Generation Mining - Unlocking Value in Ontario's Next Copper-Palladium Mine

• Generation Mining is developing the Marathon palladium-copper project in Northern Ontario, aiming to be fully permitted and shovel-ready by summer 2024.
• The company has strong relationships with local First Nations groups and has received its environmental assessment permit. It is now applying for final construction permits.
• Generation Mining believes higher copper and palladium prices will help fund the project, expects generalist funds to enter the sector as prices rise.
• Infrastructure is already in place with power lines, rail access, and a supportive local community. The company also has an experienced management team.
• Key risks include permitting delays and the ability to raise sufficient capital, company evaluation could re-rate significantly higher as Marathon approaches production

Generation Mining Poised to Advance Marathon Palladium-Copper Project

Generation Mining (TSX:GENM) is moving closer to constructing its flagship Marathon palladium-copper project in Northern Ontario. The development-stage company aims to have the mine fully permitted and ready for construction by summer 2024.

In a recent interview, Generation Mining President & CEO Jamie Levy provided an update on the project's progress and shared his views on the outlook for the copper and palladium markets. For investors considering exposure to critical "green" metals like copper and palladium, Generation offers a compelling value proposition as it advances Marathon towards production.

Interview with President & CEO Jamie Levy

Project Background and Permitting Progress

The Marathon property is located in northwestern Ontario, about a 10-12 hour drive from Toronto along the Trans-Canada Highway. The project benefits from excellent infrastructure, with two power lines from a nuclear plant in eastern Ontario intersecting the property, rail access nearby, and an existing road to the site. The town of Marathon, with a population of around 4,000, is very supportive of the project.

Generation has built strong relationships with local First Nations, signing an agreement with partner Biigtigong Nishnaabeg and engaging with other groups in the area. This social license to operate is critical, especially given the recent disruptions to mining projects in other jurisdictions.

In November 2022, Generation received its environmental assessment approval for Marathon – a major milestone. The company is now in the process of applying for its final permits to begin construction. Levy explained:

"We received our environmental assessment in November of 2022, which is a high standard of permitting a joint review panel a company can go through. After we received that, we started applying for provincial permits. We have our phase one permits, which is a closure plan permit to remove trees. Now we can technically start to do early works construction or we're going to wait for the phase two and phase three permits. They're coming along monthly. We anticipate to get them by the summer of this year."

While permitting remains a key risk, Generation appears to be in the home stretch after investing tens of millions of dollars and several years into the process. Receiving the final permits by this summer would be a major catalyst for the stock.

Experienced Team Overseeing Construction

Another key differentiator for Generation is the strength of its management team in mine construction and operation. Levy highlighted this as an issue for some companies that have run into challenges building new mines on time and on budget.

"A lot of people undervalue the necessary need for a good owner's team... My board (who's very experienced), my management team and my COO Drew Anwyll have done this before. We want to make sure that we're fully at a certain level of detailed engineering before we start construction, at the 75% complete [level]."

Generation is already 40% complete with detailed engineering and is keenly aware of the risks of starting construction prematurely. Anwyll has built multiple mines, so investors can have a degree of confidence in the team's ability to execute.

Funding the Project in a Rising Commodity Price Environment

Of course, mine construction requires significant capital, and financing is another key risk factor. Levy acknowledged that while there is a lot of investor interest in the Marathon project, generalist funds in particular are not fully engaged in the mining sector yet despite rising metals prices.

He noted the divergence between the strong performance in physical gold prices recently compared to lackluster gold mining stocks. "The gold market over the past week has been quite phenomenal. The commodity has gone up, but the gold stocks are still kind of teetering, like they're just not moving," Levy said.

However, Levy believes this will change as copper and palladium prices continue to rise due to growing supply constraints and demand growth. He sees US$4.25-$4.50/lb copper as the incentive price needed to spur new mine development.

On the palladium front, Levy pointed to reports showing a large short position that will need to be covered, as well as recent supply disruptions, as bullish factors for the metal. Palladium is a key component in automotive catalytic converters, and while Levy is measured in his outlook for electric vehicle adoption, he believes palladium demand will remain strong. Even in an EV growth scenario, copper demand would surge given its use in EV batteries and charging infrastructure.

As copper and palladium prices rise, Levy expects generalist funds to enter the mining space and bid up valuations for companies like Generation.

"It's going to start to move. The smart investors, when they start looking at the discount to NAV, they'll start buying the stocks and say, the stock is cheap relative to where they should be."

With over $10 million in cash, Generation is funded to continue advancing Marathon towards construction, while the rising commodity price tide would lift the company's valuation and improve access to capital.

The Investment Thesis for Generation Mining

• Generation offers exposure to 2 critical metals – copper and palladium – both of which face growing supply constraints and deficits. Higher prices would derisk the financing of Marathon's construction.
• The company is significantly derisked and at an attractive valuation compared to producing miners. Key permits are expected by this summer and the management team is highly experienced.
• Marathon benefits from excellent infrastructure and First Nations support in a top-tier mining jurisdiction. This should translate to a smoother path to production vs. recent new mines.
• Investors can gain exposure to Generation through its TSX-listed shares (GENM) or warrants (GENM.WT). An investment would be a bet on the company's ability to secure final permits, fund construction, and begin producing into rising copper/palladium markets.

Key Takeaways and Implications

For investors bullish on critical metals like copper and palladium, Generation Mining offers a compelling opportunity. The Marathon project is significantly derisked from a permitting and social license perspective in a mining-friendly jurisdiction. With a seasoned management team steeped in mine construction experience, Generation seems well-positioned to bring a new copper-palladium mine into production later this decade.

The key upcoming catalysts will be the receipt of final construction permits, anticipated by this summer, as well as the completion of a feasibility study and project financing package. Rising copper and palladium prices would go a long way in supporting a positive construction decision and capital raising.

While still speculative, Generation's Marathon project seems to check many of the boxes that tripped up other recent mining developments – social license, experienced team, detailed engineering. If management can execute, the company's valuation could re-rate significantly higher as Marathon approaches production in a tightening market for its key metals.

The interview with Generation Mining CEO Jamie Levy highlights several key macro themes in the mining sector. The first is the growing challenge of permitting new mines, especially in "safe" jurisdictions like Canada. While Marathon appears to be nearing the finish line, Levy emphasized the long timelines (multiple years) and high costs (tens of millions) required to permit a new mine. This is likely to constrain new supply.

At the same time, Levy sees growing demand and supply challenges for metals like copper and palladium. In copper, he pointed to reports of smelters "hurting for concentrate" and recent disruptions impacting production. For palladium, Levy cited a large short position that needs to be covered and the metal's ongoing role in emissions reduction via catalytic converters. Even in an EV growth scenario, copper demand would benefit.

Against this backdrop of constrained supply and growing demand, Levy sees rising metals prices as the cure for limited capital availability. "I think with the higher prices that will cure, that will cure [the financing challenges]. We'll cure that where we are, we're in Northern Ontario." The implication is higher copper and palladium prices will be required to incentivize new mine supply and fund the development of projects like Marathon.