"In 2019, we came out with an update to the resource done by our predecessor. We identified 3.2 million oz of palladium, 1.2 million oz of platinum, 400,000 oz Au and 800 million lbs Cu. This works out to 7.1 million oz of palladium equivalent in the measured and indicated category. It is the largest undeveloped project of palladium in North America."
What were the circumstances surrounding the creation Generation Mining in 2018?
Generation Mining is a mining explorer and developer with a focus in platinum group metals and specifically palladium. The company was incorporated at the beginning of 2018 as a spin-out of Pine Point Mining when that company was acquired by Osisco Metals. The company started with some exploration projects that built on Pine Point’s existing exploration work and their portfolio of properties. At the end of 2018, we reached out to Sibanye Stillwater to coordinate an option deal on the Marathon PGM asset in Northern Ontario. We struck a deal in April 2019 to acquire up to 80% of the Marathon PGM asset.
What type of resource is Generation Mining’s flagship Marathon PGM project in Northern Ontario?
In 2019, we came out with an update to the resource done by our predecessor. We identified 3.8 million oz of palladium, 1.4 million oz of platinum, 472,000 oz Au and over 1 billion lbs Cu. This works out to 8.6 million oz of palladium equivalent in the measured and indicated category alone, along with another 900,000 oz inferred. It is the largest undeveloped project of palladium in North America. The property has an area of 200 square kilometers. There is a lot of exploration up-side to find more palladium and higher-grade material.
The property is also privileged in terms of infrastructure, being near the Trans-Canada Highway, the CPR national rail line, high-voltage electricity and the mining town of Marathon.
We also completed at Preliminary Economic Assessment in early 2020, which indicated a capital cost of C$431 million and an after-tax net present value of $871 million at a US$1275 palladium price. Those economics are unusually positive at this stage of development.
Considering the scale and potential of the Marathon Project, how was it left available until 2019?
We got the asset at a fortuitous time. Stillwater had acquired Marathon PGM in 2010 for US$118 million. Over the next couple of years, they worked to get the property into production, before reaching a deal with Mitsubishi where they sold 25% of the company for US$81.5 million. Mitsubishi wanted to secure the concentrate offtake. In 2014, Stillwater did an internal feasibility draft that was never released. The results at $700 palladium were not great, and that combined with the inability to raise money, led the project to be put on hold. The company was also spread thin financially because they had acquired Peregrine Metals, a mining company with their main asset in Argentina for US$450 million. There were management changes and Stillwater was sold to Sibanye in 2017. The merger was for US$2.2 billion and the purchase was primarily motivated by Stillwater’s assets in Montana. When we approached them, they had no interest in developing the property in Ontario. Sibanye’s focus is in production rather than in developing the mines. For this reason, we managed to get the asset on very favorable conditions.
Do you expect palladium’s remarkable upward trend to continue?
I expect the price of palladium to rebound strongly after the virus-induced slowdown, as supplies have been in deficit for the last six to seven years. Palladium requirements for emission converters in electric cars rose from three grams to five in Europe and China, which will also cause the demand to increase. I understand above ground stockpiles of palladium have been used to regulate the commodity’s price but these are starting to run out. Finally, there has been increased awareness of the commodity and this has strengthened demand.
What are Generation Mining’s most important short-term goals moving forward?
Generation Mining’s immediate objective is to secure the 80% share of the Marathon project and this means investing US$10 million dollars over the next four years. The company has managed to raise substantial capital and see its stock price almost treble in 2019, so we have the means to keep exploring within the property and capitalize on its potential fully. One of our key goals is to complete a definitive feasibility study in 2020. If you are looking for a palladium name in a safe jurisdiction, keep an eye out for Generation Mining.