Magna Mining Moves Forward With Levack Mine Restart

0:16Jason Jessup: All right, everybody, welcome back into Mining Stock Daily and kicking off this Thursday's corporate updates with the big one from Magna Mining. They trade on the TSX with NICU and on the OTCQX with MGMNF. The headline news out of the morning briefing today on MSD and probably the news out of the mining sector is coming out of the Levesque mine within the company. They did report the preliminary economic assessment and quick approval of its restart of production for the mine. So we're going to jump right into this and all things, what it means for the company with CEO, Mr. Jason Jessup. Jason, good morning.

1:00Jason Jessup: Congratulations. We knew this was coming, but those numbers, man, we got to jump into this. Can you walk us through the payback and the economics here of Levesque and what this report is showing you?

1:13Mining Stock Daily Host: Yeah, sure thing, Trevor. You know, what really stands out to me is, you know, a very, very reasonable capital cost of about$70 million starting January 1st, 2027 and hitting commercial production at, you know, and our commercial full throughput rate is 2200 tons a day. But getting into commercial production by mid-2028, a 0.6 year payback, which is pretty remarkable. And this doesn't take into account, you know, some other factors that may come to play. such as some of the recent announcements from the Canadian government in this mega productivity deduction. So, yeah, we're really excited about it.

1:54Mining Stock Daily Host: I think it's a no brainer to move forward. And that's why our board was able to approve us to move forward. And with the cash we have in our treasury, we're well cashed up to start executing that. So we'll begin ramping up with hiring and getting some more equipment this fall in anticipation for, you know, complete restart construction in 2027. Yeah.

2:17Jason Jessup: You mentioned a little bit of the ore to mill model in there. How does that keep the capital requirements lean relative to a conventional restart here?

2:25Mining Stock Daily Host: Yeah, I know that is really the beauty of our business model. So unlike most projects that require their own mill, here in Sudbury, we're very fortunate to have two large processing plants, one owned by Valley and one owned by Glencore, that both have excess capacity in them and fairly significant excess capacity. So we have agreements in place with Valley right now to process the ore. So they're looking forward to receiving it and we don't have to invest the capital to build a mill or even expand a mill or expand tailing storage facilities and then incur those long-term liabilities for that. So it is a great business model for us where we can put the capital into the ground and start generating some revenues fairly quickly.

3:12Okay.

3:13Jason Jessup: You know, a couple of weeks ago when you and I last chatted up the hill at Beaver Creek, you said the new federal expensing treatment of sustaining capital was material enough to delay that PEA at the time by two weeks. Well, here we are two weeks later. Now that it's baked in, Jason, how much does it actually move the needle for that after-tax returns on Levesque?

3:34Mining Stock Daily Host: Yeah, so from an MPV7 standpoint, based on the understanding we have from it and our assumptions in our PEA, it makes a little over a$5 million MPV difference after tax. So not as big of an impact as we were thinking. Where we think there could be some much better, you know, implications to it, much more positive, will be when we look at the business as a whole, where we're generating revenue from McCready, as well as spending money at Levesque, and how that deduction, you know, will play over the company as a whole, as opposed to just one single project. But yeah, it's still, it's a great benefit to have and we're really fortunate and appreciative to the government for putting it in place.

4:21Mining Stock Daily Host: Okay.

4:23Jason Jessup: The net initial funding,$8.6 million. Can you walk us through this number and how it gets to that number just based on those tax credits and commercial capital, everything that's worth in here? Because this number really stands out to me, Jason. I think it's important to highlight. So kind of break this down for novice people such as myself and why this is such an important number.

4:48Mining Stock Daily Host: Yeah, so we will be spending, according to the PEA, just over$70 million in the initial 18 months. Starting in basically Q1 of 2028, we'll start generating some significant revenues. And so that$70 million will be offset by$55 million of pre-production revenues. And then there's the critical minerals investment tax credit. They'll also come into play. So when you put those together, and obviously, you know, we're still looking at the capital cost, but yeah, the net is about$8 million to get this into commercial production. So it's, that's why we have such a quick payback. It's very fortunate. So we're, yeah, we're looking forward to getting started.

5:42Mining Stock Daily Host: It is a project, I think, unlike really any other out there.

5:48Jason Jessup: You did, at the base case, the payback was just over a half a year, 0.6 years is what the number says. But if you take it, if you move that into current metal prices here, Jason, how much is that cut by?

6:02Mining Stock Daily Host: Yeah, well, it gets down to 0.4 years. So we're just talking, you know, it's a quarter. It shaves off a third of the pay dock. But yeah, it's quite robust. And really, again, this is why our board, we're able to approve it on the back of a PEA. And the other thing is, is our board understands, it's not that every mining project has technical risks and other risks. We think this is a very much a de-risk project based on not just the history of production at Levesque Mine and how much infrastructure is there and knowledge we have, but the actual history of our team operating these assets and understanding it.

6:48Mining Stock Daily Host: So very de-risked. And with the PEA now showing the potential economics of it, it was, I think, a fairly straightforward approval for the board.

6:57Jason Jessup: What's not included in this PEA is R2. And obviously that's been excellent exploration results for you, but that's just not in there. It's still early days, but you've been clear that R2 will displace lower margin material and enter the mine plan in the first half of 2027 here, Jason. So not too far away. So when investors are kind of reading this PEA and economics out today, how much upside are they maybe leaving on the table or need to be aware of? that's literally just around the corner here from R2.

7:31Mining Stock Daily Host: Yeah, we're quite excited about R2. And our plan for next year is to continue drilling R2, to develop out to it, to do some sealing on the veins and being able to actually back map and incorporate that into resource estimates. So we really understand the veins, the strike length, the dip, the number of veins. So that's going to be really helpful. And with that, we'll be generating some, we'll call it ore, but we'll be selling some of that rock to Valet as well. So that's great. You know, I'm not going to speculate on the impact it will have. We obviously have our own internal numbers and what we think we can do.

8:11Mining Stock Daily Host: The analysts do as well. So anyone that does see analyst research, you know, they can see what they value R2 at. But, you know, speaking to, you know, general terms, if somebody wants to do their own back of the envelope kind of math, you know, based on our grades and dilution and things like that, I don't think it's unreasonable to assume a 10 % copper equivalent head grade that we're shipping to the mill and then use your own metal prices and, you know, exchange rates and kind of put a 70 % payable factor after, you know, losses at the mills, melter deductions, transportation and all of that.

8:47Mining Stock Daily Host: But, you know, it's pretty robust. And I think that, you know, based on, again, experience in narrow vein, you know, footwall deposits such as the Morrison deposit and others in Sudbury, you know, a very conservative sort of throughput from R2. And again, use whatever numbers people want to use and play with it. But, you know, 100 ,000 tons a year. So if you kind of do the math, you know, you might be$1 ,000 to$1 ,500 per ton, NSR Canadian, and then times that by 100 ,000 tons a year. Like, do your own math. I'm not saying so it is, but it's pretty easy to do back to the envelope numbers and come up with, I think, something extremely meaningful.

9:34Mining Stock Daily Host: so yeah we're going to continue drilling it off and hopefully sometime towards the end of 2027 we'll be able to put out guidance for production for 2028 and that'll be great we're excited for it but we should start seeing some of that ore in the first half of 2027.

9:51Jason Jessup: So the board has approved the restart that was obviously announced this morning what's the critical path here for the final quarter of the year to get Levesque to where it needs to be for the beginning of 2027?

10:06Mining Stock Daily Host: It's really about getting the people in place. So we want to hit the ground running. We have the ability to get a number of different workplaces going. We need to get people in place. So there's a big push for hiring right now. And anybody that follows us on social media, you know, we'll see we put out, you know, looking for 50 minors and we've got, I think, a couple hundred applicants. And so we're doing a lot of hiring this fall to get the people in place, get them trained up to really hit the ground running and, you know, towards the start of next year. You know, we have some other equipment that we're purchasing and getting mobbed underground.

10:41Mining Stock Daily Host: And then it's to finalize the production hoist. So we're working on finalizing the loading pocket, doing some upgrades there to automate it, streamline the operation of that. So getting that completed, which, you know, will be completed sometime in Q1. So getting that all together is really going to be key to wrapping things up in 2027. Okay.

11:05Jason Jessup: The, this is a big report here, obviously one that we've been anticipating for a while now, but there's another one just around the corner. That's the Crean Hill PFS that you've told to us is due, you know, pretty dang soon as well. you've also had mentioned to us jason that upayana's investment that does unlock the ability not only to advance levesque but also korean hill at the same time and you mentioned the need for people to staff up so operationally how do you kind of manage all that without one project kind of robbing resources from the other because you're juggling two important projects you know with both hands here.

11:50Mining Stock Daily Host: Yeah, that's a, you know, I'll admit it's a lot right now. The managing sort of looking at two projects to be starting potentially, and we haven't had a formal start or construction decision on Crane Hill yet, but that TFS will be out very shortly. And then, you know, obviously there'll be discussion at the board level. And I'm quite optimistic that we will want to move forward with it. It's a great project. but I see synergies between doing both at the same time as well. You know, we have a team we're building right now of our, we call our shared services team, which is, you know, environmental health and safety procurement, engineering, technical services.

12:31Mining Stock Daily Host: So being able to share some of those resources between two projects as we're constructing them and ramping them up, as well as McCready West, I think has a lot of synergies and makes a lot of sense. with Creen Hill, if we move forward with that, and again, I believe we will, but we haven't made that formal decision, it would be with contractors for, you know, basically pre-commercial production. So with that, there are a number of contractors that we work with, including ADLP, which is a joint venture with local First Nations here in Sudbury, and they did our bulk sample for us. So, you know, they have people and that wouldn't take a burden off who we're hiring at Levesque Mine, I wouldn't steal from that.

13:15Mining Stock Daily Host: But I think it's a, you know, I see more synergy actually than challenges. Let's talk about people, you know, investors

13:26Jason Jessup: kind of recognizing cash flow here. And I'm sure a lot of people are kind of, like you said, doing the back of the napkin math here this morning after reading this press release.

13:41Jason Jessup: but you'll recognize that cash flows from magna can generate and they'll get reinvested into other projects that you have within the portfolio like shakespeare padolsky um those type of projects you got you got a long runway here with a vac now formally approved jason do you feel like the market is starting to price that in i guess you know we're recording prior to the open here. So we're not quite seeing the reaction yet, but where have you seen the disconnect and maybe kind of coming off the feedback that you've gotten from all the conversations you had a couple of weeks ago in Beaver Creek, where is the disconnect here from the future cashflow expectations and to where you're trading today?

14:26Mining Stock Daily Host: Yeah, I think a lot of institutional investors like to build their own models and they want to build their models off of technical studies. So I think there has been investors waiting to see this study as well as Creen Hill. And what do those future cash flows look like? And what is the estimated capital cost to move these projects forward? So I do think there has been some work being done in the background, but people also waiting on the sidelines to see these studies. So I'm quite hopeful with this study now out in the public, or at least the news release, that that'll be one piece of the puzzle solved.

15:06Mining Stock Daily Host: And then when Green Hill comes out, that'll put together, I think, a much clearer picture of what the cash flows for the next years will look like. And I think with that in place, there will be a positive re-rating for our stock. I would expect that anyway. We're quite excited about the cash flows, especially in the early years. We can see 28 and 29 at Levesque Mine at base case pricing. It's almost$100 million of free cash flow or of mine profit in cash flow. So that really, I think, starts to speak to it. Now, as we bring on potentially other zones like R2 and not only extend the mine life, but bolster it with some higher grade, the potential that we have at Levesque Mine.

15:57Mining Stock Daily Host: I do feel that just over seven-year mine life that we have in the PEA will get extended, and the back end will fill in with better grades and higher revenues, and therefore higher cash flows. So yeah, it's a project putting it all together. we're really optimistic and we're anxious to also get the Crane Hill PFS out now

16:23Jason Jessup: Let's talk about last question here Jason obviously polymetallic in nature here in the basin, everything you're working on within your projects, the precious metals factor obviously despite having some headwind in the last couple months still favorable copper obviously doing very well Uh, but you're in the Sudbury basin, an area known for nickel production. Uh, but that seems to be the least, uh, favorable, even though it's moved this year, it's still, you know, it's not boom time, boom time in the nickel price by any means. Is that maybe the dark horse in this whole thing? Uh, the traditional nickel production, uh, from your operations?

17:08Mining Stock Daily Host: I don't see it that way. I think that what we've done, and it's not a whole lot different than what FNX did back when I was working for them in sort of the mid-2000s, is focus a lot on footwall copper. And yes, we'll be mining significant amounts of sort of the contact nickel-copper mineralization, but it's almost a one-to-one nickel-to-copper. and you know we think that that's a great mix as well but yeah the precious metals and the copper in Sudbury I think is maybe not as well understood as it should be and it is becoming uh you know especially at current copper prices um you know extremely profitable so um that is where I think we we need to maybe educate some people a little bit more but yeah I think nickel is is great upside in the future we will see high nickel prices again it's just the nature of the beast that Like when you have one country like Indonesia controlling so much of the world's supply, any disruption, you know, creates a huge impact and that can have, you know, positive impacts on pricing.

18:10Mining Stock Daily Host: So nickel will be, I think, have its day, but we're really focused on copper. And like you say, the precious metals, some of our precious metals zones, like our number three footwall, the resource there averages about 26 grams of platinum, palladium, gold combined. You know, spectacular grade. So that's where we're going to focus. And, you know, with R2, hopefully add a lot more of that into our future mine plans. All right, Jason.

18:33Jason Jessup: Congratulations. Great day here for the company, one we've been anticipating for quite some time here. And there's another one around the corner. So in just a couple of weeks time, you and I will be chatting once again. But that conversation will be about Korean Hill. Magnum Mining does trade on the TSX with NICU and on the OTCQX with MGMNF. They are a longtime partner of the podcast. I'm also a shareholder and personally anticipating what the market opens up here in just a few minutes. So Jason, thanks for your time. Much appreciated and enjoy the rest of your day, my friend. Thanks a lot, Trevor.

19:06Jason Jessup: We'll talk to you again soon. The information presented should not be considered investment advice. Mining Stock Daily Yint's affiliates are not responsible for any loss arising from any investment decision in connection with the material presented herein. Please do your own research or speak with a licensed financial representative before making any investment decisions.