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Generation Mining Ltd (CNSX:GENM) Exploration Program and Palladium Market

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Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.

Generation Mining (CNSX:GENM) (OTCMKTS:GENMF) CEO Kerry Knoll joins Midas Letter to discuss what the company is working on, including their largest project, a palladium deposit in Northern Ontario, and their exploration program moving forward.

Transcript

James West: Kerry Knoll joins me now, Chairman of Generation Mining, trading on the CSE under the symbol GEMM. Kerry, welcome.

Kerry Knoll: Welcome. Thank you for hosting me.

James West: You bet. Okay, you’ve, we’ve got so much we could talk about here, Kerry, because you guys have done this before. Let’s start with an overview: what is Generation Mining doing right now?

Kerry Knoll: Our main project is a palladium deposit in Northern Ontario. It’s a large palladium deposit; I believe it’s the largest undeveloped palladium property in North America, and one of the top five or six in the world.

James West: I think you’re talking about the Marathon property, which has got a little bit of fame to it.

Kerry Knoll: That’s correct. It’s got a lot of history behind it. It was back in 2010 Stillwater Mining took the company that owned it over for $118 million USD. And we managed to pick it up for about $6 million earlier this year.

James West: Huh. Okay, and so the obvious question then is, why would Stillwater abandon it?

Kerry Knoll: Well, Stillwater put it on the shelf. They didn’t ever abandon it; they put it on the shelf in 2014 when the price of palladium was weak and the mining market was extremely weak. It was very difficult to raise capital. They had redone the feasibility study internally and didn’t like the numbers that they saw. Bear in mind that back then palladium was trading around $500 an ounce; currently it’s trading over $1,500 an ounce, so it’s tripled. So the economics have changed drastically.

James West: Okay, and maybe you could enlighten us, because I’m sure my audience would like to know – why is it that palladium reversed places with platinum in the commodities market?

Kerry Knoll: Well, platinum has always been the king of the platinum-group metals, and the reason being is because more of it was used for jewelry, for investment. And starting in the 80s and 90s, it was the most popular metal to be used in a catalytic converter in cars.

And in the early 2000s, testing different chemistries, they discovered that palladium, with a little bit of rhodium, did a better job on gasoline-powered cars; not so on diesel. So, as a result, over the last 15 years, virtually all the gasoline cars in the world now are using palladium.

James West: And diesel propulsion is kind of fading into favour, isn’t it?

Kerry Knoll: Well, it is in automobiles, but they still use it in the big tractor-trailers, in locomotives…there’s lots of platinum going into catalytic converters.

James West: Okay, so when you picked this up from Stillwater, what had been done, and what has been done since?

Kerry Knoll: Well, previous to Stillwater getting involved, the previous company had done a feasibility study. It was very positive, and in fact, that feasibility study was done at $321 palladium.

Stillwater acquired it, started the permitting process, spent something like $35 million on permitting, and then as I mentioned, in 2014, put it on the shelf.

In 2016, Stillwater was purchased by a South African company called Sibanye. And Sibanye maintained the property but did very little work on it over the next three years. Sibanye’s history has not been a mine-builder; they’ve been a mine-acquirer, and at the economics at the time, they just, they just did very little work on this. Now that palladium has run up, they decided that they would bring in a partner to develop it.

They do have a back-in right; they can pay us 31 percent of the CapEx numbers upon feasibility study, and buy their way back to 51 percent ownership, and we would have 49 percent ownership.

James West: Thirty-one percent of the CapEx required to build the mine if it goes to production?

Kerry Knoll: Yes. They would have to put that money into the joint venture, and then we’d be 51-49 afterwards. That’s if they elected to go back to come back into the project in a much greater way, and become the operator. I can’t speak for Sibanye, but I would think that given their size, with 100,000 employees, that a mine of this size probably wouldn’t be that interesting to them.

James West: Okay. So what’s your exploration program look like for the rest of 2019 and going into 2020?

Kerry Knoll: Well, we are doing a 12,000-metre exploration program that started about 10 days ago. We’re testing five or six different targets; the targets that we’re testing are a little deeper than traditional on this property. The ounces that we have there, and there’s over 6 million ounces palladium equivalent there right now, the ounces that we have there are all open pit.

We’re now looking for some deeper, higher-grade material similar to the stuff that they have been in the Bushveld in South Africa. And if we can find some of that, then that will enhance this project even further.

James West: Okay, so then, what are the big milestones that investors should be watching for that would be indicative of you achieving your goals?

Kerry Knoll: Well, first thing we’re doing is, we’ve gone back to the original drill holes, and there’s been more than 1,000 drill holes in this property. And we have gone back to those original drill holes, and we’re now re-doing the resource right from scratch. That is because the resources that were done in the past, there were some variances between different ones that were done, and we’ve decided to just go back to square one. We should have that out within the next couple of weeks.

Second step, looking forward to finishing this year, is a preliminary economic assessment to look at what do the numbers look like at $1,200 palladium, at $1,400 palladium. We think the numbers are going to look really, really good just based on what is there now. This is with no exploration success whatsoever.

If the numbers come out the way we think they’re going to come out, then we will be moving towards a feasibility study from there.

The other milestones, of course, are the exploration that we’re doing right now. We’ve just raised a little bit more money to possibly do an even bigger program, and we’re going to be doing – we have two rigs turning right now, and we will be hoping to announce some exciting results coming through the fall.

So we’ve got two prongs: we’ve got the economic study coming, the resource study, together with the economic study, and then we’ve got the drilling.

James West: Okay, great. What other companies are there in the world that could ostensibly add to the palladium supply in the next 10 years?

Kerry Knoll: Oh, in the next ten, there’s a few, but…let’s say in the next five years, for starters. Ivanhoe Mines, Robert Friedland’s company, is in the process of constructing a platinum-palladium mine in South Africa, Platreef. It’s a beautiful-looking deposit. It’s going to add, in Phase I, it’s going to add about 200,000 ounces of palladium to the market; that should be in a couple of years.

That is, to put that into perspective, the world mining market is about 7 million ounces, so 200,000 ounces is, you know, more or less 3 percent of the market.

James West: Sure.

Kerry Knoll: The other big change in the next five years will be, Norilsk is doing an expansion, a 15 percent expansion. Norilsk is the largest palladium producer in the world currently, and they’re, by going up 15 or so percent, that would add to the market, and I don’t have the number at my fingertips, but it’s probably similar addition to the Platreef numbers.

So you’re going to have a little bit of an increase from these two developments, but there’s really nothing else on the horizon. There’s a couple of other large deposits; there’s one in Finland that’s privately owned, and, but really, most of the other palladium would have to come – any increases would have to come from by-product production. So you might have a nickel mine being built somewhere, and you don’t really have much of a nickel price currently. So I can’t see too many new nickel mines being built right now, and that’s where you would probably get any additional palladium.

There really aren’t very many pure-play palladium projects in the world; there’s just, it’s a rare thing.

James West: Sure. Okay, interesting stuff. Now, finally, what’s your cash position? Is the company going to need to raise any money anytime soon?

Kerry Knoll: Well, as I said, we just did a small raise, $1.8 million. We raised $8 million in, I guess, June, to purchase the project and to get the company sort of started on this project. That, we raised $8 million then; we had about $4 million left as of the end of last month, and we’ve just added 1.8 million to it, and our program is $2 million. So we should finish the year with around $4 million, and in that case, we don’t need to raise money right now. We will need to raise money if we want to do further drilling, and we will need to raise money, probably, to do a feasibility study.

James West: You bet. All right, Kerry, well, it sounds like you’re well on your way to another success. Quickly, now, what was the last success that you just recently completed? I’m sorry, it’s cluttered with the marijuana industry in my mind, but I remember there was a good exit on your last project.

Kerry Knoll: So Generation Mining was actually a spinout company of our last project, which was called Pine Point Mines. Pine Point had a zinc project in the Northwest Territories; Osisko Metals took us over in 2018, and we took some of the exploration properties out of that company and formed Generation Mining with that as an exploration company. And we continue as an exploration company, but now our main focus is on the palladium, because we’ve got this large deposit, and because the palladium market is on fire.    

James West: Yeah, you bet. All right, Kerry, well, that’s great. As the mining market heats up, we’ll be sure to follow the story a little more closely. Thanks for your time today.

Kerry Knoll: Thank you.

Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.

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