Financier Jamie Levy and mine builder Kerry Knoll have kept busy since selling Pine Point Mining and its zinc project in the Northwest Territories last year to Osisko Metals (TSXV: OM) for $35 million.
Through their company Generation Mining (CSE: GENM), the pair have just completed an option deal to acquire a 51% interest in Sibanye-Stillwater’s (NYSE: SBGL) Marathon platinum group metals (PGM) deposit, 10 km north of Marathon, Ontario.
Generation Mining will secure a majority stake in the deposit, form a joint venture with Sibanye-Stillwater, and become the project’s operator.
“We are thrilled to be able to acquire the largest undeveloped palladium project in North America at a time when the fundamentals for the commodity have never been better,” Levy, the company’s president and CEO, tells The Northern Miner in an interview from his office in Toronto.
The palladium price has moved from US$530 per oz. in 2010 to US$1,571 per oz. at press time, after hitting a peak of over US$1,600 per oz. in March, and could continue its upward trajectory as demand for the metal rises, with no immediate supply increases available, the mining executives say.
They point to a Johnson Matthey report, released in May, which notes that 2018 marks the seventh year of deficit in the palladium market, and warned that the deficit this year “looks set to widen dramatically,” as “stricter emissions legislation” for automobiles is “forecast to trigger a step change in demand from Chinese automakers.” The consulting firm says the palladium deficit this year could exceed 1 million oz., up from 2018’s deficit of 120,000 ounces.
Eighty-five percent of the world’s palladium is used in catalytic converters, which are designed to stem emissions from gasoline-fuelled cars. A typical automobile uses between 3 and 7 grams of palladium, and the loads are increasing globally — especially in Europe — to lower emissions.
“It’s a fascinating area to be in, because there literally isn’t enough palladium,” says Knoll, Generation Mining’s chairman. “We are very pleased to obtain this project for a fraction of the amount previously spent on it, and at a time when palladium prices are near record highs.”
Under the option agreement, Generation Mining can earn an initial 51% stake for $3 million in cash, and $3-million worth of its shares. Generation Mining can boost interest 80% by spending $10 million within four years of closing. If it fails to do that, its ownership in Marathon will drop to 20%.
Upon a production decision, Sibanye has the option to earn back 51% ownership by advancing 31% of the project capex within 90 days. At that point, Generation Mining could earn a 49% interest by paying 34% of the capex.
Generation Mining raised $8 million through a bought-deal private placement in June at a 28¢-per-unit subscription price, consisting of one common share and one-half of a warrant exercisable at 45¢ per share.
Various companies have worked on the Marathon deposit since 1985, including Polymet Mining (TSX: POM; NYSE-AM: PLM) and Marathon PGM. Stillwater picked up the project in its 2010 acquisition of Marathon PGM for US$118 million. Sibanye later acquired Stillwater for US$2.2 billion. There are no outstanding royalties on the main Marathon deposit, which has seen 204,000 metres of drilling in 1,094 holes since the 1960s.
An updated feasibility study in 2010 outlined a conventional open-pit operation — processing 22,000 tonnes per day — that would produce a saleable concentrate containing copper, palladium, platinum, gold, silver and rhodium. The now-outdated study calculates an 11.5-year mine life and initial US$351-million capex.
The main deposit hosts historic resources of 114.8 million measured and indicated tonnes grading 0.78 gram palladium per tonne, 0.23 gram platinum per tonne, 0.08 gram gold per tonne and 0.24% copper, for 2.95 million contained oz. palladium, 869,000 contained oz. platinum, 316,000 oz. gold and 618 million lb. copper.
Inferred resources measure 6.2 million tonnes grading 0.31 gram palladium per tonne, 0.10 gram platinum, 0.05 gram gold and 0.15% copper, for 61,000 oz. palladium, 21,000 oz. platinum, 9,000 oz. gold and 21 million lb. copper.
In addition, the property hosts the Geordie Lake deposit, 20 km away, where historic measured and indicated resources stand at 32.4 million tonnes grading 0.61 gram palladium, 0.04 gram platinum, 0.05 gram gold and 0.37% copper, for 641,000 oz. palladium, 39,500 oz. platinum, 49,700 oz. gold and 263 million lb. copper.
The company plans to update the historic resource and begin a preliminary economic assessment (PEA) and exploration in the third quarter of this year, and permitting and a feasibility study in the fourth quarter.
“Step one is the PEA — we want to look at different sizes of the mine,” Knoll says. “For example, the feasibility study in 2010 had 22,000 tonnes a day, but we want to look at maybe making that smaller and see if that works, and we would include Geordie Lake, which wasn’t included in the feasibility study, and we’d look at different alternatives.”
At the same time, he says, “we’re going to hit the ground running on exploration — we have a 12,000-metre exploration program planned, and we have five or six interesting targets, and we want to add tonnes and find higher grade … not that the grade is bad, the main zone has a palladium-equivalent grade of almost 1.5 grams, so that’s not bad, it’s just … you want it to be higher, if you can find higher.
“There aren’t a lot of palladium mines in the pipeline,” he continues. “The only near-term one we’ve identified is Ivanhoe’s Platreef, which is under construction — two to three years away from phase one — and that will produce about 200,000 oz. palladium a year, so it will be about 2% of the market, and then Norilsk is doing an expansion of its Norilsk mine, but that’s a five-year project, and is going to take them until 2024, and that will be a 15% increase in supply.”
“We are one of the few pure-play North American palladium companies. There’s really nothing else out there,” Levy adds.
The deposit is 30 km from the Hemlo gold camp, 100 km from Harte Gold’s (TSX: HRT; US-OTC: HRTFF) Sugar Zone mine, 215 km east of Thunder Bay and 400 km north of Sault Ste. Marie. The Pic River borders the project on the east, and Lake Superior sits to the south and west.
It’s close to Marathon’s airport, situated near the Trans-Canada Highway, served by Canada Pacific Railroad’s main rail line and has abundant power available from the grid.
“This has to be one of the best located mining projects in the world,” Knoll says.
The deposit dips moderately to the west — ideal for an open-pit mine — and is open at depth, with potential for underground expansion from the bottom of the pit. Marathon is on the eastern margin of the Coldwell Complex, and its known zones of mineralization have a north–south strike length of 3 km, and dip 30° to 40° west. The mineralization has a true thickness ranging from 4 metres to 100 metres.
Highlights from previous drilling include 126 metres grading 0.97 gram PGM, plus gold per tonne and 0.35% copper in drill hole 8-417; 88 metres of 1.47 PGM, plus gold and 0.46% copper in 5-94; and 51 metres of 1.53 grams PGM, plus gold and 0.48 copper in F7.
Metallurgical testing from 1990 to 2010 indicates a quality copper-PGM concentrate, and Generation Mining plans to resume testing once it extracts adequate samples.
Rod Thomas, the company’s vice-president of exploration, says the deposit’s W Horizon — due to the extreme PGM enrichment process — has been assayed, and carried 20 to 70 grams palladium per tonne over 2-metre intervals. “If I recall, the best intersection at Marathon is 34 grams palladium per tonne over 10 metres,” he says. “There is potential for better palladium-dominant PGM grades at Marathon than in the Bushveld.”
Thomas notes that the rocks and setting are similar. “In the Bushveld, the mineralization settled out from a thick column of magma, whereas at Marathon, the magma and mineralization has been introduced in a series of pulses through the magmatic [conduit] plumbing system,” he writes in an email. “Since the mineralization at Marathon is consistent over thick intervals, it suggests that mineralization settled out deeper in the system, and was introduced in a series of pulses. That’s why there are such thick intervals [and multiple pulses] of disseminated mineralization at Marathon … meaning that it could not have settled out in place as in the Bushveld.”
At press time, Generation Mining traded at 36¢ per share in a 52-week range of 10¢ to 36¢.