Generation Completes Optimization Work for the Marathon Project with Improved Mine Plan and Reduced Capex
Generation Completes Optimization Work for the Marathon Project with
Improved Mine Plan and Reduced Capex
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
TORONTO--(BUSINESS WIRE)--November 20, 2024--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
Technical
Report
Optimization
Metal Prices)
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.