Generation Mining (GENM.T) Is In The Sweet Spot Of The Second Wave Of The Lassonde Curve.
The menu of companies at this juncture is very small.
Generation Mining (GENM.T) is one of a small group of companies in the sweet spot of the second wave of the Lassonde Curve. There are two big waves in the Lassonde Curve. One is at the sweet spot before exploration success and the other is before a project is brought into production.
Generation Mining is in the second sweet spot and trading at a steep discount to their net present value in their feasibility study. The fact that they are trading at such a deep discount is more of a reflection of the sentiment toward mining stocks, not the quality of their project. While in the sweet spot they are at a low base.
I’m excited to have them join my report sponsorship program, mainly due to the quality of their project, their low valuation and because I certainly don’t have enough companies in the sweet spot of the second wave of the Lassonde Curve. It certainly isn’t from a lack of looking.
The bottom line is that there just aren’t enough companies that have made discoveries that then advance them toward production in the mining sector. We need more of them in several metals, including palladium and copper certainly, which are two with strong supply and demand fundamentals specifically because there aren’t enough new discoveries being made that are moving toward production.
Pierre Lassonde is a legend in the mining business and has made a fortune from investing in companies that are at the sweet spot of the second wave of his Lassonde Curve. Investors that want to emulate this strategy have a very small menu to choose from. It certainly wouldn’t surprise me if in the near term Pierre Lassonde discovers the investment opportunity in Generation Mining.
Wheaton Mining has already made a commitment of $240 million to Generation Mining. Wheaton Mining is an extremely well run streaming company. They do serious homework before putting money into a project, they aren’t interested in a stock play, they make money when a mine is built and their streaming deal starts sending them precious metals. They have given this one the seal of approval that they think it will be a future mine.
Generation Mining is developing their Marathon palladium-copper project that also has platinum and gold. The Marathon project is 10km from Marathon, Ontario. It is beside the Trans-Canada Hwy, with power lines going through the project. Highlights of the feasibility study reported robust economics with an IRR of 26%, annual production of 166k ounces palladium, 41M pounds of copper, 38k ounces platinum, with AISC of US $813 per ounce of palladium equivalent and a 2.3 year payback.
Mandates to reduce emissions from gasoline powered automobiles are significantly growing the demand for palladium used in catalytic converters. Copper is crucial for the electric vehicle revolution. Both copper and palladium have bullish supply and demand dynamics, and are critical metals needing more mines to meet emissions goals. Generation Mining has both sides of the automobile coin covered whether looking at internal combustion engines or electric vehicles they have the metals needed by car makers.
Earlier this year, there were a couple big mining conferences and one of the updates that came out of them was that car makers were there in a big way. This rarely happens at mining conferences, where end users send key executives to engage with mining companies. They understand how tight supply is for the metals they need and that to secure their future supply needs they need to invest in mining.
Many countries, including Canada, are eager to play a key role in mining critical metals and are offering incentives. Other important factors to moving toward mining is they have an approved Environment Assessment, a signed Community Benefit Agreement with local First Nations, offtake term sheets finalized with Glencore & another European smelter for the
copper concentrate and a streaming deal with Wheaton Precious metals for 100% of their gold and 22% of platinum production.
Key milestones they are working on this year include advancing the permitting for mine construction, detailed engineering and mine financing as well as mine construction to begin later in the year. Construction is expected to continue through 2024, with preproduction and commissioning in the second half of 2025.
A good friend of mine offered me great advice many years ago that has stuck with me. He said that it is more important to focus on what people need than what they want.
Mining needs new mines, the local communities around Generation Minings’ project need jobs and are highly trained miners, the provincial and federal government need mines, car makers need new mines and consumers need the products that are made from the metals at the Marathon project.
Investors need more opportunities to invest in companies that are in the sweet spot of the second wave of the Lassonde Curve. They have a very small group of companies to choose from. Especially a company like Generation Mining that is trading at 4% of its net present value, so they are in the sweet spot and check all the important boxes to build a successful mine.
In closing
Now that Generation Mining is a new sponsor, I will be doing a series of interviews with their CEO Jamie Levy and discussing them in my sector reports.
I highly recommend you take a look at their corporate presentation as it discusses their feasibility study as well as plenty of other important factors about the company.
As always, my reports are for information purposes only, they are not investment advice, it is important for you to speak with your financial advisors to determine if the companies I report on are suitable for you.
I’m a big promoter of investors doing their homework. Ultimately, well informed shareholders that understand the companies they invest in, and have reasonable time frames for companies to reach their success, are prone to make logical investment decisions not emotional ones. This is a recipe for success investing in any sector.
All the best,
Allan