In mid-April Generation Mining Ltd. (GENM:CSE; GENMF:OTCQB) signed a Letter of Intent (LOI) with Sibanye-Stillwater (SBGL-NYSE ADRs) to obtain up to 80% of the Marathon PGM project near Marathon, Ontario. At the end of 2017 Sibanye reported resources of 730 million pounds of copper and 4.3 million ounces of palladium/platinum and some gold. At prices back in 2017 the company viewed the Marathon project as uneconomical but realized that it they could drill and find the feeders to the system, it could be economic.
Palladium has been on a roll lately jumping to a historic high of about $1600 before correcting back to the current $1331. Platinum on the other hand has been settling back to historic lows against palladium, gold and silver.
A new resource junior named Generation Mining (GENM-C) started in the spring of 2018 has negotiated a deal with SBGL where they can earn up to 80% of the Marathon project. Terms require GENM to pay $100,000 on signing and an additional $2.9 million by June 15, 2019 and to issue $3 million in shares of Generation Mining at the same price of a planned $10 million private placement. The PP will pay the deposit to SBGL for Generation Mining to have earned 51% of the project.
Generation can earn another 29% of the project by spending $10 million for exploration and development over a four-year period. Should they not complete all of the $10 million for exploration, SBGL will have a 90-day period where they can regain 31% of the project bringing them back to 51% for $1.
Once Generation Mining has completed their 80% earn in and done a definitive feasibility study and made a commercial production decision, SBGL can increase their ownership back to 51% by agreeing to finance 31% of the cost of capital to production. At that point partners would be responsible for financing their ownership interest to production.
It's an unusual agreement but should platinum and palladium go higher it could be a very good deal for Generation no matter if they own only 20% or 80%. It's a pure call on the price of palladium and platinum and there aren't many companies in this space.
The shares have shot higher from $0.10 at the start of the year to a high of $0.32 on the 3rd of May. Obviously the company is charging forward to complete the private placement in the next month and will have lined up investors will to take a punt on a lifetime palladium call.
Like every other new resource company with grand ideas, there are a lot things that could go wrong. Completing the $10 million placement in what is a pretty dismal financing market is a biggie. Once past that giant hurdle it's a question of if the company has the geological expertise to find the high-grade feeders at the Marathon project.
Junior resource companies are a combination of lottery ticket and baseball trading card. The Marathon project has a lot of completed drilling and technical data amassed by SBGL. It will be interesting to follow to see if Generation can move a sleeping project forward and higher.
Generation Mining is an advertiser. Do your own due diligence. I own no shares but intend to participate in the private placement.
GENM-C $.29 (May 06, 2019)
GENMF-OTCQB 45.0 million shares
Generation Mining Website.
Bob and Barb Moriarty brought 321gold.com to the Internet almost 16 years ago. They later added 321energy.com to cover oil, natural gas, gasoline, coal, solar, wind and nuclear energy. Both sites feature articles, editorial opinions, pricing figures and updates on current events affecting both sectors. Previously, Moriarty was a Marine F-4B and O-1 pilot with more than 832 missions in Vietnam. He holds 14 international aviation records.[NLINSERT]
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