Generation Mining president-CEO Jamie Levy wants to assure all that the Marathon palladium-copper mine will get built.
Ever since the Toronto junior miner first appeared on the north shore of Lake Superior in 2019, the company has been a press release-generating machine with its ambitious plans for an open-pit operation.
But in recent months, there’s been a lull in news flow that’s prompted a few concerned investors to ask Levy if the project is stalled.
“We’re still spending money on the project,” he answered. “It’s still getting developed. It’s just not on the timing that we anticipated earlier due to permitting and due to the sentiment of the market.”
As recently as three years ago, Gen Mining was targetting the start of construction for early 2023 or late 2024. Those expectations have been tempered to some time in 2025.
Government permitting and project financing has taken longer than expected to come together. Levy said they won’t make a decision on greenlighting construction for the $1-billion project until those two pieces are in place.
A decade ago, back in the Stillwater ownership days, the Montana company’s project priorities were elsewhere and Marathon was placed on the backburner.
An optimistic Levy said that’s not the case now, even with palladium prices on the wane.
“I can’t imagine it not getting built,” he said. “I don’t see any reason why we would shelve a project as robust and has got as much support as it does.”
Located 10 kilometres north of the town of Marathon, the deposit contains mainly palladium with a significant copper presence, along with platinum, gold, silver and other metals in the mix.
The mine is expected to produce an average of 166,000 ounces of palladium and 41 million pounds of copper a year over an initial 13-year mine life.
All the much-coveted public infrastructure is there with the Trans-Canada Highway, the local airport and rail connections close by. A beefed-up East-West power transmission line runs through Gen Mining’s property.
But for the project once labelled by a predecessor company as Marathon PGM, copper is now king these days.
A readjusted mine design will focus on the copper-rich areas to mine more copper and less palladium.
And it doesn’t help their cause that palladium prices have taken a tumble since early 2022, with palladium losing more than half its value, from a high of US$2,980 an ounce in March 2022 to bouncing in the $980 range in June.
A few Gen Mining investors might have been alarmed last April when chairman Kerry Knoll told the Northern Miner that the “project is not going to get built at today’s (palladium) price.”
He was looking for the metal to reach a threshold of $1,200 to $1,400 an ounce to make the project economically work.
Levy responded that was an accurate statement at the time, but copper prices have gone on a bit of a run since the spring from trading under US$4 a pound in February to peaking at more than $5 in mid-May before sliding to the $4.40 range at the end of June. Copper plays a pivotal role in the global energy transition.
“This is a copper project with a palladium credit at today’s prices," said Levy.
“We’d be producing around 41 million pounds of copper a year. Copper has really, really helped the economics of this project."
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The Marathon project still remains very robust at today’s commodity prices and the market’s interest still holds, Levy said.
“Is it as robust as when palladium was at $1,800? No. But I think what people would be investing for is the upside in palladium.
“I think the market is going to tell us when it’s ready to build.”
For a tentative construction start date, Levy said an October-November groundbreaking would be “aggressive,” opting instead for a sod-turning some time in early 2025. Factored into their decision would be the time of year, water runoff and the costs associated with activities such as pouring concrete in winter.
Carving out the pit and building all the mining infrastructure would take 18 to 24 months.
On the regulatory side, Levy said they’ve pocketed most of the required permits. The few remaining critical ones are water-related approvals, including a federal Fisheries Act authorization and two provincial permits. Though it’s taken longer than expected, Levy is confident they’ll have those inside of six months.
Equally important is project financing. The package they’re working to assemble will be a combination of lenders, private equity and government critical minerals program funding dollars.
Gen Mining has $200 million in place from an earlier deal with Wheaton Precious Metals. They also have mandate letters and term sheets to firm up with a syndicate of bankers that have agreed to loan them US$400 million. Then, there’s $100 million to be raised for mobile mining equipment leases.
Levy said they’re also looking for ways to shave costs in some areas.
Pandemic-fuelled inflation and supply chain issues boosted the price on some consumables that pushed the mine construction price tag to $1.16 billion. Prices on essentials like concrete and steel have fallen and it only makes sense to run those numbers again.
Gen Mining has hired an engineering firm to examine how and where to trim their construction and mine operating costs.
“We believe we got some of the higher prices of COVID,” said Levy. “Some the costs (for) larger components have fallen since our last study so we would look to optimize that at some point before we can come up with that final capital number.”
He didn’t rule out the possibility of starting a smaller mining operation than originally envisioned to realize some startup savings and generate revenue more quickly.
The timing of the delay may ultimately have its advantages when it comes to sourcing construction labour.
Three gold mine projects — at Gogama, Greenstone and Dubreuilville — are essentially finished or close to completion.
Levy said some contractors are contacting them about the upcoming gaps in their calendars, which may further drive down their costs.
“It’s good luck for us,” said Levy. “There’s going to be ample construction workers around for us in the near term.”
“But I’m very optimistic we’re gonna get this thing up and going when the market is there and our permits are in back pocket.”
Levy said obtaining permits has taken longer than thought, but added both Ottawa and Queen’s Park are treating Marathon as a priority project.
“We are the only critical minerals project in Ontario getting developed,” he said.
In trotting out a football analogy: “We’re in the red zone and we’re getting to the goal line and we’re going to make it a touchdown very soon. I don’t see any penalties to slow us up in the near future.”
