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Galena Mining and Toho Zinc executes definitive documentation for $90 million investment

The international zinc and lead smelting company will gain 40% ownership of Galena’s Abra Base Metals Project in WA’s Gascoyne region.
project area
Abra is now being advanced towards the construction phase

Galena Mining Ltd (ASX:G1A) and Japan-based Toho Zinc Co Ltd (TYO:5707) have executed the definitive documentation for a $90 million investment by Toho for a 40% interest in Galena’s Abra Base Metals Project.

Toho, via its wholly-owned subsidiary CBH Western Australia Pty Ltd (CBHWA) is investing in Galena’s wholly-owned subsidiary Abra Mining Pty Ltd (AMPL), which owns the Abra Base Metals Project.

The first tranche payment of $20 million has been received by AMPL.

READ: Galena Mining secures $90 million equity from Toho Zinc to develop Abra Base Metals Project

Galena managing director Alex Molyneux said: “I’m very pleased to welcome Toho as our partner for the development of the Abra Base Metals Project.

“Toho is a recognised player in the global lead and zinc industry and an experienced miner, so their investment represents one of the most positive endorsements possible.”

Under the terms of the transaction, once certain closing formalities are completed, AMPL will issue new shares to CBHWA such that AMPL will be owned 8.89% by CBHWA and 91.11% by Galena.

At that time, Galena will also receive a $5 million intercompany loan repayment from AMPL.

Subsequently, CBHWA will pay a second $10 million payment tranche to AMPL once Galena issues the definitive feasibility study (DFS) for the Abra Base Metals Project for an additional 4.44% of AMPL.

READ: Galena Mining Toho transaction gets due diligence tick

A final $60 million payment will be paid once project financing debt for the project has been confirmed on terms acceptable to both Galena and Toho and all conditions for the drawdown of the full amount of the project financing debt have been satisfied.

CBHWA will receive a further 26.67% of AMPL on payment of that final tranche, taking its total ownership of AMPL to 40.00%.

Advancing towards construction phase

Abra is now being advanced towards the construction phase. The initial project development drilling has commenced (including drilling to complete decline positioning, water bores and additional infill holes associated with early production horizons).

In addition, Galena and Toho have agreed to utilise the first and second payment tranches from the transaction to commence additional early project works, including: establishment of initial site camp; certain site infrastructure works; mine boxcut development; initial underground decline development; and procurement of certain long lead-time items.

DFS in mid-2019

In light of the fast-track move towards construction and that the DFS for Abra remains expected in mid-2019, Galena no longer proposes to publish an optimised Abra prefeasibility study as proposed prior to entering into the Toho transaction.

The company’s immediate focus will be on: commencing the early project works; finalising outstanding minor permitting approvals; completion of the DFS; and advancing discussions with project financing debt providers (including engaging with Japanese lenders introduced by Toho).

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