. 

So I feel very comfortable holding Almadex as the team carries out its mission.

Gerardo Del Real: I couldn't agree with you more. Matt, this has been insightful. It's been great to get you on. Where can people find you if they want to listen, and follow along, and maybe reach out and get in touch with you?

Matt Geiger: Sure. Happy to chat with any folks that are interested. The fund's website is https://mjgcapital.com. There's a way to reach out through the website. I'm also relatively active on X and my handle is geigercounting. So happy to chat about the fund or any of our investments with your listeners.

Gerardo Del Real: Beautiful, sir. We have quite the market. It's exciting times. It clearly sounds like you've been preparing for many, many years, and excited to have you back on here as this market develops. Thank you so much for your time.

Matt Geiger: Thanks, Gerardo. That was fun.

Gerardo Del Real: Alright, let's do it again soon. Cheers.