In a March 4 research note, analyst Adam Schatzker reported that Mackie Research Capital Corp. raised its target price on Generation Mining Ltd. (GENM:TSX; GENMF:OTCQB; 9GN:FSE) after the newly announced feasibility study of the Marathon palladium project "significantly improves economics" over those in the preliminary economic assessment (PEA).
Mackie boosted its target price on Generation Mining to CA$2.05 per share from CA$1.30; the current share price is approximately CA$0.92.
"The Marathon project is robust that will likely attract the attention of a number of other companies that may wish to partner with Generation Mining or acquire it to take full ownership of the project," Schatzker commented.
He pointed out that specifics regarding tonnage and throughput constitute the biggest change between the feasibility study and Mackie's previous estimates, "which together result in more metal produced over a shorter time."
The PEA outlined total processed tonnage of 89.4 million tons (89.4 Mt) over a 14-year mine life whereas the feasibility study shows an estimated Proven and Probable reserve of 117.7 Mt and a 13 year mine life. Processed tonnage in the feasibility study is 27% higher than in the PEA, and contained metals is 21% higher.
"The feasibility study has significantly derisked the Marathon project, and the project is of higher quality now than it was when investors had the PEA upon which they could rely," wrote Schatzker.
Given the new parameters in the feasibility study, Mackie revised its Marathon net present value at a 5% discount. That figure increased 70%, to $973 million from $574 million.
Now that Canada-based Generation Mining achieved the milestone of feasibility study completion, its partner Sibanye-Stillwater must decide in 90 days, after reviewing the report, whether it wants to maintain its 20% project ownership, boost its interest to 51%, buy the entire project or divest its stake.
"We continue to believe that the Marathon Project does not fit with SS's strategy or portfolio of assets and we are therefore assuming that it stays at 20% and may choose to exit at some point in the future," Schatzker wrote.
"We believe that there several means by which the Marathon Project can be financed (equity, royalty/stream sale, project debt, etc.) and that it is a project that will most likely proceed (assuming the palladium price remains robust), regardless of the ownership structure or composition in the future," the analyst noted.
Schatzker concluded the report by suggesting stockholders "remain patient as we believe Generation Mining will be able to generate significant value for investors given the Marathon project's robust economics."
Mackie Research rates the exploration company a Speculative Buy.
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Disclosures from Mackie Research, Generation Mining Ltd., Target Change, March 4, 2021
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