What were the main highlights from the PEA published for the Marathon palladium project?

We published a PEA on our Marathon palladium project in January 2020, which was a game-changing document for Generation Mining. The study was done at US$1,275/oz palladium, while the current price (October 2020) is around US$2,200/oz. Despite using a conservative price point, Marathon still had an IRR of 30% and an NPV of C$871 million. At today’s price, these figures would more than double.

Can you tell us about the ongoing feasibility study and recently announced metallurgical improvements?

Fortunately, most of the field work had been completed before Covid struck, and we expect the feasibility study to be published in February 2021.

G-Mining Services and Ausenco are doing the study for us, and we also brought in outside consultants such as Steve Haggarty, a metallurgist who was VP operational support at Barrick. Steve has redone our flowchart and metallurgy, improving the recovery rate of PGM and copper at a lower cost than the figures presented in the PEA. The new study, released in August 2020, showed a 4% increase in palladium recovery, 10% increase in platinum, and 3% increase in copper. All of this extra metal comes with cost savings on capex and opex, and adds as much as an extra C$25 million per year during the LOM.

There seems to be less noise around palladium than at the beginning of 2020. Do you think the market has lost interest to some extent?

It certainly feels like that to us, and there are a number of reasons for this. If you want to invest in a palladium producer, you do not have many choices, and none in North America. There are only a handful of development companies – Generation Mining, Platinum Group Metals, and New Age Metals – and we are the only one doing a feasibility study at the moment.

From second half of 2019 until January 2020, the market started to understand the severe global supply issues surrounding palladium, causing the price to go from US$1,300/oz to US$2,800/oz. When Covid-19 hit, the price went down due to a lack of demand from the automotive industry. However, it has rebounded as demand from China returned and the fundamental supply issues remain.

Considering the lack of palladium producers based in North America, would you say Generation Mining is more likely to move into production than become a near-term M&A target?

We are 100% intending to build the mine. This does not mean we will not get taken out along the way, but we are not marketing the company to do so. If M&A were to happen, the three big South African companies – Anglo, Impala and Sibanye (our partner) – would be the most likely buyers, as some companies are looking to diversify outside of South Africa. Another possibility would be a gold company, since the market allows about 25% of their production in other metals. Furthermore, copper is Generation Mining’s second most valuable metal, and before 2010, Marathon was considered a copper deposit with a palladium credit. We are designing Marathon to mine the highest grade palladium in the first five or six years, and then transition to high-grade copper for the second half of the LOM.

What are the next steps that need to be completed before a construction decision can be taken?

The first step is to finish the feasibility study in Q1 2021. The permitting was started by the previous operator, and we have continued this by changing some of the design criteria. Our timeline to complete permitting is early 2022. During this time we will be focused on financing, exploration, and detailed engineering. For the financing, we have a number of options, including bringing in a partner. Sibanye could exercise its back-in option, which means that they would have to put up two thirds of the money to build the mine. The main deposit does not have any royalties on it, so we are talking with various streaming companies about the possibility of selling a royalty or a stream that could be on the gold, or the platinum, for example. At US$1,900 palladium, the capex pay-back period would only be 18 months, which is very attractive to banks.