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Galena Mining celebrates a year amid increased equity

The base metals-focused company was joined by new managing director Alex Molyneux on September 1.

Managing director Alex Molyneux
Alex Molyneux is an experienced mining executive and financier

Galena Mining Ltd (ASX:G1A) has celebrated a year on the Australian Securities Exchange after increasing total equity in the company 33,357% to $16.8 million.

The company, which listed on the ASX a year and 2 weeks ago, released its annual results to market today as it moved towards finishing up a pre-feasibility study for the project this month.

READ: Galena Mining confirms high-grade mineralisation outside Abra resource

Galena’s Abra Base Metals Project, which assumes a US$0.95 a pound lead price, could be buoyed by a favourable market outlook for lead.

The commodity has averaged US$0.97 a pound over the last 10 years.

Galena releases annual results

The exploration and development company put out its 2017-18 annual report today, unveiling $61,855 in revenue and a $1.2 million total comprehensive loss for the financial year.

Galena’s 2018 revenue result was a turnaround, given it wrote a nil amount the previous financial year.

The company’s 2018 comprehensive loss was a $487,748 or 67% increase on the previous financial year and equated to 49 cents a share, a 77% reduction in the $2.13 a share loss of the 2016-17 financial year.

Galena increased total assets by $17.72 million or 23,009% to $17.8 million, while upping total liabilities by $934,481 or 3,500% to $961,183.

The company added $16.79 million or 33,357% to its total equity to finish the financial year with $16.84 million equity.

Among that was $8.5 million in cash and cash equivalents on June 30.

Previous study

Galena completed a scoping study in June which indicated strong positive economics for its flagship Abra project in the Gascoyne region of Western Australia.

The base metals project study confirmed Abra as an economically and technically robust opportunity, with the project having the potential to become a significant, long-life, high margin lead-silver producer.

Considerable exploration potential exists for additional lead-silver mineralisation to be converted to JORC resource with additional drilling.

New area includes high grades

Areas for extension include a new expanse 150 metres from the resource announced in March, which could can potentially provide high-grade inventory in the early years of Abra’s mine plan.

One hole from the area assayed: 16.2 metres at 9.2% lead and 44 g/t silver, including 4.5 metres at 15.1% lead and 44 g/t silver; and 6 metres at 14.5% lead and 28 g/t silver.

Other assays included: 6 metres at 11.8% and 19 g/t silver; and 4.6 metres at 5.9% lead and 19 g/t silver.

READ: Galena Mining appoints Alex Molyneux as MD as it transitions to base metal producer

Galena’s new managing director Alex Molyneux told the market 11 days ago: “These results are very exciting because they confirm high-grade mineralisation extends 150 metres beyond the existing resource model mineralised area.

“This bodes well for achieving our resource development ambitions when we come to publish an updated mineral resource estimate.”

Abra’s Gascoyne region resource consists of 36.6 million tonnes at 7.3% lead and 18 g/t silver.

READ: Galena Mining's shares spike on confirmation of world-class lead-silver resource at Abra

Former Galena MD Ed Turner said in June the company’s scoping study had “confirmed the economic viability of the Abra project.

He reported in June: “It has increased our confidence in the real potential of the project as a near-term Western Australian development opportunity.

“This is an exciting long-life, high margin and low capital project in a tier-1 jurisdiction.

“Abra’s latest representative metallurgical test work demonstrates that it can produce a very high grade (74.5% lead and 140 g/t silver), high-quality clean concentrate that is in high demand.” 

Potential upside

At its full production rate, Abra is projected to be fifth or sixth largest lead producer in the world.

The scoping study was based on work undertaken by Galena and a study team consisting of in-house personnel and external, independent industry-expert consultants.

It relates to underground mining, ore processing, mine site infrastructure, environmental permitting, logistics and marketing.

The study is also underpinned by the extensive historical technical database that has been acquired by Galena.

Scoping study outcomes

Among the outcomes are:

  • Base case pre-tax post royalties NPV10 of $394 million and IRR of 61%, based on a long-term lead price of US$0.95/pound, silver price of US$16.50/ounce and USD:AUD exchange rate of $0.75;
  • Spot case pre-tax post royalties NPV10 of $615 million and IRR of 82% (based on spot Pb price of US$1.14/lb, silver (Ag) price of US$16.50/oz and USD: AUD of $0.75);
  • Initial mine life of 11 years, with opportunities identified to extend beyond 11 years;
  • Annual throughput of 1 million tonnes, with average grades of 9.7% lead and 15 g/t silver, producing 91,000 tonnes of lead and 450,000 ounces of silver;
  • Average life of mine cash (C1) costs of US$0.46/pound and total costs (C3) costs of US$0.56/pound (includes all royalties) – high margin, strongly cash generative operation;
  • Average LOM revenues estimate of $251 million and operating cash flows of $104 million per year (Base Case); and
  • Pre-production CAPEX estimated to be $153 million with a payback period of about 18 months.

Strong lead outlook

Potential development of Abra coincides with a strong outlook for lead.

Increasing demand and reducing supply has produced an average spot lead price of US$0.97 per pound over the last 10 years.

Lead price outlook

Given the strength of the scoping study, Galena is progressing into the next phase of work at Abra across multiple fronts and at a maximum pace.

Galena owns 100% of the base metals project, which is in the Gascoyne region of Western Australia.

It was discovered in the late 1970s and has been the subject of an extensive historical exploration and preliminary level economic studies.

There has been no previous mining activity and the deposit does not outcrop.

Focus on high-grade mineralisation

The proposed throughput rate allows mining to focus on high-grade lead-silver mineralisation.

This rate is based on mining studies performed on the latest JORC resource estimate.

The mineable material that is the basis of the study compromises 9.2 million tonnes at a grade of 9.7% lead and 15 g/t silver for a contained 842,500 tonnes of lead and 4.2 million ounces of silver.

About 51% of the mineable material is in the indicated category with the first two years of production in this category.

This ensures 100% of the payback period of less than 1.5 years of production is mining solely indicated resources.

Mining method

The planned mining method comprises an underground mine accessed by a decline.

Initial material is expected to be mined during quarter one of 2021.

Underground extraction will be mostly by sublevel open stoping mining and partly by room and pillar mining.

These methods, together with paste filling high-value stopes, will enable maximum extraction of the ore body.

Underground material will be trucked to the surface via the access decline.

Processing method

Processing will comprise conventional crushing, grinding and two stages of conventional flotation and filtration to produce a lead (plus silver) concentrate.

The construction cost of the facility is estimated at $66 million including $6 million of contingency costs.

Construction is scheduled to begin during the second quarter of 2020, with a 15-month time frame for commissioning.

Near-term schedule

The next steps for Galena’s Abra project include:

  • Completing the pre-feasibility study in September 2018;
  • Additional infill drilling to convert more inferred resource material to the higher confidence indicated classification in late 2018; and
  • Completing the marketing exercise with potential buyers, including smelters and traders, to obtain contract terms for Abra’s lead concentrate.

 

Quick facts: Galena Mining Ltd

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