Generation Mining - A Once In A Generation Opportunity?

A few disclaimers right at the start. I am not a mining engineer, or any kind of an engineer. I am not a CPA or a financial analyst. Generation Mining is a development company, and there is an art and a knowledge base that helps in evaluating these kinds of projects.

But... I was a General Partner of Lazard Freres. I have been in the markets since 1972. I thoroughly understand discounted cash flows and math as it relates to investments. Yes, I am an intuitive buyer but always have a focused and serious micro and macro perspective and put significant weight on management caliber.

I do know the platinum group metals well, and as you perhaps may have noticed, :-), named this site, PlatinumIsRare.com. I travel under the twitter handle, @PlatinumRic! Further, if you peruse this site, you can't avoid my ebook (I think it is valuable, but I've only sold 6 copies and I bought 3! :-). And if you scroll through my blog posts over the past few years, many relate to platinum group metals. 

I am invested throughout the space, including physical metal, Sibanye Stillwater, Impala in smaller size, and Generation Mining. 

My intention is not to write a "treatise" on Generation Mining :-), but in fact, to simply offer an introduction. There are resources, including presentations, on the company's website and on YouTube. No need to repeat that excellent work, including the latest excellent interview by Matt Gordon with Kerry Knoll, Executive Chairman. By joining Crux Investors Club, Matt's site, I got access to "Back Commentary" (Matt's assessment following his session with Kerry), which in and of itself was worth the price of admission.

While there are numerous PGM plays, many in the early development stage, these are my only PGM stocks. 

Ok, so much with the extensive preamble. So what is it that has attracted me to Generation Mining?

I know Sibanye Stillwater (SBSW) extremely well, and Sibanye became the owner of this property when it purchased the Stillwater palladium mine in Montana in 2017. Not many years earlier, Stillwater had paid $118 million for what was then known as the Marathon Project, and in turn sold a 25% interest to Mitsubishi for $85 million. But with palladium prices in the $250 range, the property was never developed, though Stillwater did spend significant resources on a 30,000 page study, which identified a tremendous metal profile. At that time, it was viewed as a copper project with a palladium credit, but today, with palladium at $2375, the property is clearly a palladium project with a copper credit. 

With significant opportunities at Stillwater and the 2019 purchase of the Lonmin properties in South Africa, SBSW became the largest platinum group metal producer in the world, selling its Marathon interest to the current group. SBSW retained 20% and the option to increase that to 51% once the new group spent $10 million and completed the Feasibility Study, with a 31% payment of the cost to develop the mine 

That Study, according to a recent presentation, should be completed in about 5 weeks, and confirms the mineralization Stillwater had previously identified. While this is a large resource and by no means fully explored, what has been identified is 9 million pgm equivalent ounces and 1 billion pounds of copper, planned as an open pit mine, with a 14 year life and production within less than 2 years. IRRs are 30% at $1200 palladium and enormous at todays $2375 price. 

The management team strikes me as extremely credible, senior, committed, excited and disciplined about both getting needed financing, the mine buildout, and running the project. The property has excellent access to power, rail, shipping, and quality labor, in a supportive jurisdiction, very close to mining municipalities. Little infrastructure is required. In addition to Sibanye, Eric Sprott is an investor, along with Lukas Lundin.

The best part; there are 130 million shares outstanding, and the stock, trading at about $.7 USD, is around $100 million, dramatically below the properties NPV.

I believe that the release of the Feasibility Study will be a significant catalyst for the stock. My view is that investors win whether Sibanye exercises its option or not, given the quality of the resource and the team running the project.

Remember, none of this is original research by me. It's simply my assessment, based entirely on what I have read, interviews, and my experience in the platinum group metal market. Yes, generations come and they go, but I think this has the potential to be a long lasting generational opportunity. 


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