Generation Mining in US$400M debt deal to advance Marathon project

Generation Mining (TSX: GENM; OTC: GENMF) has arranged a senior finance facility of up to $540 million (US$400 million) for its 100%-owned Marathon palladium-copper project in northern Ontario. A syndicate including Export Development Canada (EDC), ING Capital, and Societe Generale are the mandated lead arrangers. 

The debt facility along with a $200-million streaming arrangement with Wheaton Precious Metals (TSX: WPM.CA; NYSE: WPM) gives Generation a total of $740 million for mine and mill construction, the company said in a release on Tuesday. Generation has also secured the approval of both federal and provincial agencies for its environmental assessment.

The debt facility is expected to close in the third quarter of this year. 

“The interest of EDC, ING, Societe Generale, and Wheaton Precious Metals further validates the Marathon project’s status as an economic, sustainable, environmentally sensitive, low-cost producer of critical metals that are needed to support emissions controls and the transition to a greener economy,” said Generation president and CEO Jamie Levy, who added that the debt facility and streaming deal represent a significant amount of the initial financing required to develop the project.

Generation updated its feasibility study for Marathon at the end of March, replacing a previous study published in 2021. It pegged capital costs at $1.11 billion ($898 million net of equipment financing and pre-commercial production revenue), with a payback period estimated at 2.3 years. It has a net present value (using a 6% discount rate) of $1.16 billion and an internal rate of return of 25.8%.

The feasibility outlines an open-pit mine and process plant with a mine life of 12.5 years, producing a total of 2.1 million oz. palladium and 517 million lb. copper. Payable metals over the mine life include 485,000 oz. platinum, 158,000 oz. gold and 3.2 million oz. silver.

Marathon hosts open pit proven and probable reserves of 127.6 million tonnes containing 2.3 million oz. palladium at 0.65 grams per tonne and 530 million lb. copper grading 0.21%. It also hosts 285,000 oz. gold at 0.07 grams per tonne, 806,000 oz. platinum at 0.2 grams and 6.8 million oz. silver at 1.6 grams.

Located 300 km east of Thunder Bay and just north of Lake Superior, the Marathon project involves the construction, operation, decommissioning and remediation of three open pits to produce copper concentrates. In late March, it finalized an offtake agreement with Glencore (LSE: GLEN), which will buy 50% of the concentrates produced at Marathon.

Generation shares were up almost 4% on Tuesday, reaching 54¢ in Toronto when markets closed. They traded in a 52-week window of 51¢ and 96¢, valuing the company at $98 million.