General Base Metals
Generation Mining (TSX: GENM)(OTC: GENMF) Executive Chairman Kerry Knoll on Maintaining Operatorship of Flagship Marathon Palladium-Copper Project, Ontario, Canada & Next Steps Toward Mine Construction
Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the executive chairman of Generation Mining — Mr. Kerry Knoll. Kerry, it's been a bit. How have you been?
Kerry Knoll: I've been good… real good, thanks!
Gerardo Del Real: It’s good to have you on! There was some pretty important news on the 21st of July that I want to cover and then get your take on. Here's the headline… the headline reads:
Generation Mining maintains operatorship and majority control of the Marathon Project as Sibanye-Stillwater confirms it will not exercise ownership increase right.
I think there's kind of two camps. There's the camp that I'm in, which is this was the outcome that I thought was likely. It's the outcome that I think was signaled to the market by the company; correct me if I'm wrong. And then, there’s another camp — which we discussed a bit off air — that felt that there was a possibility for a takeover bid.
Now, I still think Generation is a clear takeout target because of the impressive economics around the project. But clearly, the contingent that thought you were going to get taken out before the next step decided they were going to sell some shares. And clearly, somebody has stepped up into the market and decided they're happy to buy them.
So I'd love to get your take on all of that, Kerry.
Kerry Knoll: Well, certainly it was our feeling — at least amongst the top management — that it was most likely that they were going to do what they actually did for a lot of reasons that I have reiterated over the last year; one being that these are not mine builders.
Sibanye, they are great mine operators and acquirers. But they, in their short history, have not built mines. They don't operate in Canada; they don't operate open-pit mines. So for those starter reasons — and then, more recently, if you follow their reportings — they have indicated that they want to move towards gold and battery metals. And they are already large producers of palladium and platinum. And I think they want to diversify, and that's fair enough. So that was also going against them making this move.
But that all said, I think that this is the best thing for our shareholders. And it was our preferred outcome because we think that, first of all, we're going to be able to finance and build this. It's not a complicated mine.
The number of banks, etc., that are interested in helping us raise that money has been growing. And even in the last 24 hours, we've been getting some new calls, and we think we’re going to be able to finance it. We think we're going to be able to build it, and we think that the shareholder value will be much, much higher built.
Gerardo Del Real: Agreed. Let's talk about that. You have a history of success monetizing assets and getting stuff done. It was interesting to me that in the news release, there's a quote there that reads:
Gen Mining will continue to advance the project financing alternatives — as you just mentioned. And then it says… including potential non-dilutive funding options.
Obviously, I'm aware that if you're in the middle of talking with several potential banks and suitors, you probably don't want to show your hand in an interview with me. But can we talk a bit about the non-dilutive funding options that the company is receptive to without getting into the specifics that I know you can't get into?
Kerry Knoll: So there's kind of two situations. There's one, is the money we're going to need before production. So in the next year from now, we're going to need money to do the detailed engineering, which is part of the capital cost. We're going to need money to put some down-payments on equipment and ball mills, etc. That's part of the capital cost.
We're going to need to get through the permitting process, which is not part of the capital but is substantial. And then, obviously, you need working capital. And we have about C$12 million in the bank currently. So we're going to need some more money but we don't want to be selling shares at C$0.90. So the idea for us is to possibly… one of the alternatives… is to get a down-payment on a stream.
So we've had a lot of interest from the streaming companies. We're fortunate in that we have five different metals that we're going to be producing: palladium, platinum, copper, gold, silver. And we can stream a few of those, or a part of some of those, and still keep, say, the copper and the palladium to ourselves and maybe most of the platinum and get enough money to cover all of the money that we need to spend before we start construction. And then, get a much bigger tranche from the streamer at the time of construction starting.
So that's what a lot of the companies have been doing. Historically, you really had debt and equity — and that's all you had. And now, we've got these streaming companies that actually have access to billions of dollars and it's very competitive. So the deals are getting better all of the time. They're a lot better than they were two years ago.
And then, there's also other things out there. There's private equity partners. The smelters are desperate for a concentrate of the quality that we're going to be producing. And some of those are talking about secondary financing, secondary debt, in return for an offtake agreement. One of the streamers is talking about secondary debt as a kicker to the offtake.
So there's all of these different things. And debt, to us, is really the way we want to go as much as we possibly can because of the short payback period. We have a payback period at today's metal prices of a year and a half, less than a year and a half. So it would be a very short-term loan. And then, of course, banks like that because they're at less risk to commodity prices. And we like it because of less dilution.
So there's all of these things happening. At some point, we're going to be engaging a firm to manage this process for us. We've interviewed a bunch; they're all good. We kind of want to hire them all but we can't. So that'll probably be our next step.
And then after that, through the course of the fall, we would start announcing, certainly, who's going to do the detailed engineering for us. And then, the next steps would be — I don't know the exact order — but we will be announcing some streaming deals, some debt deals, and so on.
And we would probably still have to do some equity through the piece but we're trying to keep that down to a very minimum. And we certainly don't want to do it right now, especially with the other offers that are coming in.
Gerardo Del Real: Well, that was a whole lot more specific than I thought you were going to be… so let me say, thank you for that, Kerry!
And I've got to say that it's got to be music to shareholders' ears that you're looking at it that way because it makes perfect sense given where rates are right now, given the year and a half payback time and everything else that you just mentioned and highlighted.
You also recently announced the commencement of an 8,000 meter summer exploration drilling program back at the end of May. How is that coming along?
Kerry Knoll: Well, we were drilling two different areas. One was the feeder zone that we've been drilling for the last couple of years. And we did — geez, I don't remember the number — seven or so holes into that. And that part is finished; lots of core out for assay and we'll be announcing that… it's probably a good month away.
And then, the second zone we're drilling is a new zone for us north of the open pit. It's called the Chonolith Zone. And there was a drill hole back in 2006 that was pretty good looking stuff. And it was a little too deep for an open pit so they didn't follow it up. But at today's metal prices — that's a different story!
So we are following it up, and I think we're on our second hole into that, or maybe our third. And again, that core is being sawed and logged and sent out for assays. And that stuff will probably come another month out so we'll probably get the result towards the end of September on that. I can just add, though, that none of that is going to be part of the Feasibility Study. This is all gravy for down the road.
Gerardo Del Real: Yep and that was going to be my next point. Between the already very favorable economics at much lower commodity prices, and the multiple financing options that you have, and the news flow, which — as you just mentioned — it's all gravy; it’s all the cherry on top!
A lot to look forward to… a lot of news flow. Anything else to add to that, Kerry? Thank you for your time… I appreciate you jumping on the call on such short notice.
Kerry Knoll: No, I don't think so. I do want to reiterate that I think that this is the best thing for our company… to have control of this project… to take it into production. I think it's going to be great value for shareholders, and I just think it's going to be a really great ride over the next couple of years.
Gerardo Del Real: I'm looking forward to it… thanks again!
Kerry Knoll: Thank you.