Marathon Palladium Project Location

Generation Mining (GENM.TO) confirmed the Joint Review Panel has released its report on the Marathon PGM project. The report sets out recommendations for the company and the federal and provincial governments to mitigate the impact of the Marathon project, and the document has now been submitted to the relevant authorities which are expected to make a decision within 120 days (so late November/early December).

The executive summary of the Joint Review Panel’s consideration can be found HERE.  After reading the summary, it sounds like the JRP is mainly ‘concerned’ about the First Nations so if Generation Mining can get those on board and work out any potential issues with them, there’s very little opposition to the project. From all other perspectives, including operational hazards, the JRP seems to give the project the green light with quotes like ‘the Project is not likely to cause a significant adverse environmental effect’.  It’s up to CEO Levy and his team to work things out with the First Nations.

Another element that could perhaps play a role is the caribou. Although Generation Mining clearly stated there is no evidence of caribou being present in the Site Study Area and the potential for caribou to interact with the Project is very low, government agencies concluded all areas of the Lake Superior Coastal Range are considered critical habitat that could support the species. This will be interesting to see how this will be interpreted in the final stage of the permitting process. If an area is considered a habitat that ‘could support’ the species, but the species doesn’t occur there, then what’s the answer going to be? Could a project really be axed because an area ‘could support a species’ that isn’t even present?

We will find out in about four months. Meanwhile, the economics of the projects are still looking excellent as the palladium price still exceeds $2,000/oz while the platinum price of $934/oz also has value. The copper price has come off in the past few months but nobody seems to be too worried about the copper price going forward. The only uncertainty (from an economic point of view) is the initial capex and it will be interesting to see how the inflationary environment has impacted the capex and opex. But as the spot palladium price would add in excess of C$300 to the after-tax NPV6%, the higher capex could be mitigated by the current higher commodity prices.

Generation Mining has also been active in securing long-lead items for the project. After signing an agreement to lease and potentially purchase a construction camp, the company signed an agreement with Hycroft Mining (HYMC) to acquire an SAG mill and ball mill for a total cash payment of US$12M. $0.5M was paid upon signing the agreement while a second tranche of $0.5M is payable by the end of September. The final, larger payment of US$11M is payable by the end of Q1 2023.

A solid move by Generation mining (although the mills are slightly larger and can handle more throughput than the rate used in the project’s feasibility study) as not only will this help to avoid negative capex surprises, another element at play here is the visibility. By already acquiring long-lead items, Generation Mining can get a tighter grip on its construction timeline. It clearly shows the Generation Mining team isn’t just sitting on their hands while waiting for the environmental approval but is actively and proactively thinking on how to get Marathon PGM across the finish line.

Disclosure: The author has a long position in Generation Mining. Generation is a sponsor of the website. Please read our disclaimer.

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