Magna Mining Bets Big on Copper's Future with Acquisition of KGHM's Sudbury Portfolio

• Magna Mining is acquiring the McCreedy West copper mine and other Sudbury assets from KGHM in a transformational deal expected to close in Q1 2025
• McCreedy West is currently producing 300,000 tpa at 1.6% Cu. Magna sees potential to optimize and expand production to 1,500 tpd, potentially generating $20-40M in free cash flow in 2026
• Magna plans to use McCreedy cash flow to restart the Levack mine in 2026 and advance its Crean Hill project to production by 2027, with a PFS planned in 2H 2025
• CEO Jason Jessup and Magna's team have extensive prior experience at these assets from their time at FNX Mining. FNX grew these non-core INCO assets into a $1.5B company
• Magna sees further exploration upside in the 2km trend between McCreedy West and Levack, targeting a new high-grade footwall copper discovery in the next 2 years

Copper has emerged as one of the most critical metals for the global energy transition. With demand poised to surge from the electrification of transportation, renewable power infrastructure, and the electricity grid, the world needs new copper supply. One company positioning itself to help meet this need is Magna Mining (TSXV:NICU), a Sudbury, Ontario-focused copper exploration and development company on the cusp of becoming a producer through a transformative acquisition.

A Game-Changing Transaction

In September 2024, Magna announced a deal to acquire eight properties in the Sudbury Basin from Polish mining giant KGHM for a total of $9.3 million. The purchase price consists of $5.3 million in cash, $2 million in Magna common shares upon closing, an additional $2 million in cash due on Dec. 31, 2026, and contingent payments of up to $24 million, depending on future milestones. The crown jewel is the currently producing McCreedy West copper mine, but the package also includes two mines on care and maintenance (Levack and Podolsky), plus five exploration properties.

This acquisition has been years in the making. Magna CEO Jason Jessup recognized the opportunity back in 2015 when he saw these assets becoming non-core under KGHM's ownership after it acquired Quadra FNX in 2012. Jessup and several Magna team members are Quadra FNX alumni who know these assets intimately and see the potential to replicate FNX's success in growing these former INCO properties into a $1.5 billion company.

Back in 2002, FNX acquired these five past producing operations from INCO...these were non-core assets to a major mining company like INCO, and then FNX as this tiny little junior, invested into exploration, restarted McCreedy West mine, made a big discovery at Levack, restarted Levack mine, made a discovery at Podolsky, restarted Podolsky...and became a company that in 2010 was acquired for $1.5 billion. We thought, you know, there was just a great business model there.

McCreedy West: The Foundation

The producing McCreedy West mine will form the foundation for Magna's growth. The underground mine hosts three distinct zones - a nickel-rich Main zone, a copper-dominant 700 Complex, and a PGM-rich PM zone - providing commodity diversification and flexibility.

McCreedy West produced 317,000 tonnes grading 1.6% Cu in 2023 from the 700 Complex. Magna sees potential to optimize and expand production from around 900 tpd currently to 1,500 tpd by the end of 2025, primarily from the 700 Complex. Jessup hopes that this production level could generate $20-40 million in free cash flow in 2026, depending on copper prices.

Interview with CEO Jason Jessup

The Path to Four Mines in Production

Magna plans to use McCreedy West cash flow to organically fund the restart of the Levack mine, targeting initial production in 2026. Levack boasts a historic high-grade resource of 700,000 tonnes at 4% Cu, 1% Ni and 4-5 g/t PGMs.

The Levack mine was the flagship when I went there in 2009. We started developing what was called the Levack Footwall Deposit, later named the Morrison Deposit, and it was an incredibly high-grade copper footwall deposit. We were mining month after month 8 to 10% copper, 8 to 10 grams platinum/palladium/gold combined and about 1.5% nickel... high grade, narrower, more selective mining, but incredible grades, high margin rock. That was our flagship.

In parallel, Magna will conduct a pre-feasibility study on its 100%-owned Crean Hill project in H2 2025, aiming to commence underground development in early 2026. By the end of 2027, Magna envisions three mines in commercial production - McCreedy West, Levack and Crean Hill - with Podolsky offering a fourth mine in the future. Cash flow from the operations could potentially fund the construction of a stand-alone mill and a restart of Magna's Shakespeare open pit mine. Though Jessup clearly presented this plan as "conceptual" and noted that things could change.

The Exploration Upside

In addition to a clear path to production growth, the KGHM transaction offers Magna compelling exploration upside. Jessup sees particular potential in the footwall environment along the 2km trend between McCreedy West and Levack.

Generally behind every mine there's a footwall deposit - these high-grade PGM deposits. We've got, I think, a better understanding than a lot of groups out there, and it's been demonstrated by the discoveries that have been made in the footwall by our team in the past. There's still a tremendous amount of upside there. That area between the McCreedy West mine and Levack mine, it's about a 2 kilometer trend there that has seen very little drilling in the footwall.

With a stronger balance sheet post-financing, Magna will aggressively drill these targets, and Jessup said that would be "disappointed" if the company didn't make a new high-grade footwall discovery in the next two years.

The Investment Thesis for Magna Mining

• Near-term cash flow perspective from McCreedy West copper mine, with potential to optimize and expand production to generate $20-40M in free cash flow in 2026
• Plans to restart Levack mine in 2026 and advance 100%-owned Crean Hill project to production by 2027
• Exploration upside in prospective 2km trend between McCreedy West and Levack, with goal of high-grade footwall discovery in next 2 years
• Track record of value creation - management team grew these assets with FNX Mining and sold it at $1.5B sale to Quadra in 2010
• Attractive valuation for a copper producer with a pipeline of development assets and exploration potential in a Tier 1 jurisdiction

Macro Thematic Analysis:

The global shift towards electrification and decarbonization is intensifying the need for copper. The red metal is a critical component in electric vehicles, charging infrastructure, renewable energy systems, and transmission and distribution networks.

Copper's unmatched thermal and electrical conductivity make it essential for the clean energy transition. For example, EVs require up to 4x more copper than internal combustion engine vehicles. S&P Global predicts that demand for copper will increase from 25 million metric tons in 2022 to 50 million metric tons by 2035.

However, supply growth is constrained. Years of underinvestment have left the copper project pipeline thin. New discoveries are scarce, projects are often smaller and lower grade, and permitting and capital costs are rising.

Capitalizing on the coming supply gap will require new mines in stable jurisdictions. As Magna Mining CEO Jason Jessup sums up:

We are pretty bullish on copper. We think it's got some really strong fundamentals going forward.