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Getting into Palladium at the Right Time…with the Right Company

Dave Jackson Dave Jackson, Stockhouse
1 Comment| October 18, 2021

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Savvy Stockhouse metals & mining investors are acutely aware of the fact that the Platinum Group Metals market (PGMs) has been on a bit of a roller coaster ride due to the global wide shortage of semiconductors. But industry analysts believe that of all the metals in this ‘exclusive club’, palladium has the best chance of rebounding from a rapid sell-off of precious metals used by the auto industry.

In fact as recently as October 12th, palladium prices have seen a technical rebound and as a CNBC reported, “Palladium advanced 1.6% to USD$2,110.93 per ounce, with analysts attributing the bounce to short-covering after recent declines, while platinum was last down 1.8%, to USD$1,008.17, after hitting a two-month peak earlier.”

So even as the palladium price has dropped almost $1,000 per ounce, shareholders and investors should see this as opportunity to invest rather than a problem. And the simple reason for the price decrease is that auto manufacturers have had to cut back production because they cannot get enough chips to build the number of cars they would like to. And most palladium goes into cars. As a result, they bought less palladium and the price sank.

But this is where value and opportunity meet in perfect harmony.

Enter Generation Mining Ltd. (GENM) (TSX.GENM, GENMF, Forum) – an early-stage, junior explorer currently developing the sizeable Marathon Palladium-Copper project in Northwestern Ontario. Gen Mining currently owns an 82.6% interest in the Marathon Project, with the remaining interest owned by Sibanye-Stillwater (SBSW).

In the two short years since Generation acquired the Marathon project, it completed a very robust Preliminary Economic Assessment (PEA) in January 2020, followed by a Feasibility Study in March of 2021. Along the way, mining luminaries Eric Sprott and Lukas Lundin acquired significant positions in the Company.

Most palladium demand is for autocatalysts in cars, which scrub toxic emissions from exhaust and therefore make our air much cleaner. As the company says, as part of its motto, “green metals for future generations.”

(Click image to enlarge)

The Company released the results of the Feasibility Study on March 3rd, 2021 and published the NI43-101 Technical Report dated March 25, 2021. The Marathon property itself covers an extensive land package of approximately 22,000 hectares, or 220 square kilometres.

A recent feasibility study estimated a Net Present Value (NPV) is approximately CDN$1.07 billion with a payback of 2.3 years at conservative metal prices.

Today, the Marathon Project is the largest undeveloped palladium project in North America, with an easily accessible location along the Trans-Canada Highway in Northwestern Ontario. Approximately 58% of the revenue from the project will come from palladium, and a further 26% from copper – based on prices of USD$1,725 per ounce for palladium and US$3.20 for copper. The remaining revenue will come from platinum, gold, and silver. Operating costs are estimated at USD$687 per ounce, while All-In-Sustaining-Costs are estimated at USD$809 per ounce. The project will produce an average of 245,000 palladium equivalent ounces per year.

Today, about 85% of palladium ends up in the exhaust systems of cars, where it helps turn toxic pollutants into less-harmful carbon dioxide and water vapor.

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In the News

On October 13th, GENM announced that Wood – a leading global consulting and engineering company – has been awarded and has commenced with the processing plant engineering and long lead-time procurement (EP Services) for the Marathon palladium-copper Project. At the same time it was also announced that Paul Murphy, an engineer with a storied history of building mines, had joined the company’s management team.

Jamie Levy, President and CEO of Gen Mining, commented:

“This study confirms that the Marathon Palladium and Copper Project is a substantial mining project that is expected to provide a very robust return on investment. We expect the palladium supply in particular to remain in deficit for the foreseeable future as Europe, China and other regions roll out tougher emissions standards. We are excited about the opportunity to create jobs and economic stimulus to Canada, Ontario and to the communities surrounding Marathon.”

In early September, Generation Mining announced exciting results from the first three holes drilled in the Chonolith area immediately north of the Marathon palladium-copper deposit in Northwestern Ontario. As with recently completed work on the Central Feeder Zone (see 2021 news releases of January 27th, May 10th, and August 17th), current exploration activities are focused on evaluating the potential for additional resources which could, in the future, potentially extend the life of the proposed operation.

The September results were especially positive as they indicated multiple high-grade intercepts including a 46 metre interval of 1.01 grams per tonne palladium and 0.46% copper from 50 m to 96 m downhole.

Investors Corner: View from the C-Suite

Stockhouse Editorial met up with Generation Mining’s Executive Chairman Kerry Knoll to discuss the latest company happenings and what investors can expect from the company moving forward in 2022 and beyond.

SH: Can you update our investor audience and your Generation Mining shareholders on any new company developments, especially in the wake of COVID-19?

KK: We’ve been pedal to the metal throughout the pandemic. It didn’t hurt us that we were at the stage where most of the work was the desktop sort, which was perfect for people working from home.

SH: How does a palladium play resonate with our investor audience – primarily retail?

KK: It’s been a little difficult getting the message through, but when people do understand what we have here they are often positively surprised. One of the issues is that it is a very small market in terms of producers, developers and even explorers, so there are few companies to compare us to. We think that we should be compared to a base metal company, but with a precious metal twist. Another of the issues seems to be that most palladium goes into one thing – catalytic converters in automobiles. Since that is more or less legislated into being used in every gasoline-powered automobile in the world, the commodity has a guaranteed customer. And new supplies have been running lower than demand for more than 10 years now.

Click to enlargeSH: For company shareholders and potential investors, what kind of future development and progress can we expect at your flagship Marathon Project?

KK: The next year is expected to lead us to begin mine construction. The events leading up to that include securing approval of the Environmental Assessment from the federal and provincial governments, followed by our various permits. We will also be getting a head start on the detailed engineering we need to do before construction starts. Arranging financing of this work as well as the construction itself is also a big part of what we are doing now.

SH: You have a series of upcoming financing events. Can you walk us through them?

KK: We would like to raise about $50 million Canadian to complete the engineering, permitting and start to order some of the equipment. We have a number of non-binding proposals in hand and are evaluating them as we speak and hope to announce a non-dilutive financing in the near future. The announcement may include part of the production financing as well. Once that is done, we will be working on the rest of the mine finance package, which could include a combination of streamers, royalty companies, private equity partners, smelting companies and other types of lenders.

SH: What can you tell our investor audience regarding the current valuation of your stock and why you think it’s still a good buy right now?

KK: A typical mining company at the feasibility stage should be trading somewhere between 50%-100% of their discounted net present value. At the higher end, the companies usually have the financing and permits in place, which we don’t as yet but they are on the horizon. Our current market cap as I speak is just over $100 million, and this for our 82.4% interest in a project with a net present value of over a billion dollars and we are trading around 10% of our net present value.

SH: This isn't just a palladium mine; you have other metals as well, notably copper. How does that help the economics?

KK: About $40% of our revenue in the Feasibility Study comes from metals other than palladium, mainly copper and platinum. The copper will be a great contributor. At today's copper price ($4.68/lb) it more than pays for all of the operating costs, leaving the costs of producing platinum and palladium essentially free. If some of the copper price predictions out there come true, it may at some point surpass the palladium revenue.

SH: Can you tell our audience a little bit about your recent additions to the corporate management teams, along with the experience and innovative ideas they bring to the PGM exploration space?

KK: We’ve been team-building all year. A few weeks ago, we announced two key hires in the ESG side of things, Cathryn Moffett, who handled Sustainability at Detour Gold and Jeremy Dart, who spent the past 20 years as environmental at the large Hemlo gold mine near our operation. Then we brought on two seasoned mine builders from LQ Consulting. Gord Lung was a senior engineer at SNC where he fixed up a number of Kinross’ mines, and Pierre Legare, also an SNC alum, was amongst other things the Senior Project Director at the big Cobre Panama copper mine. And we also brought in Paul Murphy, an engineer who has spent the last several years at G Mining (which did most of our feasibility study) and previous to that was head of projects at companies like Iamgold and Centerra.

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To find out more, visit

FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.

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