logo-loader
Galena Mining Ltd

Galena Mining at project financing stage after Abra lead-silver mine is valued at $553 million

Snapshot

Galena hopes to secure debt funding so it can start producing at Abra in 2021 and have its first full year of commercial production in 2022.

Alex Molyneux of Galena Mining

Quick facts: Galena Mining Ltd

Price: 0.295 AUD

Market: ASX
Market Cap: $111.28 m
Follow
  • The company’s feasibility study values the project at $553 million before tax, with a 39% pre-tax IRR

  • Abra has an expanded 16-year estimated mine life

  • Galena expects 95,000 tonnes of lead and 805,000 ounces of silver will be produced a year after ramp-up

  • Total production would be 1.24 million tonnes of lead and 10.6 million ounces of silver over the life of the mine

  • Galena hopes to secure project funding for Abra, with a resources-savvy bank designing a debt package

  • The company is advancing a funded development works program and has outlined next steps for the market

What does Galena Mining do?

Galena Mining Ltd (ASX:G1A) is a base metals project developer in Australia.

The Western Australian company is led by Alex Molyneux, a financial analyst with more than 23 years experience in the metals and mining and banking sectors.

Molyneux previously led large uranium company Paladin Energy Ltd (ASX:PDN) as its chief executive officer, seeing through a US$700 million successful recapitalisation of the company and re-listing of the company on the ASX.

Galena’s CEO has led and chaired a number of companies over the past 14 years.

He has held vice-president, director and financial analyst roles at a number of high-profile financial institutions, including UBS, Deutsche Bank and Ford Motor Company and was a managing director and metals & mining investment banking head for Asia and Australia at Citigroup Inc (NYSE:C).

Molyneux has an undergraduate economics degree from Monash University and is obtaining a graduate diploma in mineral exploration geoscience and geological and earth sciences from Curtin University.

What does Galena Mining own?

The key asset is the Abra Base Metals Project in Western Australia, a wholly-owned asset of Galena subsidiary AMPL.

This globally significant lead-silver project is in WA’s Gascoyne region and was discovered in 1981.

AMPL is 91.11% owned by Galena and 8.89% by Japan's Toho Zinc Co Ltd (TYO:5707), with Toho hoping to farm into a 40% stake in the project with a further $70 million of spending before Abra project construction.

Abra is found on granted mining lease M52/776 and has all the major regulatory approvals to start construction.

These include permits from the Western Australian Department of Water and Environment Regulation and Western Australian Department Mines, Industry Regulation and Safety.

A native title agreement is in place for the mining lease and is documented in an indigenous land-use agreement and heritage agreement with the native title claimant Jidi Jidi Aboriginal Corporation.

In May 2019 the company attracted $100 million in funding to finish its feasibility study and engage in early development work program.

The development work involves offtaking, engineering design and securing long-lead-time items.

What are the economics of Abra project?

On Monday Galena published its feasibility study for Abra, finding the development project has technical feasibility along with low risk and strong projected economic returns.

The study was prepared with the assistance of GR Engineering Services Limited (ASX:GNG).

Mine life for the lead-silver mine was put at 16-years — a two-year extension on the company’s 2018 prefeasibility study (PFS).

The project has a $553 million net present value before tax at an 8% discount, using spot prices, with a corresponding 39% internal rate of return (IRR).

Galena’s latest study showed 8% lower operating costs for Abra project but 10% greater capital expenditure (capex) estimates when compared to the PFS.

Cash costs were reduced by US 4 cents a pound to 44 cents a pound while pre-production capex was $16 million higher at $170 million.

Financial assumptions for the modelling assumed metal payability of 95%, a US$0.92 a pound lead metal price, US$16 an ounce silver metal price and US$96 a tonne conc. lead treatment charge and a US 70 cent to $1 Australian exchange rate.

Galena’s feasibility study for the project increased life-of-mine production estimates by about 140,000 tonnes for lead to 1.24 million tonnes and about 800,000 ounces for silver to 10.6 million ounces, compared to the PFS.

The study estimated Abra would produce 95,000 tonnes of lead and 805,000 ounces of silver per year for 1.24 million tonnes of lead and 10.6 million ounces of silver after ramp-up and over the life of the mine.

What are Galena’s next steps?

Galena confirmed its next steps were to finalise offtake agreements, obtain project debt financing, undertake and complete its development work, and update the project’s JORC resource and reserve.

The early development work program already underway is funded by a $100 million tip-in during the June 2019 quarter.

Galena’s Monday release confirmed it may buy subsidiary and shareholder AMPL’s offtake rights to high-grade, high-value lead-silver concentrate production from Abra to on-sell the product in international markets.

A mining-experienced bank is drawing up a project financing debt package and may source funds from Japan.

A camp module is being designed for Abra while negotiations are underway for a pastefill plant to be refurbished and re-sited to Abra.

Fruther development activities are expected to be accelerated in the December 2019 half-year.

Drilling on Abra is tipped to increase 30% ahead of resource and reserve update work.

Inflection points

  • Continued early development work on offtaking, engineering design and long-lead items
  • Progression of future work program, updating the JORC resource and reserve
  • Finalising offtake agreements
  • Project debt financing
  • Other funding milestones
  • Future study work and investment decisions
  • Significant transactions such as for partnering and financing arrangements

Abra study shows “sector-leading” returns, confirms Galena MD Alex Molyneux

“I’m very pleased that Abra has now completed feasibility study-level technical and engineering work, with the project continuing to demonstrate sector-leading financial returns with a pre-tax NPV of Australian $553 million,” Galena managing director Alex Molyneux told the market this week.

“It’s also important to have completed the study on time given that it is a milestone to moving through the final phase of the project financing debt process, which is well underway.”

 

NO INVESTMENT ADVICE

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is...

In exchange for publishing services rendered by the Company on behalf of Galena Mining Ltd named herein, including the promotion by the Company of Galena Mining Ltd in any Content on the Site, the Company receives...

FOR OUR FULL DISCLAIMER CLICK HERE

Watch

Full interview: Galena Mining ramps up surface infrastructure development at...

Galena Mining Ltd (ASX:G1A) managing director Alex Molyneux updates Proactive on increased surface infrastructure development activities at the Abra Base Metals Project in the Gascoyne region of WA. This forms part of a $15 million development works program. The work is being done prior to...

on 10/10/19

6 min read