Categories: Precious Metals
Topics: General Precious Metals

Generation Mining (CSE: GENM) Executive Chairman Kerry Knoll Talks Past Successes, Finding Value in the Resource Space, & the Marathon Palladium Project

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the Executive Chairman and Director of Generation Mining (CSE: GENM)(OTC: GENMF), Mr. Kerry Knoll. Kerry, how are you this afternoon?

Kerry Knoll: I'm great, thanks. How are you?

Gerardo Del Real: I'm well, thank you for asking. Anyone that's been in the resource space is familiar with your past, your successes. Can you provide a bit of that background to those that may be new to the Generation Mining story or the resource space? We're finally at a point in the space where we're having new sets of eyes and new blood per se. So can you provide some context as to your background and the many successes you've had, Kerry?

Kerry Knoll: Yeah, of course. Well, going way back, I was a journalist and I wound up at a newspaper called The Northern Miner. I was editor of their magazine. They had a magazine then, and I was the editor of that for a few years. What happened was I wrote this big feature on this new way of recovering gold called heap leaching, which is now responsible for about half of the world's gold, or at least it was at one point. Oddly enough, there was no heap leaching going on in Canada, and Canada was the third largest gold-producing country in the world. I just thought that was really odd. 

So I asked a bunch of mining companies here in Canada why there wasn't any, and they all said it was too cold in Canada. So I went down to visit a mine in Idaho, and it was 35 below zero and they were heap leaching away. And I thought, "Well, that's not true." It's just funny how people are slow to adapt to new technology in some cases. So I left my job in 1987 with the goal of starting the first heap leach mine in Canada. That was why I did it. 

I was also a little bit upset with the junior mining companies. They're actually a lot better today than they were then. But back in those days, the juniors, they weren't interested in building mines. They were interested in selling stock and mostly selling their own stock. That kind of all disappointed me. So I also wanted to be the guy who had a junior company and actually built it into a mining company.

I incorporated my first company, it was called Glencairn Gold. I had Glencairn for 20 years. I was president of it. Well, we first of all built a small diamond mine in Brazil that didn't make any money. Then we spun out a new subsidiary called Wheaton River, and that was in 1991. 

In Wheaton River we did what I set out to do. We built the first heap leach mine in Canada. That was the Golden Bear Mine. It was very successful. We were producing gold for $125 an ounce. It wasn't a big mine, but we made up to 100,000 ounces one year. In 2001 or 2002, we caught the attention of Frank Giustra, and he put some money into the company. He's a mining billionaire, I guess, today. He brought in some other people; Pierre Lassonde, Ian Telfer, and Frank Holmes. There was a group of them.

Gerardo Del Real: That group has done well for itself. Not to cut in there, Kerry, but please continue.

Kerry Knoll: Yeah. Eventually they took control of it and they used that as a vehicle and started buying up other mining companies, and eventually bought up Goldcorp and changed the Wheaton River name to Goldcorp and at that time, within about three years, became the largest cap gold mining company in the world. They also spun out another company called Silver Wheaton, which is now called Wheaton Precious Metals. Randy Smallwood is the president of that company, which is, I think, a $20 billion company on its own. Randy was one of our top geologists at Wheaton River. So Randy's worked for the Wheaton name for longer than anybody, for almost 30 years.

Anyways, so Glencairn at that time was basically a holding company. Then in 2002 decided it was time for it to become a mining company as well. So we acquired a project in Central America, in Costa Rica, and got it permitted and got the mine built, and acquired a couple of other mines in Nicaragua. In 2007  got taken over by B2Gold, at which time we had three operating mines and about 1,200 employees. That was 2007. 

Then kind of in the meantime, after those guys took control of Wheaton River from us, in 2004 we started a new company called Blue Pearl Mining. We wanted to get into the molybdenum space. And famously Blue Pearl, we came out at $0.10 a share and within about a year, we were trading at about $2.50 a share because the price of molybdenum went through the roof. We acquired the largest undeveloped molybdenum project in Canada.

Gerardo Del Real: It's a great way to never have to buy a drink again, huh Kerry?

Kerry Knoll: Well, people were buying us drinks. It went to $2.50 a share, and then we did a reverse takeover of the largest private mining company in the US called Thompson Creek, which we raised $700 million to purchase, which is to this day the largest raise of any junior mining company ever in Canada. We bought a company called Thompson Creek that was making $1 million dollars profit a day back in those days.

Gerardo Del Real: Wow.

Kerry Knoll: Our shares became a market darling, and molybdenum kept going up. So eventually we were trading at $24 US a share within two years of coming out at a dime, so that was a good one.

Gerardo Del Real: That's a heck of a resume, Kerry. Obviously, from your feature on heap leach, the heap leaching process, to the multiple, multiple successes, big successes by the way, you like projects with scale and you like being early to ideas. 

You obviously know how to monetize those, which brings me to Generation Mining. I look at Generation Mining, and I tell you what attracts me to it. Obviously the after tax net present value of the Marathon Palladium Project being about $1.55 billion Canadian, give or take, right? And the current market cap at $45 million. There's a lot of runway and there's a lot of disconnect there. So let me ask you with all of that success, you could be anywhere in the world having a great time, enjoying a drink. What attracted you to the Marathon deposit and Generation Mining in particular?

Kerry Knoll: Let me go back a little bit. So with that molybdenum story I told, what was very apparent to me was first of all, focus on the commodity. It's not that hard, figure out which commodities are going to be in short supply. Look around when they're out of favor and buy them. You got to be able to write a check of course, so I was able to do that. In 2004, we chose molybdenum. In 2009, I got into the lithium business. In 2014, I got into nickel, which had a short-lived rally, but it had the rally nevertheless. In 2016, I got into zinc, and it had a rally, it went up to a $1.60. And we sold that company to Osisko Metals.

Generation was a spinout of a company that we sold to Osisko in 2018. And we called it Generation Mining. The reason I call it Generation Mining is so that we want to build a mine that will last for at least a generation. So we were looking for big. One of the early mistakes I made in my career was a lot of our mines had 6 and 8-year mine lives. It's not of interest to other companies to acquire you if you have a short mine life. So we started looking. We looked at cobalt. And I was looking really hard at vanadium, and looking at some of the other nickel again. I looked at the fundamentals for palladium. And you know what? I had never seen as good fundamentals for any metal in my entire career. And I've been a gold bug for over 40 years now.

The reason is because in the world there were virtually no mines under construction. There was none, other than Platreef, that's near to production. And yet it's a metal that is required to be in every car sold in the world. So the government is saying, you can't sell a car without this metal, and yet there's not enough of it. It was just a recipe for the price to go up. And so at that point, I think palladium was trading around $900 or $1,000. Jamie, the president of Generation, kept showing me different palladium projects but none of them were any good. And then he showed me Marathon. And I was like, "Holy crap. This is big. This is on the Trans-Canada Highway.” I have a checklist of about 26 items that have to have 100% rating in order for me to buy a project.

The metallurgy, the dimensions of the ore body, the local environmental situation, the socioeconomic, the natives, the local town, all of these different things have to check on the list, and this one checked everything. So we called up Sibanye in January of '19, and told them we'd like to buy it. And they said, "Well, you know what? It's for sale." 

So we negotiated a price and we were able to get it before palladium had its big run up. So our timing was good, and we've come out with the numbers. One thing I'm not very good at is, I don't think I'm a really good promoter. The shares in my company tend to lag for a while until they really catch on and once they catch on, they catch on. But I think that this one, its time is coming because we're doing a feasibility study now. And I think we'll get re-rated when the numbers of that come out.

Gerardo Del Real: Agreed, agreed. And just for some context – and we went over it last week with Jamie – but there's over 3.8 million ounces of palladium. For those not familiar with palladium, it's trading $100 higher than gold spot price right now, right? So you have $1,826 palladium right now. So you have 3.8 million ounces of palladium. There's a platinum credit there that's not insignificant, 1.2 million ounces. Both of those are in the measured and indicated category. You have nearly 500,000 ounces of gold in the measured and indicated categories. And just for kicks, a billion pounds of copper in the measured and indicated category. So again, I look at the market cap, it's $44, $45 million. $13.9 million of that I believe is in cash. Again, there's very, very solid economics tied to this. 

So let's talk about what it looks like moving forward and what the end game is, which I'm going to put words in your mouth, but I have to believe that you plan on monetizing this. I imagine that with the economics tied to it, with the community relations you have, with the metallurgy, the recoveries and the upcoming catalysts, isn't going to be the most difficult thing for Generation, given the network and the extensive set of contacts that you and the team have. But can you paint a picture for me, Kerry, about what the next few quarters look like for Generation? Because I think they're important ones for the company.

Kerry Knoll: Yeah. So there's multiple things happening. Obviously, the most important one for us is the feasibility study. We're using tier one firms. We want to make sure that we know exactly how much this is going to cost. It's well known in the business that if you're selling a project, you use certain companies to do your studies. And if you're going to build a project you use a different set of companies. So we're planning to build it. So we are definitely using tier one companies. We'll be announcing the list of those companies shortly. We've already announced a couple of them. So that's plan A.

Plan B is to get our permits. Permits are probably our biggest time lag towards production. We think it's going to take us a couple of years, and there's a lot of work involved. But we think it's eminently permittable because first of all, it's a clean mine, as mines go. There's no acid rock drainage or other deleterious elements that are going to go into the rivers. That's a big thing on my checklist when we look at projects. Number two, the local town is almost dying. It's gone from 5,000 to 3,000 people because the local mines have been running out of ore. They're very solidly behind this project as well. So you've got the people behind it and you've got the right projects to get permitted. So that'll be an ongoing thing. There will be landmarks as that's going on. 

The third thing we're doing, and it's not as if we need more tonnes because in our PEA we only used about 37% of the tonnes of measured and indicated that we had on the property. There's a lot more rock there that we could put into a mining plan. It's probably not quite as economic. It's a little deeper or a little further away, but we don't need to find another deposit that's a gram and a half of palladium equivalent. But what we're looking for – and so this is where our exploration comes in – is there's been a few rocks found on this property that are very, very high-grade, massive sulfide palladium. As high as 200 grams per tonne of palladium and 9% copper.

Gerardo Del Real: Wow.

Kerry Knoll: It's thought that these came from a deeper deposit. So what would have happened is a deposit somewhere in the plumbing system would have formed back in the day, when all these volcanoes were happening and forming the various deposits on our property. It's thought that one of those deposits was very rich, down below somewhere, and that a subsequent volcanic event brought parts of that to surface or to higher up in the system. So we're looking deeper in the system for the source of those boulders. We did some seismic work last year, and we're doing something called Magnetotelluric this year, and that's what you're talking about, the press release we just came out with.

Magnetotelluric is a method that takes the electromagnetic field of the earth and looks at it from the bottom up. It can go very deep, a lot deeper than most geophysics. And interestingly, the discovery by Impala called Sunday Lake, which is not that far from us, was made using Magnetotellurics. And Magnetotellurics has never been used on our property. 

Also up until we came along, nobody had ever drilled deep on our property. This is like 1,000 meters down where we'll be looking, and nobody's ever looked that deep before. So we're looking for a deep, very high-grade deposit. That could be a game changer for us if we're able to find it. It's of course exploration and there's never any guarantees, but we do have rocks that indicate there is or was a very rich deposit somewhere. So it's a detective game. We're looking for it. We've got some drill targets. We're going to do the MT work this summer, and then we're going to drill

Gerardo Del Real: These MT deposits and the drilling that's going to happen are on the Sally deposit, correct?

Kerry Knoll: We have a big anomaly on the Sally deposit, that's one of our targets. There's four zones on our property. There's the Sally, the Geordie, the Main Zone, and then something called the W-Horizon, which is right next to the Main Zone. The W-Horizon is the richest of all of them. It's not that big, but it's rich. So that has not been fully delineated. If you can envisage a sink with a drain, with a trap underneath, it's such a trap that will form these small, high-grade deposits that for example, the Eagle nickel mine just south of us, it's one of Lundin Mining's projects, is such a trap.

We're thinking that possibly in the feeder zone that brought us the W-Horizon, if there is a trap down there somewhere that could also be the source of a very rich deposit. Bear in mind that it doesn't have to be that rich to be worth a lot of money. North American Palladium, which had about 6 years of reserves left, they're mining underground, they're just over 3 grams palladium equivalent and they sold that company for $1 billion. So if we can find something 3, 4 or 5 grams could be a game changer for us.

Gerardo Del Real: A lot of runway between $45 million, the current market cap, and $1 billion, right?

Kerry Knoll: Yes. For sure.

Gerardo Del Real: Excellent. Kerry, I know I've taken up a little bit of your time today. I want to thank you for that. I think the background is important. I think it's an exciting story that's not yet understood well. I suspect that will change in the coming months. 

Is there anything else that you'd like to add? Obviously, I'm looking forward to having you back on as we get closer to two results from the surveys and the drilling there that's forthcoming.

Kerry Knoll: Not really. I just want to make sure that people understand that we're well-financed. We did a raise in January. We're financed to do this drilling, to do the feasibility study, to do the permitting. We're not going to need to go back to the market in the near future. I think that people always want to know that, and I wanted to make sure everybody does know.

Gerardo Del Real: Absolutely. And you have some deep pocketed shareholders, yourself included. Osisko's on board, Zebra Holdings is on board, Sibanye, Eric Sprott. Pick of the litter, right? Again, the network I think is going to be incredibly helpful for the end game, which is to sell this for a whole heck of a lot more than it's worth now.

Kerry Knoll: I think so. I think that'll happen. I think somebody will be buying this company. I don't know whether that'll be after we build it or before we build it, but it doesn't really matter in the long term. This is going to be a nice addition to some company, perhaps a South African company who wants to diversify out of South Africa. Perhaps a gold company that wants to stay in the precious metal space, but doesn't want to have to go too far afield. We're in Canada, a nice tier one jurisdiction. I think there's going to be some interest at some point. But I think the feasibility study will tell that tale.

Gerardo Del Real: Agreed, agreed. Great work. Kerry, thank you again.

Kerry Knoll: Well, thank you. Thanks for the call.