RE:Palladium and platinum: The dawn of a new bull marketIn my opinion, the company that owns the best overall project is Generation Mining. For me they tick all the right boxes: Generation has an experienced management team, a lot of shares are owned by insiders, it has good infrastructure nearby the Marathon project, it has a high IRR at 25.8%, it has a low cost of production at $813/oz of palladium equivalent, it is located in a safe country (Canada), it has a long mine life at 15 years and it has a very short payback period at 2.3 years.
Below I have done a deeper study on Generation Mining. Through a linear regression on the data of their economic study, I have found out there is a 99% correlation between NPV and palladium prices. This shows that the project has massive leverage to PGM prices and the NPV can be predicted through palladium prices, which is what I have done in the table below. Currently palladium prices sit at around $1000/oz and even at this levels Generation Mining has an NPV of $226M, much higher than the $57.2M market cap it trades today.
Generation Mining, own estimates.
Furthermore, Generation Mining owns 9M shares of Moon River capital, which trades at around C$1 per share, which equals $6.6M of value. And they have $11.1M in net cash including the last financing. So, for a market cap of $57.2M, shareholders are getting $11.1M in net cash, $6.6M in publicly traded securities and $226M in NPV of the Marathon project at current prices. So, its trading at around a 75% discount to my fair value estimate. On top of this, insiders own over 8% of the company and Sibanye Stillwater owns around 18%.
Kerry Knoll, the chairman of Generation has been chairman of Pine Point Mining (sold to Osisko Metals), CEO of Glencairn Gold (sold to B2 Gold), co-founder of Thompson Creek Metals (sold to Centerra) and Wheaton River Minerals (merged with Goldcorp). Therefore, he has a successful history of creating great assets which become targets of larger miners.
To start the Marathon project the company needs C$1,112M, C$898M net of equipment lease and preproduction revenue. However, they have secured C$240M from Wheaton precious Metals for a royalty on 100% of their gold and 22% of platinum. This way Generation Mining will keep most of the PGM leverage and all the copper exposure. Generation has also achieved C$540 through a finance facility from several banks. Therefore, they are really advanced in their financing progress, and they have done so without diluting shareholders