"At US$1,900 palladium, the capex payback period would only be 18 months, which is very attractive to banks.”
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.
In August, Generation Mining began a 5,000-meter exploration drill program along western margin of Marathon Deposit. What is the main area of interest you are targeting?
The main area where we are doing the feasibility study is made up of two zones. One is the main Marathon deposit, which contains about 7 million ounces of relatively low grade ore. This deposit has a palladium equivalent grade of approximately 1.24 g/mt. The other zone is the W-Horizon, which is smaller, narrower and richer than the main zone.
These deposits were formed by a volcanic eruption by magma coming up through a conduit. We are looking down the conduit for spots where the minerals got concentrated to potentially form massive sulphide deposits (VMS), and this is the other target of our current campaign.
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?
I have started six companies in my career, and four of them moved into production before they were taken over. The other two were taken at the PEA and feasibility stages, respectively. 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.
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. 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. At US$1,900 palladium, the capex pay-back period would only be 18 months, which is very attractive to banks.