Generation lines up $1.3B Marathon financing

Generation Mining (TSX: GENM; US-OTC: GENMF) lined up the final $340 million (US$244 million) needed to fund its Marathon copper-palladium mine in northwestern Ontario, clearing the last major financing hurdle before its board decides whether to build.

The broader financing package totals about $1.3 billion, compared with a $992-million construction estimate that includes $119 million of contingency. The mine lies near the town of Marathon on Lake Superior, about 1,000 km northwest of Toronto.

“To assemble project capital totaling approximately $1.3 billion for a company of our size is a significant accomplishment,” Chief Financial Officer Brian Jennings said in a Monday news release.

The package, which is more than six times Generation’s current market value, moves the permitted project closer to construction after years spent arranging capital. Generation must still close the financings, secure required shareholder and regulatory approvals and make a final investment decision before building. Ottawa-backed investors and Glencore (LSE: GLEN) will play major roles in funding the mine and selling its concentrate.

Generation shares fell 10% to 64¢ by early Tuesday afternoon in Toronto, matching the equity issue price and valuing the company at about $207 million.

Funding terms

Generation plans to raise $200 million through a bought deal of 312.5 million shares at 64¢ each. Canada Growth Fund will buy another 62.5 million shares at the same price for $40 million.

Together, the deals will result in 375 million shares being issued, more than doubling the 321 million that Generation reported outstanding at March 30. The transactions include about $100 million of commitments from Canada Growth Fund, Wheaton Precious Metals (TSX, NYSE: WPM) and Glencore Canada.

Canada Growth Fund and Canada Infrastructure Bank will provide $100 million through equal investments in unsecured convertible notes. The notes carry 9% annual interest and convert at 89.6¢ a share, a 40% premium to the equity financing price.

The bought deal is expected to close on Sept. 21, with Canada Growth Fund’s private placement to follow. The convertible notes still need shareholder approval, which Generation plans to seek at a special meeting before year-end. The board expects to consider a final construction decision after the financings close.

Earlier commitments include a US$310-million senior debt facility, a $200-million subordinated facility from Canada Infrastructure Bank, about $200 million still available under a Wheaton stream and an estimated $145 million of equipment leases.

The financing package carries a $185-million cost-overrun facility on top of the $119-million contingency already included in Marathon’s construction estimate. It also includes $78 million of surety bonds and letters of credit for mine closure, fisheries commitments and other obligations.

Concentrate sales

Generation also said Monday it had reched agreement with Glencore to buy Marathon’s polymetallic copper concentrate for the life of the mine under a contract with a minimum 14-year term starting Sept. 1, 2028.

It will take all concentrate produced during the first two years after commercial production starts and again from year 13 onward. Glencore will receive about half of the mine’s annual output in the intervening years.

The concentrate is to feed Glencore Canada’s Horne smelter in Rouyn-Noranda, Que., and its CCR refinery, adding a domestic processing outlet to the financing relationship. Horne is Canada’s only copper smelter.

Mine economics

A March 2025 feasibility study put Marathon’s after-tax net present value at $1.07 billion using a 6% discount rate. It estimated a 28% internal rate of return and 1.9-year payback.

The Marathon deposit holds 128.3 million proven and probable tonnes grading 0.64 gram palladium per tonne and 0.21% copper, containing 2.63 million oz. palladium and 605 million lb. copper. The reserves also contain 815,000 oz. platinum, 291,000 oz. gold and 6.88 million oz. silver.

The 13-year mine plan calls for the production of about 2.16 million payable oz. palladium and 532 million lb. copper, plus platinum, gold and silver.

Generation has its main construction permits and project team in place. It plans to start early works before year-end, subject to closing the financings and receiving the remaining approvals.