Generation Mining Limited (“Gen Mining”, “Generation”, or the “Company”) is pleased to announce that it has begun the process of interviewing consultants to undertake a Feasibility Study on the Marathon Palladium Project located in Northwestern Ontario. At the same time the Company has been undertaking a number of short-term trade-off studies as part of the preparatory phase of the study. It is expected that the full DFS will be underway in the current quarter and is expected to take about 7-9 months to complete. This work began immediately upon the appointment of Drew Anywll, P.Eng. as Chief Operating Officer last month.
Fortunately for Generation Mining, the current phases of work involve no field work and we are able to continue full speed ahead despite the lockdown due to the coronavirus. All of the things we are doing now are deskwork. The only special measures we have taken during the lockdown is to close our head office and site office and have everyone work from home.”
Jamie Levy, President and Chief Executive, Generation Mining
The process to begin the DFS involves selecting firms for the various segments of the study, including Mineral Resources, Mining & Reserves, Plant Design, Metallurgy, Infrastructure, Geotechnical, Water Balance, Environmental, Capital and Operating Costs and Economic Analysis. Generation Mining has opted to undertake the DFS rather than prepare a Preliminary Feasibility Study as there have been two previous Feasibility Studies which were undertaken in 2010 and 2014 at significantly lower palladium prices. Accordingly, the technical and financial aspects of most of the various components of these studies either stand, or need only to be supplemented and/or updated rather than redone.
Generation is well-funded for the next phases of work, including the DFS and the restart of the permitting process, with approximately $14 million in working capital.
In January 2020, the Company released the results of a Preliminary Economic Assessment on the Marathon Project, with the following highlights:
- The Project would produce an average of 194,000 palladium equivalent ounces per year over a 14-year mine life (including credits for copper, platinum, gold and silver). Constituent metals that make up 194,000 palladium equivalent ounces per year are 8,680 ounces (oz) gold (Au), 151,220 oz silver (Ag), 24,400 oz platinum (Pt), 105,740 oz palladium (Pd) and 25.59 million pounds (lb) of copper (Cu) per year, respectively. Net smelter revenue (NSR) is calculated in CAD using a CAD:USD exchange rate of 1.32 and based on an average two-year trailing palladium price of USD 1,275 per ounce. Process plant recoveries are estimated at Au:73.2%; Ag:71.5%; Pt:74.5%; Pd:82.9% and for Cu:92% during the first five years falling to 90 per cent thereafter.
- The Project generates an after-tax internal rate or return (IRR) of 30.0% and an after-tax net present value (NPV) of $871million at a 5% discount rate at Nov. 30, 2019, two-year trailing average metal prices (base case), including a palladium price of USD 1,275 per ounce.
- The Project generates an after-tax net present value of $1,541-million and an internal rate of return of 45.8% at a 5% discount rate at recent spot metal prices (final LBMA London price fix for precious metals; final LME bid price for copper, Dec. 31, 2019).
- The Project would generate base case after-tax cash flows of $520 million in years 1 to 3, resulting in a 2.5-year payback period.
- Actual palladium production will average 107,000 ounces annually over the mine life, at a Cash Cost per Ounce of USD 504 and an all-in sustaining cost (AISC) of USD 586 per ounce, net of by-product credits.
- The PEA used Measured and Indicated Mineral Resources as well as a very minor amount of Inferred Mineral; Resources in the Marathon Deposit in its calculations and did not include the Geordie and Sally Deposits, which are located on the same property (see news release dated Dec. 2, 2019). The Marathon Deposit has no outstanding royalties or financing streams registered against it.
For more information, please refer to the full PEA and Generation Mining's press release dated Jan. 6, 2020, both of with are available under Generation Mining's profile on SEDAR.
The PEA is preliminary in nature and its production plan includes Inferred Mineral Resources that are too speculative geologically to have economic considerations applied to them that would enable them to enable them to be categorized as Mineral Reserves, and there is no certainty that the PEA will be realized. Inferred Mineral Resources have a lower level of confidence that that applied to an Indicated Mineral Resource and must not be converted to a Mineral Reserve. It is reasonably expected that the majority of the Inferred Mineral Resource could be upgraded to an Indicated Mineral Resource with continued exploration. However, it should be noted that Inferred Mineral Resources in the PEA process plant feed tonnage is 51 k tonnes, which is 0.06% of the total LOM feed of the planned production that is Measured and Indicated Mineral Resources.