Generation Mining Limited (9GN.F) Earnings Call Transcript & Summary

Good afternoon, everyone. My name is Kerry Knoll and I'm the Chairman of Generation Mining, and welcome to the 2022 annual meeting of the corporation. We are holding this meeting in our offices in Toronto, and we're here in the room with us for most of our Board of Directors, some of our management and the rest of them are linked in on Zoom. And we also have a number of shareholders present on Zoom as well. It's my pleasure to welcome the shareholders and those present or those in person on the Zoom call. And thank you for attending. We will proceed with the formal business of the meeting. As highlighted in our Notice of Meeting and the Management Proxy Circular, shareholders joining us via Zoom will not be able to vote or participate in the formal business of the meeting. Following formal business, generation management will present an update on the company, and those joining us in person or participating via Zoom will have an opportunity to ask questions at that time. Instructions on how to ask questions via Zoom will be provided after the formal business of the meeting. The meeting will now come to order. I, Kerry Knoll, the Chairman of Generation Mining, will act as Chairman of the meeting. And with the consent of the meeting, I will appoint Adam Siegel, the company's General Counsel, to act as General Secretary of the meeting. With the consent of the meeting, I will appoint TSX Trust Company, the registrar and transfer agent for the corporation acting through its representative, Ms. Lori Winchester, to act as scrutineer of the meeting. In order for a quorum to be present in accordance with the bylaws of the company, the scrutineers' report must show that there are not less than 2 shareholders present in person or represented by proxy. The scrutineer has already provided her preliminary report and I can report that the requisite number of shareholders for a quorum is present, and the meeting is properly constituted for the transaction of business. I direct that the final scrutineers' report or be annexed to the minutes of the meeting as a schedule. Notice calling this meeting and the accompanying management information circular and form of proxy have been mailed to all shareholders of record to the directors and to the auditors of the company and the Secretary has received and filed with me proof of mailing, I direct that a copy of such materials together with the proof of mailing be annexed to the minutes of this meeting as a schedule. Before commencing the business of the meeting, I would like to comment on the voting procedure. Each holder of a common share on the record date for this meeting, May 4, 2022, is entitled to one vote for each share held by such shareholder in respect of each matter to be dealt with at the meeting. Based upon information I received from the scrutineer to the best of my belief, if a ballot was conducted in respect of each matter to be voted upon at the meeting, the total number of votes attached to the shares represented at the meeting by proxy and required to be voted against or withheld from voting on what would be the decision of the median respect to each matter was less than 5% of all the votes that might be cast at the meeting on each such ballot. Accordingly, in order to expedite the voting on such matters, unless a ballot is demanded in respect of a particular matter, each matter will be voted on by a show of hands. Each shareholder or proxy holder present in person at this meeting has the right to demand that a ballot be conducted on any resolution either before the show of hands or following that vote. In that case, each shareholder or proxy holder will receive a ballot at the appropriate time. To make the best use of our time at the meeting, certain management shareholders have been asked to move and second items of business, which are called for in the Notice of Meeting. I shall now request the secretary to table the minutes of the last Annual Meeting of Shareholders of the corporation held on June 28, 2021. The minutes of the June 28 meeting are available for review by any shareholder. Unless someone wishes to have them read, may I have a motion that the minutes be taken as read and approved.

Mr. Chairman, I move that the minutes of the Annual Meeting of Shareholders held on June 28, 2021, be taken as read and approved.

Mr. Chairman, I second the motion.

We will conduct this vote by a show of hands. All those in favor of the resolution, please so signify by raising your hands. [Voting]

Contrary, if any? [Voting]

I declare the resolution carried. I shall now call upon the Secretary to file with the company's records, a list of shareholders of the company showing their respective shareholdings and the original proxies deposited at the meeting. I will now ask someone to move and someone to second a resolution respecting the destruction of proxies.

I move a resolution as follows: be it resolved that the proxies forwarded by shareholders for use at this meeting of shareholders of the company be retained with the records of the company for a period of 6 months after the date hereof and then that same be destroyed.

I second the resolution.

All those in favor of the resolution, please so signify by raising your hands. [Voting]

Contrary, if any? [Voting]

I declare the resolution carried. I now present to the meeting the audited financial statements of the company for the financial year ended December 31, 2021, and the report of the auditor thereon. The Board of Directors has approved these financial statements and the financial statements were mailed to registered and beneficial shareholders who requested a copy. Shareholders are not being asked to approve the audited financial statements, however. However, I will be pleased to deal with any relevant shareholders' questions concerning those financial statements after the formal part of the meeting is completed. We shall now proceed with nomination and election of directors. The number of directors to be elected at this meeting has been set by the Board at 8. All of the management's recommended nominees are currently members of the Board particulars relating to the 8 recommended nominees are set out in the circular. I now declare the meeting open for nominations.

Mr. Chairman, I nominate Jamie Levy, Kerry Knoll, Stephen Reford, Rodney Thomas, Paul Murphy, Phillip Walford, Cashel Meagher, Jennifer Wagner, as directors of the company to hold office until the next Annual Meeting of Shareholders or until their successors are elected or appointed.

Are there any further nominations? If there are no further nominations, I will entertain a motion that nominations be closed.

I move that nominations be closed.

I second the motion.

All those in favor of the motion, please so signify. [Voting]

Contrary, if any? [Voting]

I declare the nominations closed. I will now ask someone to move and someone to second a resolution for the election of the 8 persons nominated as directors and directing Mr. Levy to cast a single ballot for such election.

I move a resolution as follows: be it resolved that the 8 persons nominated be and are hereby elected as directors of the company to hold office under the next Annual Meeting of Shareholders or until their successors are elected or appointed and Mr. Levy be and is hereby authorized to cast a single ballot for such election of the 8 persons as directors of the company.

I second the resolution.

All those in favor of the resolution, please so signify by raising your hand. [Voting]

Contrary, if any. [Voting]

Based on the casts -- based on the votes cast in person and by proxy, I can declare the resolution carried and those nominated have been duly elected as directors of the company to hold office until the next Annual Meeting of Shareholders or until their successes are elected or appointed. Promptly following this meeting, the complete results of the ballot as reported by the scrutineer will be filed on SEDAR and will be available for viewing under the corporation's profile at www.sedar.com. The next item of business is the appointment of auditor and the authorization of the directors to fix the auditor's remuneration. I will now ask someone to move and someone to second a resolution appointing the auditor and authorizing the directors to fix the auditor's remuneration.

I move a resolution as follows: be it resolved that RSM Canada LLP Chartered Accountants be and is hereby appointed auditor of the company to hold office until the next annual meeting of shareholders at such remuneration as may be fixed by the directors and the directors be and are hereby authorized to fix such remuneration.

I second the resolution.

All those in favor, please so signify by raising your hand. [Voting]

Contrary, if any? [Voting]

I declare the resolution carried. If there is no further business to come before this meeting, I will entertain a motion to terminate the formal part of the meeting. I will ask someone to move and someone to second that motion.

Mr. Chairman, I move the meeting be terminated.

I second the resolution.

All those in favor of the motion, please so signify by raising your hands. [Voting]

Contrary, if any? [Voting]

I declare the meeting is now terminated. The formal part of the meeting is now terminated. Before beginning the next part of the meeting, I will now ask Ann Wilkinson to read a statement regarding forward-looking information.

I'd like to remind everyone that Jamie's presentation will relate to the performance of business conditions of Generation Mining Limited and as such, may contain forward-looking information about the strategies and expected financial results. Various factors, many difficult to predict and control, could cause actual results to differ materially from forward-looking statements. Forward-looking statements may be made in connection with business objectives and targets, company operations, anticipated financial results and the outlook for the company, its industry and the global economy. Accordingly, the audience is cautioned against undue reliance on these remarks. We refer everyone to the cautionary language regarding forward-looking statements set out in our most recently filed Annual Information Form, which is available on the corporation's website at www.genmining.com and available on SEDAR at www.sedar.com.

Thank you, Ms. Wilkinson. I'd now like to turn to the information part of the meeting. I'm going to give a brief presentation on the recent events and the direction the company going forward. And for those attending via Zoom, please enter your questions through the chat function on Zoom at any time and we'll present your question at the conclusion of the presentation. So welcome, everyone who's still on the line then. If you can start advancing the presentation, here's a forward-looking proposition. So for us, investors in this company, we like to present what the investment proposition is here. Why we think that investing in this company for people who -- it's a suitable investment, why it makes sense for people who are interested in the mining space. We came out last year with a very robust feasibility study, showing a net present value of just over CAD 1 billion, a 30% internal rate of return and a 2.3-year payback on upfront CapEx of about CAD 665 million. We're looking at producing significant amounts of favorable metals in the decarbonizing economy, specifically palladium and copper. We've got -- we've assembled a very experienced leadership team, people who built mines before, people who have operated mines, people who financed mines. And I think we've got one of the best teams in our in our space. This is just -- if you can just go back a bit. So this is the main team that we've assembled. And then going on to the next one. And this is our group of 6 independent directors, and I would hold it for a company our size, this group of directors is nothing short of top-notch, all leaders in their respective fields and whether that be law, geology, geophysics, accounting or engineering. If you look at our capital structure, we've got about 180 million in shares outstanding. This company has only raised about $45 million since it was incorporated, and we've accomplished all of what we've done with that money. And we've still got a significant amount of money in the bank, and we have another $20 million coming in from Wheaton River later on this summer. We've got also a group of very knowledgeable shareholders, Sibanye-Stillwater own 18%. And they've been a shareholder now for 3 years and have never sold a share. Eric Sprott is approaching 10%. Lukas Lundin at 6%. And Osisko and there's also a number of other very sophisticated shareholders in this company. And the officers and directors have been significant buyers of the shares out of the market. We seem to be a little bit -- there we go. So this is the measured and indicated portion of our resource on the property. It's not our reserve. I want to caution on that. But we do have 4 million ounces of palladium and over 1 billion pounds of copper as well as well over 1 million pounds of platinum, and we've got significant amount of gold as well, which we have streamed out to the Wheaton Precious Metals. And location in one of the busier mining regions of Canada, which is Northern Ontario. There's several mines in this area under construction as well as several that are already operating. And as far as the -- drilling down a little closer, as far as infrastructure goes, this is one of the reasons we're able to build this mine for a lot less than some of the other mines in the area. And that's because we've got infrastructure, we've got highway. We've got rail. We've got a town nearby. We've got an airport right on the property. And we've got grid power, which is essentially carbon free in Ontario these days, and we're able to hop right into that grid. And this is the start of our mine building team. It's going to grow as we get closer towards production. But Drew Anwyll, our Chief Operating Officer, has assembled this group of people. And I really look forward to working with them and watching them progress this mine. Drew, do you want to talk? I'm going to turn this over to Drew Anwyll. Go ahead, Drew.

All right. So the operation is planned to be a 13-year mine life, of which will produce an equivalent of just over 240,000 ounces of palladium. So that's an equivalent that brings in all the metals that we have to put it in terms of palladium. The upfront capital cost, as Kerry said earlier, CAD 665 million. And there's a bit of math coming in and out with equipment financing and preproduction numbers, but still a very robust number. It gives us an all-in sustaining operating cost of just over $800 equivalent ounce. NPV is over $1 billion at the feasibility assumed metal prices, which were $1725 for palladium and $3.20 for copper and as some of you know, the market has taken a bit of a turn right now, but we certainly anticipate in the time of feasibility study, the palladium price was certainly higher. And at that price of around $2,400 and $4 copper, we had a -- notably improvement of an NPV up to about $2 billion. Again, simple numbers this year. Again, the value of the reserves are largely on palladium, which is just about 60% and copper, about 26% and that was again at the feasibility prices. What we did in the design of the operation? We attempted to bring our highest value commodity as far forward as we can. So that was done largely with the mine sequencing. But what this allowed us to do is generate about CAD 1 billion of cash flow in the first 3 years. So obviously, that's how we've managed to generate the short payback [ period ]. And again, as I said, we brought the palladium as far forward in the first half of the mine life. In our opinion, it really derisks the production profile at a certain point in time, when palladium becomes less driven on the demand side when more cars go electric. So we take advantage of the metal prices when it's high. And certainly, you see downstream once the capital is paid off, we have leverage both to copper in the longer term.

Yes. So we're in the process of now raising the money to build this mine. And as you probably know, if you follow the company, we did a stream announcement last December with Wheaton Precious Metals for $240 million. We're getting $40 million of that upfront to help us with the detailed engineering and procurement. And then the next step in our time line is to work on the debt. And we announced last week that we have arranged -- not arranged, but have expressions of interest of $1 billion, and we're looking at a total debt of about USD 400 million, and we're putting that syndicate together currently. And we're hoping to be in a position to announce that sometime late summer, early fall this year, who the syndicate is. And then the next step will be to look for some more so say, out-of-the-box financing with some of the possibly trading companies or some of the smelting companies or some of the other mezzanine financing companies that are out there. And we already have some term sheets from some of them. And then at the end of the day, we're going to have to figure out how much equity we're going to need at the end of the day. So that all, we expect that to all happen through the balance of this year as we go through the final environmental negotiations and get ready to start having our permits delivered. And one interesting thing we had a company called Skarn Associates out of London, do an analysis of this project compared to other copper projects because no one has done it on palladium and other copper projects around the world. And on a copper equivalent basis, we have about 1.5 tons of carbon emissions for every ton of copper. And that is in the bottom 4% in the world. And going forward, there's a lot of large investors who really want to look at a carbon footprint of a company before they decide to invest. So we'll check that box very well. Jamie?

It's Jamie Levy, President and CEO. Thanks for attending. A time line estimated, it's a little Gantt chart of where we're at right now. As you can see, we're late in 2021 here. We are -- sorry, 2022. We are progressing with detailed engineering. We talked about that another time. Drew did a webinar last week to discuss where we're at on that side on the permitting. But needless to say that's progressing well. Mine financing, as Kerry mentioned before, we had some good indicated interest from a few banks in the Export Development Corporation of Canada, and we hope to have that finalized by third or fourth quarter of this year. The joint review panel, which I know Drew had mentioned on the last webinar again, concluded about 6 weeks ago. We're hopeful that they'll give us an answer by the first or second week of August. The outside date is the end of August and from then the federal and provincial ministers have 120 days to give us the final stamp of approval to receive our environmental assessment. Yesterday, we were down at PDAC and Minister Rickford came by. We're getting very good support from the provincial and hopefully from the federal side that it won't take the 120 days, but the outside date on our EA would be the end of December. From that time, it's -- we start to apply for the provincial permits and hopefully, the provincial government keep granted those permits so we can begin construction in the first quarter of 2023. So hopefully, by next time on our AGM, it will be in construction. That is a forward-looking statement. That's -- and now we're open for any questions.

There are no questions on the chat. Any questions can be submitted to...

Any questions, you can come off mute and ask us questions or please send it through the chat.

There's nobody, there's no questions.

All right. Well, there's been no questions. So that will be the conclusion of today's presentation. Thanks for attending, and please don't hesitate to reach out to us if you have any further questions going forward.