Generation Mining feasibility defines 13-year open pit mine

A feasibility study from Generation Mining (TSX: GENM) on its 80%-held Marathon palladium-copper project in northwestern Ontario suggests a 25,200 tonne per day open pit operation producing a copper-PGM (platinum group metal) concentrate for sale to an off-site smelter.

In its first three years of operation, the 13-year surface mine would generate a total of 588,000 palladium oz. and 122 million lb. of copper from an estimated 270,000 tonnes of shipped concentrate. Life-of-mine payable metals are estimated at 1.9 million palladium oz., 467 million copper lb., 537,000 oz. of platinum, 151,000 oz. of gold and 2.8 million oz. of silver.

With all-in sustaining costs pegged at US$809 per palladium-equivalent oz., and an initial capital cost assumption of $665 million, the after-tax net present value for the development is estimated at $1.1 billion with a 29.7% internal rate of return and a 2.3-year payback. These numbers are based on a 6% discount rate for the NPV and long-term metal prices that include US$1,725 per oz. palladium and US$3.2 per lb. copper.

“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,” Jamie Levy, Generation Mining’s president and CEO, said in a news release.

Executive Chairman Kerry Knoll added that over the remainder of the year, the company plans to move forward with the environmental approval process as well as with detailed engineering and financing work. Construction is expected to start next year, pending permitting and financing constraints.

According to Drew Anwyll, Generation Mining’s chief operating officer, the latest 9.2-million-tonne-per-year process plant design incorporates improved metallurgical recoveries. The mine plan also features “strategic sequencing” of the pits, targeting higher-grade material in the first half of the mine life.

Generation Mining is progressing an Environment Approval process for the site. The initial Environment Impact Assessment (EIS addendum) was issued in January, the second volume is expected in the first quarter. Marathon is assessed under the Canadian Environmental Assessment Act and the Ontario’s Environmental Assessment Act through a joint review panel.

The capital cost estimate accounts for an 18-month construction timeline with a nine-month commissioning and ramp-up.

Mining would develop three open pits, at a peak rate of 110,000 tonnes annually.

The process design includes a flotation circuit with Woodgrove direct flotation reactors that are expected to use less power with improved performance. Recoveries are forecast at 86.9% for palladium and at 93% for copper. The element grades in the concentrate are estimated at between 39 grams per tonne and 171 grams per tonne for palladium and between 18.7% and 19.7% for copper, with additional platinum, gold, silver and rhodium.

Generation Mining holds an 80% interest in Marathon; South Africa-headquartered Sibanye Stillwater has a 20% interest and back-in rights which, in specific circumstances, would allow it to increase its stake in the project to 51%.

The joint venture management committee and Sibanye Stillwater (JSE: SSW) have not yet approved the feasibility – the two parties are planning to review the study.

Pit-constrained resources at the Marathon project include 244.9 million measured and indicated tonnes grading 0.53 gram palladium per tonne, 0.2% copper, 0.07 gram gold per tonne, 0.18 gram platinum per tonne and 1.58 grams silver per tonne. Inferred resources add 33.8 million pit-constrained tonnes at 0.4 gram palladium per tonne, 0.22% copper, 0.05 gram gold per tonne, 0.1 gram platinum per tonne and 1.48 grams silver per tonne.

Pierre Vaillancourt of Haywood Securities raised his target price on the company following the news to $2.25 per share, up from his previous forecast of $1.75 per share.

“The feasibility study confirms the economic viability of the Marathon project, and opens the way for permitting milestones,” the analyst wrote in a research note. “The focus now is to move ahead with the detailed engineering and the Environmental Assessment (EA) process, which is expected to be completed in 2Q22. Once the EA is approved, GENM will be in a position to obtain key permits in time for construction to begin in 3Q22.”

“The mine is expected to take 18 months to build,” he continued, “which could result in production startup in 1Q24. this schedule assumes there are no delays, which is far from certain, however, the project has strong support from provincial ministries and First Nations, which are critical in moving the mine forward.”