Back in August 2019, Stockhouse investors and readers were introduced to a unique palladium play. Palladium, you say? Yes. And it’s not the string of famous theatres and movie palaces across North America. So what is the metal palladium, and what exactly is it and used for? A rare, precious metal – one of the six platinum group metals (PGMs). Its very name conjures up exotic images of a glistening, space-age metal with a price-tag that matches its scarcity
Savvy mining exploration and development companies like
Generation Mining Ltd. (
T.GENM,
GENMF,
Forum) have taken keen note of this. The Company acquired a large property holding covering about 22,000 hectares near the Northern Ontariotown of Marathon – a historical mining hotbed smackdab in the heart of the Canadian Shield. Metals & mining insiders know this is a significant strategic move. Today, the Company is developing the largest undeveloped palladium project in North America.
After the release of a very robust Preliminary Economic Assessment in January of 2020, GENM has begun a feasibility study which is expected to be completed in early 2021.
About Palladium
Palladium is a rare, precious metal – one of the six platinum group metals (PGMs). Its very name conjures up exotic images of a glistening, space-age metal with a high price-tag that matches its scarcity. Its lustrous sheen has historically made it a popular choice for wedding bands and other jewelry, plus it is feathery light, wears well, is highly ductile, and doesn’t degrade like other precious metals. Its other uses include dental, chemical, and electronic applications
But, it’s the automotive industry – catalytic converters specifically – that dominates its usage. Today, most palladium demand is for autocatalysts in cars, which scrub toxic emissions from exhaust and therefore make our air much cleaner.
About 85 percent of palladium ends up in the exhaust systems of cars, where it helps turn toxic pollutants into less-harmful carbon dioxide and water vapor. The metal is mined primarily in Norilsk Russia and South Africa, and is mostly extracted as a secondary product from operations that are focused on other metals, such as platinum or nickel.
And it’s that scarcity and supply issues that drive demand and, in turn, price. Not only has palladium been the
best performing commodity for two years straight, the price of the precious metal (which is 30 times as rare as gold) has risen by more than 50 percent since August 2018 – surpassing the price of gold for the first time since 2001. Palladium has been on a roll lately jumping to a historic high of about USD$2714 p/oz in February – an all-time record high. At press, it was still trading at around a still robust US$2300 p/oz.
Stockhouse Editorial recently reached out to Executive Chairman and Director, Kerry Knoll, to check in on the latest company happenings and what’s in store for Generation Mining, its shareholders, and potential investors moving forward. Mr. Knoll co-founded several successful mining companies over 35 years including Wheaton River, Thompson Creek, and Glencairn Gold, and is the former editor of The Northern Miner Magazine.
SH: So, Kerry, what sets Generation Mining apart from other junior mining companies in this space and what makes your business model attractive to investors?
KK: In the world of developing mining companies, there are only a handful focussing on palladium despite the incredible run it’s had. One reason for this is the rarity of the metal and of the geological environments that host economic deposits. What sets us apart from the few companies out there is that we will soon be only the second developer with a positive feasibility study on a palladium project, and the only one in a Tier One jurisdiction. What makes us attractive at this point is that companies tend to get re-rated when a feasibility study is released.
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SH: Palladium has a significant green perspective to it that really puts your company into a category getting better known as ‘climate conscious investments’ (i.e. this metal is a real world necessity and crucial in the battle against climate change). Can you explain the green impact of your project?
KK: Catalytic converters do three things: they transform poisonous carbon monoxide into carbon dioxide; they convert nitrous oxide, which is 300 times more potent than carbon dioxide as a greenhouse gas, into nitrogen, which is benign, and oxygen. And it converts unburnt gasoline, which is a pollutant, into carbon dioxide and water. These devices are required on every car sold anywhere in the world.
SH: A Preliminary Economic Assessment was prepared by P&E Mining Consultants and released by Generation Mining on January 7, 2020. What were some of findings and positive results to come out of the PEA?
KK: The main finding was that the Marathon project has great economics, and that we should be advancing it towards a mine. It showed that at a US$1900 palladium price and US$3 copper, it would have a discounted net present value of more than C$1.5 billion, nearly four times the upfront capital of C$431 million. And palladium is currently above $2300 per ounce. You don’t see numbers like this in mining very often. Of course, a PEA is preliminary by its very nature, and these numbers have to be confirmed by a Feasibility Study.
SH: What are the key advantages and challenges to mining in this region of Northwestern Ontario?
KK: The advantages are clear. We are in a Tier One jurisdiction, so no-one doubts things like property title. Look at what happened to Barrick in Papua New Guinea. We have the Trans-Canada highway going right through the property, the CPR main rail line, an airport right on the property. The new billion-dollar 230 kilovolt power line going across northern Ontario crosses our property. And we have a town a few kilometres away that totally supports us. We don’t see any particular challenges other than the long winters, but Canadians have been mining in the north for more than 100 years.
SH: Permitting in Ontario, visa vis the Ford Government’s initiatives, has now changed…mostly for the better. Can you walk us through a few of these changes and how it affects the Marathon Project?
KK: I don’t think they’ve changed anything regarding the science you need to do to get a permit, but what they have done is try to streamline the process. As Ford’s northern development minister Greg Rickford said to the press, “
It cannot take us eight years to open up a frigging mine” Last week they introduced what’s become known as the Red Tape Bill, aimed at reducing some of the nonsense that so often accompanies the process. Permitting should be based on science and community acceptance, and not on who can shout the loudest.
SH: Let’s talk about future opportunities beyond Marathon. Can you update our investors audience on any developments here?
KK: We’ve been pretty nose-to-the-grindstone about getting Marathon into production. However, we have seen indications that there could be higher grade deposits on the property, much higher grade. There are scientific papers written about this, and so we have been looking for these. It’s a very big property, twice the size of Vancouver.
SH: Your Marathon property has provided “significant historic resources” with sizeable deposits of palladium, platinum, gold, and copper. Can you please elaborate on them?
KK: There have been more than a thousand drill holes on our property, most of them in the Marathon Deposit which is why the resource there is almost all in the measured and indicated category, in fact, 60% of it is measured. So a very high level of confidence in the more than five million ounces of precious metals and more than a billion lbs of copper, all open pit.
SH: I’m going to go ahead an speculate a bit here…it’s common to see a stock skyrocket on the results from a feasibility study, so investors want to get in early and now is that time, I know you can’t go into too much detail but what can you share with investors so far about the pending FS?
KK: We’ve been updating our shareholders as we go through the process. One big step is the improvements in metallurgy which we announced last month. Simple math indicates these improvements could add more than $20 million per year to our revenue at no additional operational cost and a lower capital cost on a per-tonne basis. Another item is that we are considering starting at a higher rate of production than indicated in the PEA, though the exact number hasn’t been determined. It would mean a higher capex but lower incremental costs for both capex and opex. We are expecting the study to come out in February of next year.
SH: ‘Value and opportunity’ are industry catchphrases that really get the attention on resource sector investors? What can you tell them makes this particular mining project so intriguing and attractive?
KK: First, if you want to invest in the palladium space, there are few advanced projects to choose from. The producers are all based in South Africa or Russia, and their share prices have already had big moves. Most of Canadian and Australian developers are at the exploration stage and frankly, it will be difficult for them to get into production over the next few years. The few that are more advanced are either lower grade than us or in difficult jurisdictions. We are in Ontario, Canada, with great infrastructure on our doorstep and a feasibility study almost complete.
SH: I recently spoke with Rick Rule of Sprott Holdings and here’s what he had to say about value investing in the junior mining sector:
“5% percent of the management teams, in the junior sector, deliver 100% of the value. The first thing you have to do as investor is segregate against the lame, the halt, and the blind and send them back to selling cars…Adding value in exploration is answering a series of unanswered questions.”
Kerry, how would you respond to those comments visa vis Generation Mining?
KK: I couldn’t agree with him more. At the first meeting I ever had with a fund about 30 years at, I got asked why management in our industry is so bad. A lot of people follow the flavor of the month, tech, cannabis, whatever then cycle back to mining when metal prices go up. I’ve heard it said that in this sector, management is actually more important than the project itself, though I think they have equal footing. Early on I started observing the successful mining people, Robert Friedland, the Hunter Dickenson group, the Lundin family. The common denominator was good management, technical people, financial people. So we set out to bring on the best people we could afford. When you look at investing in mining, you have to ask, have these people had big wins for their shareholders? Have their projects gone into production? Less than one in a thousand projects in our business ever produce any metal. Frankly, most junior promoters have business plans based on luck. Once in a long while these work, but not very often.
SH: He also mentioned that “days of the ten-bagger in resource exploration sector are a thing of the past”. Is that a good or bad thing in your opinion?
KK: Ten baggers are always fun unless you are short. I wouldn’t say they are extinct. People will make discoveries that send share prices through the roof. Various commodities will have their day in the sun and the lucky juniors that got in early will see ten baggers.
SH: Your company has some significant experience on your management team which makes you unlike most other juniors. Can you expand on the pieces that really set you apart for investors?
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KK: Out of six companies that I have founded or co-founded, four of them went into production, one of the others was sold after a feasibility study and one was taken over after a PEA. The projects didn’t all work out but most did and created billions of dollars for shareholders. The key here is to bring on the right people, like our Chief Operating Officer, Drew Anwyll, who has built mines before and worked on operations similar to the one we are planning to build.
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For more information, visit
www.genmining.com
FULL DISCLOSURE: This is a paid article of Stockhouse Publishing.