Highlights:
- Mine plan optimized with reduced strip ratio bringing
additional 78k ounces of palladium, 34k ounces of Platinum and 2M
lb of Copper in the first 3 years
- Estimated $190M in additional payable revenues1 and
operating cost benefits by the end of year 3 of operations
- Initial Capital estimate reduced by $89M despite
industry-wide inflationary cost pressures
- Improved Project Economics with a 26% after-tax IRR and 2.1
year after-tax payback period1
Generation Mining Limited (TSX:GENM, OTCQB: GENMF) ("Gen Mining"
or the "Company") is pleased to provide an update on the project
optimization work (the “Optimization Work”) previously announced on
June 6, 20242 on the Marathon Palladium-Copper Project (the
“Marathon Project”) in Northwestern Ontario. The Optimization Work
focused on two key aspects: (1) optimization of the mine plan to
maximize metal production and defer waste stripping in the early
years of operations in order to improve early cash flows and reduce
the payback period (“Mine Plan Optimization”); and (2) review and
optimization of the plant design and layout, including sizing of
key equipment, plant footprint and foundations, in order to reduce
the initial Project capital costs (“Initial Capital
Optimization”).
Jamie Levy, President and CEO, commenting on the Optimization
Work, remarks:
“The optimized mine plan is a notable
improvement to the existing plan, with $190 million in additional
payable metal revenues1 and savings from a reduced strip ratio
during the initial 3-years of mine operations.
The other meaningful improvement to the
project is the optimized plant design and ancillary changes
recommended by Ausenco, which represent a net savings in total
project capital costs of over $89 million, after taking into
account the impact of inflation on certain construction materials
and equipment, and other design change escalations since the end of
2022.
This optimization work by Ausenco and our
team represents a meaningful improvement to the financeability,
constructability and economics of our project following several
years of significant inflation in many input costs, and validates
the continued robustness of the Marathon Project.”
The Mine Plan Optimization was carried out by the Company and
the Initial Capital Optimization was performed by the Company in
collaboration with Ausenco Engineering Canada ULC (“Ausenco”). All
amounts are reported in Canadian dollars unless otherwise noted
herein.
Mine Plan Optimization
The Company evaluated alternative pit sequencing options that
exploit the benefit of the ore body’s proximity to surface. The
results of this work demonstrated the viability of focussing on a
higher grade, lower strip ratio for the initial phase of mining
operations. This results in the deferral of approximately 36
million tonnes of waste stripping during the first three years of
operations while increasing the amount of recovered and payable
metals during this period.
Highlights of the Mine Plan Optimization are as follows:
Units
Optimization Work
Technical Report3
Variance
LOM Throughput
Peak Process Plant Throughput
tpd
27,700
27,700
Nil
Mt/year
10.1
10.1
Nil
Peak Mining Rate
tpd
157,000
115,000
42,000
Mt/year
57
42
+15
Production Data (to end of Y3 of
Operations, Incl. Pre-Production)
Total Mined
Mt
97
132
(35)
Total Waste Mined
Mt
62
98
(36)
Total Ore Mined
Mt
35
34
+1
Strip Ratio
waste:ore
1.8
2.9
(1.1)
Payable Metal (to end of Y3 of
Operations, Incl. Pre-Production)
Palladium
k oz
669
591
+78
Copper
M lbs
139
137
+2
Platinum
k oz
143
112
+31
Gold
k oz
43
36
+7
Silver
k oz
512
477
+35
The deferral of 36 million tonnes of waste material and
increasing payable metal production up to the end of the third year
of operations, including the pre-production period, is estimated to
result in $190 million in additional revenues and cost savings
during this period.
As a result of this new sequencing the peak mining tonnage will
increase to 57 Mtpa. The costs associated with this stripping are
included in the life of mine operating costs, capital costs and
project economics, discussed below.
Initial Capital Optimization
The Company engaged Ausenco to perform a review of the Marathon
Project’s capital and operating costs, with a primary focus on the
Processing Plant and ancillary infrastructure. This work benefitted
from Ausenco’s extensive experience in plant design and
construction of copper concentrators, most recently at Capstone
Copper’s Mantoverde Mine in Chile, as well as their recent
experience working in Northern Ontario at Alamos Gold’s Magino
Mine. The goal of the work was to improve the designs for Project
constructability and to decrease initial capital costs as compared
to the estimates disclosed in the Technical Report.
The optimization work included changes to the plant layout and
footprint, adjustment of equipment selections to ensure key
equipment is ‘fit for purpose’, and review of the foundation and
structural designs to take advantage of favourable site
geotechnical conditions and minimal overburden across the site.
Total initial capex is now expected to be $961 million4
(“Initial Capital”), or a reduction of $89 million from the amounts
previously estimated in the Technical Report, and reflects updated
costing for inflation since the effective date of the Technical
Report. The key changes from the Optimization Work are summarized
below:
Capital Costs
Impact $M(a)
Explanation of Cost and
Variance
Equipment and Building Layout
(71)
Reduced plant pad footprint (-22%) Reduced
plant volume (-20%) Reduced concrete (-46%) Reduced Structural
Steel (-30%) Improved Electrical layout and e-rooms
Equipment Sizing
(29)
Reduced mill sizing (SAG, Ball, Regrind)
Reduced electrical redundancy
Equipment Deferrals
(35)
Pebble crusher and tailings thickener
deferred to sustaining capital
Reduced tailings thickener size
Market Escalation Impacts
+50
Inflation in construction labour rates
Inflation in mechanical parts costs
Earthworks and Site Infrastructure
+6
Escalation on Earthworks Offset by
optimization of site infrastructure
Mobile Equipment Leases(b)
+4
Escalation on mobile equipment costs
Project Indirects
(14)
Re-estimation of EPCM and some
reallocation to direct costs
Total
(89)
Overall reduction as compared to
Technical Report
Notes:
(a) (negative) numbers represent a
reduction from the Technical Report values.
(b) Includes additional leasing deposits and payments during the
construction and pre-production phase only.
As part of the initial capital cost review, the processing plant
costs were estimated at a Class 3 AACE standard. In addition, the
mining fleet was retendered to obtain current market pricing and
the earthworks scope was partially retendered and adjusted for
inflation.
Operating Costs
The Project operating costs have been updated and are reflected
in the below table.
Unit Operating Costs (Average
LOM)
Units
Optimization Work
Technical Report
Mining
$/t mined
3.43
3.25
$/t milled
12.32
11.45
Processing
$/t milled
8.27
8.70
G&A
$/t milled
2.53
2.67
Transport & Refining Charges
$/t milled
4.22
4.13
Royalty
$/t milled
0.10
0.09
Total Unit Operating Cost
$/t milled
27.44
27.04
Project operating costs per tonne of ore milled have increased
primarily as a result of changes in mining costs, with an offset
from reduced processing costs. Mining costs have been impacted by
escalation in equipment maintenance parts (per manufacturer’s
guidance), updated fuel pricing, mining operating labour rates, and
adjustment to truck cycle times under the optimized mining plan.
Processing costs have been updated to reflect consumable pricing
and labour cost estimates. Consumption rates for consumables are
largely unchanged.
Capital Costs
The initial capital costs for construction and ramp-up, together
with expected sustaining capital and closure costs, are presented
in the table below:
Capital Area
Units
Optimization Work
Technical Report
Variance
Mining Equipment for Construction(a)
$M
61
57(b)
4
Processing Plant
$M
280
345
(65)
Infrastructure
$M
86
72
14
TSF, Water Management and Earthworks
$M
80
95
(15)
EPCM, General and Owners Cost
$M
210
228
(18)
Preproduction, Startup, Commissioning
$M
153
157
(4)
Contingency
$M
92
97
(5)
Initial Capital
$M
961
1,050(b)
(89)
Preproduction revenue(c)
$M
(173)
(156)
(17)
Total
$M
788
894
(106)
Sustaining Capital
$M
502
424
78
Closure and Reclamation Costs
$M
72
72
Nil
Notes:
(a) Mining Equipment acquired for
Construction is presented as the cost of equipment deposits and
lease payments during the construction and pre-production period.
The remainder of the equipment leasing costs are incurred during
operations and are included in the financial analysis.
(b) The Technical Report presented the
capital costs for mining and surface equipment as $117M, the
initial capital sub-total as $1,112M, and a $58M Equipment
Financing adjustment. For consistency of presentation, the net cost
of leased mining equipment during the construction and
pre-production period, including working capital adjustments, is
presented above.
(c) See Economic Analysis, below, for
additional information on the different metal price assumptions
used in the Optimization Work and the Technical Report.
Economic Analysis
In order to quantify and assess the value of the Optimization
Work to the economics of the Marathon Project, the Company
completed an economic analysis using the following key
assumptions:
Key Assumptions(a)
Units
Optimization Work
Technical Report
Palladium Price
US$/oz
1,525
1,800
Copper Price
US$/lb
4.00
3.70
Platinum Price
US$/oz
950
1,000
Gold Price
US$/oz
2,000
1,800
Silver Price
US$/oz
24.00
22.50
Foreign Exchange
$:US$
1.35
1.35
Diesel Price
$/litre
1.10
1.17
Electricity
$/kWhr
0.07
0.07
Note:
(a) Metal price assumptions are based on the adjusted 3-year
historical trailing averages as of November 1, 2024 for each of the
metals. The 3-year averages are as follows: Palladium -
US$1,523/oz, Copper at U$4.02/lb, Platinum at US$964/oz, Gold at
US$1,995/oz and Silver at US$24.02/oz.
The economic analysis of the Optimization Work is based on the
same economic model used for the economic analysis in the Technical
Report. The model inputs principally consist of metal production
volumes and metal prices, unit operating costs, capital costs,
sustaining capital expenditures, treatment charges (“TCs”) and
refining charges (“RCs”), royalty terms, closure and reclamation
costs, and taxation rates. The economic analysis of the
Optimization Work also includes the impact of the sale of gold and
platinum metal under the Precious Metal Purchase Agreement with
Wheaton Precious Metals Corp. (“PMPA”), excluding any delay ounces.
Although current market TCs and RCs are lower, the TCs and RCs in
the economic analysis are unchanged from the Technical Report. The
economic analysis does not consider any potential economic benefits
which the Marathon Project may qualify for under any government
incentive programs for critical mineral production.
The following table presents the key outputs of the economic
analysis for the Optimization Work, as compared to the economic
analysis contained in the Technical Report, and the economic
analysis contained in the technical report adjusted for the metal
price assumptions used in the Optimization Work.
Financial Evaluation(a)
Units
Optimization Work
Technical Report (using
Optimization Metal Prices)
Technical Report
Pre-Tax Cash Flow (undiscounted)
$M
2,877
2,859
3,387
Pre-Tax NPV6%
$M
1,555
1,464
1,798
Pre-Tax IRR
%
32.8
22.2
31.9
Pre-Tax Payback
years
1.9
2.5
2
After-Tax Cash Flow (undiscounted)
$M
1,923
1,929
2,285
After-Tax NPV6%
$M
998
935
1,164
After-Tax IRR
%
26.3
22.2
25.8
After-Tax Payback
years
2.1
2.9
2.3
Note:
(a) The economic analysis was carried out in real terms (i.e.,
without inflation factors) in Q4 2024 Canadian dollars, assuming no
project construction financing but inclusive of mining equipment
leasing.
Project Cash Flows
The table below highlights the estimated cumulative cash flows
to the end of year 3 which result from the Mine Plan Optimization,
the Initial Capital Optimization, and the Optimization Work on
sustaining capital and operating cost estimates. This analysis is
presented in comparison to the same analysis performed for (a) the
Technical Report, and (b) the Technical Report using the same metal
prices as the Optimization Work.
Cash flows from the project’s start to the end of year 3 of
operations are approximately $247 million greater than the
Technical Report cash flows and $129 million greater by the end of
year 5 at the same metal prices. These cumulative cash flows
include the initial capital cost used to construct the project,
including the impact of the PMPA, and therefore the positive cash
flow results support the short payback period.
Financial Evaluation
Units
Optimization Work
Technical Report (adjusted
for Optimization Metal Prices)
Technical Report
Cumulative After-Tax Cash Flow to End of
Y3
$M
232
(15.3)
91
Cumulative After-Tax Cash Flow to End of
Y5
$M
470
341
523
Sensitivities
The Project has significant leverage to palladium and copper
prices. The after-tax valuation sensitivities for the key metrics
are shown below.
Palladium Price US$/oz
1,000
1,250
1,500
1,525
1,750
2,000
NPV6% ($M)
394
682
969
998
1,257
1,543
Payback (yrs)
4.5
2.5
2.1
2.1
1.9
1.5
IRR (%)
14.8%
20.5%
25.8%
26.3%
30.7%
35.2%
Copper Price US$/lb
3.00
3.50
4.00
4.50
5.00
NPV6% ($M)
726
863
998
1,135
1,270
Payback (yrs)
2.4
2.2
2.1
2.0
1.9
IRR (%)
21.7%
24.1%
26.3%
28.5%
30.5%
After-Tax NPV 6%
Results
Palladium Price Sensitivity
(US$/oz)
1,000
1,250
1,500
1,525
1,750
2,000
Copper Price Sensitivity
(US$/lb)
3
112
410
697
726
984
1,274
3.5
255
546
834
863
1,122
1,408
4
394
682
969
998
1,257
1,543
4.5
531
819
1,106
1,135
1,393
1,678
5
666
954
1,242
1,270
1,528
1,812
After-Tax Results
OPEX Sensitivity
+30%
+15%
0%
-15%
-30%
NPV 6% ($M)
620
810
998
1,188
1,376
Payback (yrs)
2.4
2.2
2.1
1.9
1.9
IRR (%)
19.9%
23.2%
26.3%
29.2%
31.9%
After-Tax Results
CAPEX Sensitivity
+30%
+15%
0%
-15%
-30%
NPV 6% ($M)
779
889
998
1,109
1,218
Payback (yrs)
3.0
2.4
2.1
1.5
1.2
IRR (%)
18.2%
21.7%
26.3%
32.8%
42.8%
Further Opportunities and Next Steps
As part of the Optimization Work, Ausenco identified
approximately $75 million of further optimization opportunities
that require additional analysis. The opportunities relate to
additional layout optimizations, adjustments that would require
additional processing and metallurgical testwork, and market
re-tendering. Additional work will be required to validate some of
the concepts and to determine if these opportunities can be
realized.
The Company anticipates integrating the Optimization work into
the Project designs and will continue to investigate additional
construction efficiencies and opportunities, including working with
contractors to incorporate new earthworks details and cost
estimates.
The Optimized Mine Plan discussed herein does not result in any
material change to mineral resource and reserve estimates. Future
work will determine if any of the 2024 drilling (see July 31, 2024
press release)5 will be incorporated into an updated mineral
resource estimate.
The Company is continuing to finalize the provincial
construction permits and pursue project financing opportunities in
order to bring the Marathon Project into production.
Footnotes:
1 See “Economic Analysis” in this release for additional
information on the metal price assumptions used in the Optimization
Work and the Technical Report.
2 See
https://genmining.com/news/2024/generation-mining-continues-with-project-optimizat-8979/.
3 All references herein to the “Technical Report” refer to the
Company’s NI 43-101 technical report for the Marathon Project
entitled, “Amended Feasibility Study Update Marathon Palladium
& Copper Project Ontario, Canada” dated May 31, 2024 with an
effective date of December 31, 2022.
4 Initial capital is the total project capital, inclusive of 10%
deposits and lease payments for mobile equipment during the
construction and pre-production phase. The balance of this mobile
equipment cost is amortized during the operations phase.
5 See
https://genmining.com/news/2024/generation-mining-receives-key-approval-from-the-f-9207/.
Qualified Person
The scientific and technical content of this news release was
reviewed, verified, and approved by Drew Anwyll, P.Eng., M.Eng,
Chief Operating Officer of the Company, and a Qualified Person as
defined by Canadian Securities Administrators’ National Instrument
43-101 - Standards of Disclosure for Mineral Projects.
Forward-Looking Information
This news release contains certain forward-looking information
and forward-looking statements, as defined in applicable securities
laws (collectively referred to herein as "forward-looking
statements"). Forward-looking statements reflect current
expectations or beliefs regarding future events or the Company’s
future performance. All statements other than statements of
historical fact are forward-looking statements. Often, but not
always, forward-looking statements can be identified by the use of
words such as "plans", "expects", "is expected", "budget",
"scheduled", "estimates", "continues", "forecasts", "projects”,
“predicts”, “intends”, “anticipates”, “targets” or “believes”, or
variations of, or the negatives of, such words and phrases or state
that certain actions, events or results “may”, “could”, “would”,
“should”, “might” or “will” be taken, occur or be achieved,
including statements relating to mine planning and pit designs; the
timing and amount of estimated future revenues, the timing and
volume of payable mineral production, the payback period, and
financial returns from the Marathon Project.
Although the Company believes that the expectations expressed in
such forward-looking statements are based on reasonable
assumptions, such statements are not guarantees of future
performance and actual results or developments may differ
materially from those in the statements. There are certain factors
that could cause actual results to differ materially from those in
the forward-looking information. These include the timing for a
construction decision; the progress of development at the Marathon
Project, including progress of project expenditures and contracting
processes, the Company’s plans and expectations with respect to
liquidity management, continued availability of capital and
financing, the future prices of palladium, copper and other
commodities, permitting timelines, exchange rates and currency
fluctuations, increases in costs, requirements for additional
capital, and the Company’s decisions with respect to capital
allocation, and the impact of COVID-19, inflation, global supply
chain disruptions, global conflicts, including the wars in Ukraine
and Israel, the project schedule for the Marathon Project, key
inputs, staffing and contractors, continued availability of capital
and financing, uncertainties involved in interpreting geological
data and the accuracy of mineral reserve and resource estimates,
environmental compliance and changes in environmental legislation
and regulation, the Company’s relationships with Indigenous
communities, results from planned exploration and drilling
activities, local access conditions for drilling, and general
economic, market or business conditions, as well as those risk
factors set out in the Company’s annual information form for the
year ended December 31, 2023, and in the continuous disclosure
documents filed by the Company on SEDAR+ at www.sedarplus.ca.
Readers are cautioned that the foregoing list of factors is not
exhaustive of the factors that may affect forward-looking
statements. Accordingly, readers should not place undue reliance on
forward-looking statements. The forward-looking statements in this
news release speak only as of the date of this news release or as
of the date or dates specified in such statements. The Company
disclaims any intention or obligation to update or revise any
forward- looking information, whether as a result of new
information, future events or otherwise, other than as required by
law. For more information on the Company, investors are encouraged
to review the Company’s public filings on SEDAR+ at
www.sedarplus.ca.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241120361109/en/
For further information please contact: Jamie Levy
President and Chief Executive Officer (416) 640-2934 (O) (416)
567-2440 (M) jlevy@genmining.com
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