"This agreement will provide financing for the project's mobile mining equipment through project development and into the first several years of mining operations at an attractive overall cost of capital for Marathon," the company's president and CEO Matt Manson said.
The deal is in the form a credit-approved commitment letter with Caterpillar Financial for equipment lease financing.
Canaccord Genuity Capital Markets analyst Michael Fairbairn said he had anticipated that Marathon would look to lease equipment to minimize initial capital and associated potential shareholder dilution.
"Today's commitment letter represents another domino as Valentine's financing package continues to fall into place," he said.
"Marathon ended Q1/22 with ~C$73 million [US$57 million] in cash and no debt. We expect Marathon will fund Valentine construction through a combination of cash on hand, debt, and equity," he said.
Marathon's Valentine project saw its initial capital expenditure rise 12% from an April 2020 pre-feasibility study to C$305 million in an April 2021 feasibility study—and has since risen further.
In an April update, Marathon said the industry-wide issue of cost inflation and construction market volatility would mean that previous estimates for total life-of-mine capital costs of C$662 million, cash operating costs of US$704 per ounce, and all-in sustaining costs of US$833/oz would likely be between 15-20% higher.
"Marathon also intends to re-characterize certain capital costs that were previously captured as early sustaining capital items to initial capital costs," it said at the time.
"This will increase the initial capital cost but reduce AISC and de-risk the project's ramp-up to positive cash flow," it added.
At a panel hosted by CG in late May, Manson—along with Artemis Gold's vice president for capital markets, Nicholas Campbell, and Osisko Mining's chairman and CEO John Burzynski—said that over the past 12-18 months, the inflationary environment has resulted in about a 20-30% increase in initial project capital expenditure estimates.
Marathon closed a 6.5-year US$185 million credit facility for Valentine in March.
"We also model a C$230 million equity raise, which we forecast will close [Marathon's] remaining financing gap and still leave a ~C$30 million buffer on its balance sheet should cost overruns occur," Fairbairn said.
"Importantly, Marathon has a strong institutional shareholder base, which we believe will help with the company's upcoming equity financing. In addition, mining legend Pierre Lassonde is a substantial shareholder after having purchased shares in multiple rounds of financing," he said.
Given Lassonde's roles as a co-founder and long-time chairman of Franco Nevada, former president of Newmont Mining, and former chairman of the World Gold Council, his investment in Marathon is a strong endorsement for the project, Fairbairn noted.
CG's forecast is that Valentine will reach commercial production in 2025 and produce roughly 160,000 ounces annually at US$914/oz cash costs and US$1,177/oz AISC over a 16-year mine life.
The April 2021 feasibility study presented a 13 year mine life, with a run rate of 173,000oz from 2024-2033, and AISC of US$833/oz.
Valentine is due for a mineral resource update mid-year this year, early site works to begin in Q3, and a new technical report in Q4.
The Cat Financial lease will be available to Marathon upon release of the project for its federal Environment Assessment process, review of the project's updated feasibility study, satisfaction of a cost to complete certification, and other customary conditions, the company said.
Marathon's share price was C$1.67 on June 13, giving the company a market capitalization of C$426.58 million. CG has a price target for the company of C$3.60/share.
