Galena Mining Ltd (ASX:G1A) has entered into an offtake agreement with tier-one international trading firm IXM S.A. for the supply of high-value, high-grade lead-silver concentrates from its Abra Base Metals Project in WA.
Additionally, the company has also entered into a back-to-back agreement with Abra Mining Pty Limited (AMPL), the project's joint-venture (JV) company, to produce the concentrates that will be supplied to IXM.
Under the IXM offtake, Galena has agreed to sell IXM 65,000 tonnes per year of high-value, high-grade lead-silver concentrates for a period of 10 years from the beginning of production.
"Reflects premium value"
Managing director Alex Molyneux said: “I’m pleased Galena has entered into an offtake agreement with a tier-one buyer that reflects the premium value of Abra’s high-grade concentrate product.
“The arrangement demonstrates a higher value over and above the assumptions used in the feasibility study.”
This agreed volume accounts for 60% of Abra production that has not been earmarked for offtake to Toho Zinc Co, Galena’s JV partner in AMPL.
The premium in favour of Galena under the IXM offtake will generate annual pre-tax cash flow for the company once Abra is in steady-state production.
This represents the high-quality nature of Abra’s concentrate, which is anticipated to be the world’s highest-grade lead concentrate commercially available.
The IXM Offtake will be priced based on standard metal payabilities for lead concentrates and pricing based on London Metal Exchange quoted lead metal price.
Treatment and refining charges will be deducted from the payable amount based on the annual benchmark for equivalent lead concentrates together with an adjustment in favour of Galena.
US$12 million financing facility
IXM and the company have also agreed on indicative terms with respect to a US$12 million financing facility to be available in two tranches of US$6 million during project construction and ramp-up.
The IXM facility is not intended to be part of the Abra project financing debt but will provide a valuable additional source of funding for Galena to draw as an option in the event it, or AMPL have liquidity requirements during critical phases of Abra’s development.
IXM was established in 2005 as a metals trading division of Louis Dreyfus Company prior to a 2018 sale to NCCL and a 2019 sale and consolidation into China Molybdenum Co Ltd, a US$10 billion international mining company listed on the Hong Kong Stock Exchange and Shanghai Stock Exchange.