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Sometimes The Market Gives You A Gift


Generation Mining just closed the $240 million streaming agreement with Wheaton Precious Metals. This is a critical milestone, and means that Wheaton, the most sophisticated mine financing company in the business, has begun funding the buildout of this mine, with an initial tranche of $20 million Canadian dollars, and subsequent tranches to be paid as the construction proceeds. 
What does this mean? Well, the entire company is currently valued at 193,600,000 shares x the current price of $.77 US dollars, or $149,000,000 US. Yet Wheaton has committed $240 million Canadian, or approximately $192 million US dollars, but only receives less than 5% of the mines production,  a  percentage which reduces once payback is made. The fact that Wheaton is putting real money down, and committed to funding more than the entire value of the company, but receives only a very small percentage of production out in the future, is a testament to the value in the stock today.
Another way to cut it? The mine will produce 245,000 palladium equivalent ounces. The cost of production in the feasibility study, that takes into account all costs, is $809 US dollars per ounce. Let's call it $1000. The current palladium price is $2400. Let's call it $2000. That means there is a $1000 profit per ounce, on 245,000 ounces per year, which is $245,000,000 US dollars of profit for just one year (the mine life is 13 years with lots left to be explored) when the entire company is valued at $149,000,000 US. $245,000,000 is a yearly profit the mine will produce for 13 years under current pricing and projections. 
Certainly, in this inflationary environment, the All In Sustaining Cost (AISC), which takes into account all costs, can be higher, and palladium is a volatile commodity, and while I am bullish the price can be lower... but there is a huge buffer of profit. Importantly, we will produce a huge amount of copper as well so palladium price weakness, if that were to occur, can be made up by copper strength. The press release also describes the total expected production of gold, platinum, and silver.
Thank you Mr. Market!

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