The federal government is giving the go-ahead to the construction of a new Ontario critical minerals mine that should help Canada establish a bigger foothold in a key automotive metal largely controlled by Russia.
Toronto-based Generation Mining Ltd. has received provincial and federal approval to proceed with its Marathon palladium and copper project in northwestern Ontario. The company hopes to start building the mine next year, and once in production, it will operate for 13 years, and feed metals to the North American and European automotive industries.
Ottawa’s approval of the new critical minerals mine comes after two significant setbacks at the federal level for large resource projects.
Last month, Northern Affairs Minister Dan Vandal turned down Baffinland Iron Mines Corp.’s plans to double its production at an iron ore mine in Nunavut, owing in part to concerns about the impact on the environment. In addition, the top critical minerals expert in the federal government recently told The Globe and Mail that mines might never get built in Ontario’s remote but highly touted Ring of Fire region.
Located near the town of Marathon, Ont., Generation acquired the project in 2019 from South African miner Sibanye Gold Ltd. Among Generation’s biggest shareholders are Sibanye, Canadian resource billionaire Eric Sprott, Osisko Mining Inc. and the late mining financier Lukas Lundin’s family trust.
Palladium is part of the platinum group of metals and it is the most expensive of the precious metals. Its primary use is in catalytic converters for cars. Russia and South Africa accounted for 77 per cent of global palladium production in 2021, according to the U.S. Geological Survey, while the United States and Canada were also-rans. But with the Marathon mine set to come on stream, Canadian production is set to roughly double.
Over the past few years, the Canadian and U.S. governments have made a big push to try to establish North American supply chains of critical minerals such as palladium and lithium. Russia’s invasion of Ukraine, and the ensuing natural gas price spike in Europe earlier this year, crystallized the dangers of relying on hostile powers for key resources.
The palladium market also saw an impact after the invasion, with the price of the metal briefly spiking to a record of US$3,400 an ounce.
“What’s happening in Russia is pretty scary,” said Jamie Levy, chief executive of Generation, in an interview.
“Car manufacturers would like to have a secure supply of platinum group metals, and copper, from Tier 1 jurisdictions that are carbon-friendly and have support from governments and First Nations.”
Despite receiving approval from Ontario and the federal government, construction of the Marathon mine and its associated processing plant is not a fait accompli. The mine was last estimated to cost $665-million to build, but Mr. Levy said the final cost will be higher because of inflation and a new estimate will be released early next year.
A significant portion of the funding for construction is lined up, thanks to a $240-million output streaming deal with Wheaton Precious Metals Corp. Mr. Levy is optimistic that Generation will be able to raise another US$200-million from various banks, and US$200-million from Export Development Canada, which has indicated interest in a debt financing.
He also hopes the U.S. government will step in. The Globe reported last month that the Department of Defense is looking at funding some critical minerals projects across North America, so pressing is the need to secure supplies.
“That would be a nice way to bridge the gap,” he said.
Junior mining companies occasionally build mines on their own and some have had great success, including Osisko, which built the Malartic gold mine in Quebec about a decade ago.
Generally, though, investors prefer it if smaller companies are acquired by a bigger and more experienced mine builders before construction begins, in order to reduce risk. Over the past few years, several small mining companies have experienced startup problems with mines, most recently Pure Gold Mining Inc., which was forced into creditor protection in October after its northern Ontario gold mine ran into catastrophic geological problems.
While Mr. Levy is confident his team, headed up by Generation chief operating officer Drew Anwyll, have the skill and experience to build the Marathon mine, he said he isn’t averse to being taken over by a bigger company either.
Editor’s note: Due to a source error, an earlier version of this article said the Export Development Canada funding was firm. It is not, in fact, firm.