Generation Mining targets Q3 construction start for Marathon

Generation Mining’s (TSX: GENM) Marathon palladium-copper development in northern Ontario is among few critical minerals projects in Canada to recently seal both government approval and local Indigenous support. 
 
In late November, the federal and provincial governments approved Marathon’s environmental assessment (EA), marking major progress for the project. 
 
“I believe we’re the only mining company to go through an EA process [with a joint review panel] in Ontario and get approved. And that’s a very high level of process for a company to go through,” said Generation CEO Jamie Levy, who was also the CEO of Pine Point Mining, before it was sold to Osisko Metals (TSXV: OSK). 
 
“It’s a great milestone for us but it’s not a time for us to celebrate. There are 300-400 conditions to meet in the EA and numerous other permits we need before we can start production.” 

The EA process was started in 2010 by Marathon’s previous owner, Sibanye-Stillwater (NYSE: SBSW; JSE: SSW). Generation acquired a 51% interest in Marathon from Sibanye in 2019 and 100% in January 2022. 
 
The approval came just six weeks before the federal government green lit the EA of Galaxy Resources’ James Bay lithium project in Quebec. Galaxy became part of Allkem (TSX: AKE; ASX: AKE) in a merger last year. 
 
Marathon, located 10 km north of the eponymous town and 300 km east of Thunder Bay, hosts open pit proven and probable reserves of 2.3 million oz. palladium at 0.62 grams per tonne and 532 lbs. copper grading 0.2% held in 117.7 million tonnes of material, according to a 2021 feasibility study. It also hosts 255,000 oz. gold at 0.06 grams per tonne, 756,000 oz. platinum at 0.2 grams and 5.3 million oz. silver at 1.41 grams.  

At palladium-equivalent cash costs of US$687 per oz. and all-in sustaining costs of US$809 per oz., the operation will consist of three open pits and have a mine life of 13 years.  

Upfront capital costs are pegged at $665 million, a number Levy said could go up by 20% to 30% due to inflation and rising costs of fuel, lumber and steel. He hopes to give investors and lenders a more specific amount of the higher capex within two to three months in an updated feasibility study. 

In terms of financing, Generation has received interest from a banking syndicate led by Export Development Canada for US$400 million ($541.4 million), and it has a streaming deal reached in December 2021 with Wheaton Precious Metals (TSX: WPM; NYSE: WPM) for $240 million. 

Those funding sources aren’t contingent on permitting or on the updated capex, Levy said, and additional funding for the capex would have to be raised through non-dilutive financing. 

Levy also hopes the project can receive some funding from the almost –$3.8- billion federal Critical Minerals Strategy. 

Rising demand from hybrids, EVs 

Marathon is important because it will answer demand for the copper and palladium that are essential in both hybrid and electric vehicles, said Generation’s vice-president of investor relations, Ann Wilkinson. 

“We think, given the dearth of new copper projects that there won’t be enough copper to [meet demand for] electric vehicles,” she said, adding that demand is expected to grow four-fold. 
 
“And we think that palladium is going to be stronger for longer given the fact that we think there’s going to be a migration from the internal combustion engines to the hybrids and then the EVs. A hybrid has two to three times the palladium in it. So it’s the right project in the right jurisdiction,” Wilkinson said, adding that helping secure domestic palladium sources would reduce reliance on Russian and South African supplies. 
 
For this year, Levy hopes some of the key provincial permits, related to species at risk, tree harvesting and water quality can be secured so that early construction works can start. Generation is targeting the third quarter for the start of construction, with production slated for the third or fourth quarter of 2025.

Indigenous buy-in 

The past few months also brought Marathon’s Indigenous engagement to fruition in its signing of a community benefits agreement with the Biigtigong Nishnaabeg (BN) First Nation, just south of Marathon. 
 
The agreement, ratified by a community vote on Nov. 12, 2022, outlines employment, business opportunities, and training and education the community will receive from the project. 
 
Levy declined to give details of the agreement, citing confidentiality but said “every sort of job, from labourers to heavy machine operators” would be offered to qualified BN members. 
 
“We hope most of our workforce or a lot of our workforce can be Biigtigong Nishnaabeg or First Nation employees. First we’re going to need to do some training with them, give them some mentorships, give them some scholarships…to help because they don’t have that experience quite now,” Levy said. 
 
The agreement also commits Generation to environmental management around the mine site, an issue of great concern to BN, Levy explained. 
 
“When you talk to First Nations communities, they mention they’re caretakers of Mother Earth. So, if there is (an environmental) concern for them, let’s bring them under the tent and show them that they shouldn’t be concerned, that there is no deleterious materials we’re putting into their water…(and) that the air will be the same once we leave the project.” 

Levy wouldn’t name other Indigenous communities consulted for the project, although the federal EA document directed the company to also consult with the Ginoogaming First Nation, Jackfish Métis Association, Métis Nation of Ontario- Region 2, Michipicoten First Nation, Netmizaaggamig Nishnaabeg, Pays Plat First Nation, and Red Sky Métis Independent Nation. 
 
While the CEO noted that the Generation website claims Marathon is “the largest undeveloped palladium project in North America,” he admitted he’s tempering his excitement due to all the work yet to be done. 
 
“I think there are too many companies now that over promise and under deliver. We want to do the opposite and break the mold. We want to maintain expectations,” he said. 

“Until we actually get this built, and cash flowing for shareholders and money to the First Nation communities…I feel like we’ve just started. The game is just beginning.”

Generation shares traded at 59¢ on Tuesday, in a 52-week window of 51¢ and $1.11, valuing the company at $106.4 million.