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GALENA MINING LTD. (“Galena” or the “Company”) (ASX: G1A) reports on its activities for the quarter ended 30 June 2023 (the “Quarter”), primarily focused on the ongoing production ramp-up of both the underground mine and the processing plant to achieve steady-state production in the second half of 2023, at its 60%-owned Abra Base Metals Mine (“Abra” or the “Project”) located in the Gascoyne region of Western Australia.
HIGHLIGHTS
- Strong recovery achieved with May and June physicals following limited activities in April due to rainfall events. Ore mined of 194,644t at 5.4% Pb grade and 16.9g/t Ag grade and processed 190,258t at 5.1% Pb grade and 19.0g/t Ag grade for the Quarter.
- Second and third in-specification lead concentrate shipments of ~5kt each completed in the Quarter, doubling revenue from the previous quarter to ~A$20.4 million.
- July month to date on track to achieve first positive monthly operating cash flows with over 90% of the next ~9-10kt concentrate shipment produced and committed shipment set for loading between 28 July and 4 August.
- Underground development achieved 1,583m advance during the Quarter with the decline reaching 1,234mRL (312m vertically below the surface). Underground stope production achieved 81,592t at 6.3% Pb grade. Pb grade is slowly improving and will continue to do so in the coming months as new work areas are established and the ratio of stoping ore to development ore increases to required production levels.
- Cash balance at Quarter-end of A$19.3 million.
- Galena completed an oversubscribed placement to provide additional working capital funding for the Abra ramp-up.
- September quarter mining plans set to achieve over 2,000m development and over 250,000t stope production expecting to process over 300,000t of ore as next quarter ramp-up milestones. Targeting ~25-30kt of lead concentrate shipments expected to generate positive operating cash flows.
Managing Director, Tony James commented, “We made a strong recovery from no production in April to set new project highs in both May and June, and we expect to achieve first positive operating cash flows in July. The plant is showing its capacity to process everything put in front of it so far and the focus remains on increasing mine production levels. The key to the mine reaching the levels required is good planning and execution. With the mine plans at 90% grade control status through to January 2024 we see the pathway well laid out to achieve our targets. Some very strong technical work has been completed to increase our confidence in hitting our targets.”
ABRA BASE METALS MINE (60%-OWNED)
Abra comprises a granted Mining Lease, M52/0776 and surrounding Exploration Licence E52/1455, together with several co-located General Purpose and Miscellaneous Leases. The Project is 100% owned by Abra Mining Pty Limited (“AMPL” the Abra Project joint-venture entity), which in turn is 60% owned by Galena and 40% owned by Toho Zinc Co., Ltd. (“Toho”) of Japan.
Abra is fully permitted, and construction of the processing plant and surface infrastructure was completed in December 2022. First production of its lead-silver concentrate occurred in January 2023 with first product shipment achieved in March 2023.
Review of operations
Notes:
1. Total Recordable Injury Frequency Rate (“TRIFR”) and Notifiable Incident Frequency Rate (“NIFR”) are the 12-month moving average at the end of each quarter calculated per million work hours.
2. Concentrate sales and average lead price received initially based on provisional invoices and subsequently updated with final invoices, including final assays and quotational period adjustments.
3. Payable lead and silver based on 95% metal payability subject to standard deductions (i.e., 3 units for lead and 50g/t for silver).
4. C1 costs include mining costs, processing costs, site general and administration costs, transport, logistics and shipping costs, and treatment and refining charges, adjusted for inventory movements and net of silver by-product credits.
5. All-in sustaining costs include C1 Costs plus royalties, corporate general and administration costs, sustaining capital and capitalised mine development costs. All-in sustaining costs exclude growth capital and exploration costs.
6. Abra Project construction works were completed by the end of the December 2022 quarter (see Galena ASX announcements of 10 January 2023 and 13 January 2023).
During the Quarter, new quarter high mining and processing production levels were achieved. This achievement also takes into account the limited activities in April 2023 due to the rainfall issues affecting access to the Abra mine site.
In June, a mine development record was set with 646m of lateral and vertical development achieved during the month. A third Jumbo commenced in the mine in June with the aim of increasing the mine’s monthly development rates to 800m per month during the September quarter.
The mine delivered 194,644t (April: 31,915t, May: 81,014t and June: 81,715t) at 5.4% Pb grade to the plant during the Quarter, including stope production ore of 81,592t at 6.3% Pb grade. The higher development ore during the Quarter is consistent with the ramp-up of mine production as new stoping areas are established. In general, mine production in the Quarter was also affected by congestion in the available work areas, production delays associated with upgrading secondary ventilation networks and loader availability. These impediments were continually rectified during the quarter.
The plant effectively processed all the ore delivered from the mine during the Quarter with 190,258t processed (April: Nil, May: 102,719t and June: 87,539t). 12,468t of concentrate was produced containing 8,070t Pb and 63,122oz Ag. Plant availability in May was 99% and in June 86%. A flotation blower (compressor) breakdown caused the lower availability in June. The plant was able to operate consistently at the 150dmt/hr level during the Quarter.
The mine call grade for ore processed during the Quarter was estimated at 5.4% Pb, which is approximately 0.3% Pb higher than the reconciled processing grade of 5.1% Pb.
Considerable technical improvements were achieved during the Quarter with detailed resource modelling and mine planning work completed. A new Mineral Resource Estimate (“MRE”) is expected to be finalised in the coming weeks which will include all the recent underground drilling and revised geological modelling. This work will lead into a new Ore Reserve estimate and 2024 budget completion in the December quarter. Three month rolling mine plans have been established and the mine planning for the remainder of 2023 is well advanced with 90% of that plan built on grade control drilling down to a 12.5x12.5m spacing.
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This article includes content from Galena Mining, licensed for the purpose of publishing on Investing News Australia. This article does not constitute financial product advice. It is your responsibility to perform proper due diligence before acting upon any information provided here. Please refer to our full disclaimer here.
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Galena Mining
Overview
Galena Mining Limited (ASX:G1A, Galena) owns 60 percent of the Abra base metals mine located in the Gascoyne region of Western Australia - home to one of the largest lead and silver deposits in the world, set to produce the highest-grade, cleanest lead concentrate available globally. The company is capitalizing on its Tier 1 asset in a Tier 1 jurisdiction, strengthened by and leveraging partnerships with Japan's largest zinc and lead smelter, as well as with one of the top base metals trading firms in the world.
The company also owns 100 percent of the Jillawarra Project, which covers 76 kilometers of strike extension directly to the west of Abra. The Jillawarra Project contains several large-scale analogous exploration targets including the Woodlands Complex, Quartzite Well and Copper Chert areas.
Galena's major partnerships include Toho Zinc (TSE:5707), Japan's largest zinc and lead smelter, and IXM SA, one of the world's top three base metals trading firms. Toho provided AU$90 million project equity and has a long-term offtake agreement to purchase 40 percent of Abra's production; while IXM has entered into a 10-year take-or-pay offtake contract to purchase the remaining 60 percent.
The company's management team brings decades of experience in the mining and base metals industry and has a proven track record of success throughout all stages of exploration, from development to production.
In November 2020, Galena put in place US$110 million in finalized debt facilities arranged by Taurus Funds Management. The facilities include a US$100-million project finance facility plus a US$10-million cost overrun facility.
The project finance facility consists of a 69-month term loan primarily to fund capital expenditures for the development of Abra. Key terms include:
- Fixed interest of 8 percent per annum on drawn amounts, payable quarterly in arrears.
- 1.125 percent net smelter return royalty.
- No mandatory hedging.
- Early repayment allowed without penalty.
- 15 quarterly repayments commencing on 31 December 2023.
The cost overrun facility is a loan to finance identified cost overruns on the project in capital expenditure and working capital. Fixed interest of 10 percent per annum applies to amounts drawn under the cost overrun facility.
The Taurus debt facilities have been fully drawn and are secured against Abra Project assets and over the shares that each of Galena and Toho own in Abra.
Company Highlights
- Positioned to realize value for shareholders:
- Abra mine construction completed in December 2022, on time and on budget.
- First in-specification concentrate shipment achieved in March 2023.
- Abra is one of the largest and cleanest lead-silver deposits in the world (high-grade, high-value concentrate 1/10th typical deleterious elements).
- Exciting exploration ground and known copper-gold mineralisation below the Abra lead-silver deposit.
- JV between Galena (60 percent) and Japan's largest zinc and lead smelter Toho Zinc (40 percent) underpins long mine life (10+ years) in an exciting new mineral province in Western Australia.
- Galena has a 10-year offtake agreement with IXM, one of the world’s largest base metals traders.
- Annual steady-state guidance:
- Mill throughput of more than 1.3 million tonnes per annum (Mtpa), producing +90,000 tonnes per annum lead and +550,000 ounces per annum silver.
- Annual average lead C1 direct cash cost of US$0.55 to US$0.65/lb.
- Annual average EBITDA (earnings before interest, taxes, depreciation, and amortization) of AU$90 million to $100 million.
- The Abra mine is located in the Gascoyne Region of Western Australia, home to one of the largest undeveloped lead deposits in the world and the highest-grade lead concentrate available, globally.
- The Abra mine carries a JORC mineral resource estimate (July 2023) of 16.2 million tons (Mt) at 7.3 percent lead and 19 grams per ton (g/t) silver in the indicated category, and 16.9 Mt at 6.9 percent lead and 15 g/t silver in the inferred category.
- Abra has been named the world's lowest-cost primary lead mine by Wood Mackenzie, a leading mining research and consultancy group.
- US$110 million of project financing debt facilities from leading mining-specialist lending fund Taurus Funds Management.
- Galena's management team brings decades of experience in the mining and base metals industry and has a proven track record of success throughout all stages of exploration, from development to production.
Key Projects
Abra Mine
The Abra Mine is a 60:40 joint venture between Galena and Japanese lead producer Toho Zinc. It is a globally significant lead-silver project located in the Gascoyne region of Western Australia, between the towns of Newman and Meekatharra approximately 110 kilometers from the DeGrussa copper mine owned by Sandfire Resources (ASX:SFR).
Abra Mine Site Location
The Abra mine carries a total JORC mineral resource estimate published in July 2023 of 33.4 Mt at 7.1 percent lead and 17 g/t silver (5 percent Pb cut-off grade), which includes 0.3 Mt at 7.3 percent lead and 32 g/t silver in the measured category; 16.2 Mt at 7.3 percent lead and 19 g/t silver in the indicated category; and 16.9 Mt at 6.9 percent lead and 15 g/t silver in the inferred category.
All permits for the Abra project have been obtained from the appropriate Western Australian regulatory bodies. The project is also subject to an existing land use and heritage agreement with the Jidi Jidi Aboriginal Corporation. The Abra property is well-serviced by public roads and highways, and all the necessary infrastructure has been developed to transport lead-sulphide concentrates to the Port of Geraldton, Abra's primary export port.
Abra Processing Plant
A final investment decision to complete the Abra Project was made in June 2021 and construction was completed in December 2022, on time and on budget. Several important milestones were achieved in the March 2023 quarter, including the commissioning of the processing plant, first ore fed into the plant and first concentrate produced in January 2023.
The processing plant achieved in-specification concentrate production from the commencement of concentrate production and during the 2023 calendar year, 967,622 tons of ore was processed and 61,800 tons of lead concentrate was produced.
The company is currently undertaking detailed technical work to develop an updated production plan for 2024 production targets and guidance.
Jillawarra Project
Exploration and growth associated with the 100 percent Galena-owned Jillawarra Project covers a highly prospective elongated tenement package covering approximately 76 kilometers of continuous strike length and 508 square kilometers directly to the west of Abra.
The Jillawarra Project hosts many base metals prospects which have had limited shallow exploration work completed since the 1970s by various companies. The bulk of the exploration work was completed by Amoco, Geopeko, Apex Minerals and Abra Mining Limited. The work completed to date has identified several base metals, manganese and gold prospects, of which the Woodlands Complex, Quartzite Well, Manganese Range, Copper Chert, TP and 46-40 were subject to early-stage exploration. Most of the drilling completed within the Jillawarra Project investigated the first 100 to 200-meter depth which, based on recent knowledge of Abra, may not have reached the depths required.
The main prospective corridor within the Jillawarra Project lies within the margins of the Quartzite Well – Lyons River Fault zones which extend east-west along the entire tenement package. Also, the contact between the dolomitic sediments of Irregully Formation and the lower sedimentary unit, polymictic conglomerate, of the Kiangi Creek Formation represents an important marker for the occurrence of base metal mineralisation as seen at Abra.
The Woodlands Complex is an Australian scaled geophysical anomaly which represents a significant target area with the anomaly being 12 kilometers long and 10 kilometers wide. Limited work and technical evaluation have occurred at Woodlands which presents a great opportunity for Galena in the years to come. Ongoing geophysical and exploration drilling will occur concurrently with the development of Abra. The knowledge and understanding of Abra due to its development will provide a significant exploration advantage at Jillawarra.
Management Team
Tony James – Managing Director and CEO
Tony James is a mining engineer with over 30 years’ mine operating and project development experience predominantly in Western Australia. He also has previous experience at managing director level of three ASX-listed companies with two of those companies successfully guided through a merger and takeover process benefiting the shareholders. He has a strong mine operating background (examples being the Kanowna Belle gold mine and the Black Swan nickel mine) and a strong feasibility study / mine development background (examples being the Pillara zinc/lead mine and the Trident/Higginsville gold mine).
Adrian Byass – Non-executive Chairman
Adrian Byass has more than 25 years of experience in the mining industry both in listed and unlisted entities globally. He has served as non-executive and executive director of various listed and unlisted mining entities, which have successfully transitioned to production in bulk, precious and specialty metals around the world. He currently serves on the boards of ASX gold, base metals and lithium companies.
Neville Gardiner – Non-executive Director
Neville Gardiner has over 30 years of experience advising boards on mergers and acquisitions,
equity and debt capital markets, transaction structuring, capital allocation and complex
commercial arrangements. His career achievements include senior executive leadership
roles in Deloitte, Torridon Partners, and at Bank of America Merrill Lynch, where he spent five years as the head of its Australian Natural Resources Team. He also spent nine years with Macquarie Bank, where he had responsibility for its Western Australian Corporate Finance business and its Australian Oil and Gas Advisory business. He has a very strong experience and knowledge base associated with the resources sector in Australia.
Stewart Howe – Non-executive Director
Stewart Howe has more than 40 years of experience in the global resource industry including 18 years in mining. He was chief development officer at Zinifex, one of the world’s largest miners and smelters of lead and zinc. He led the spin-off of Zinifex’s smelters to create Nyrstar NV, and restarted the development of the Dugald River mine.
Craig Barnes – Chief Financial Officer
Craig Barnes has over 25 years of experience in senior finance and financial management within the mining industry and previously the financial services industry. He has considerable experience in project financing, mergers and acquisitions, joint ventures, treasury and implementation of accounting controls and systems.
Before joining Galena, he held the position of CFO of Paladin Energy for more than five years and was part of the team that successfully completed the company's capital restructuring in 2018. Prior to that, he was the chief financial officer of DRDGOLD (NYSE and JSE:DRD) and its affiliated subsidiaries for more than seven years.
Aida Tabakovic – Company Secretary
Aida Tabakovic has over 11 years of experience in the accounting profession, which includes financial accounting reporting, company secretarial services, ASX and ASIC compliance requirements. She has been involved in listing several junior exploration companies on the ASX and is currently company secretary for numerous ASX-listed companies
Abra Construction At 97% Complete – First Ore Stockpiled For January Processing
Managing Director, Tony James commented, “Record underground development in November with delivery of the first 9,000t of ore to the ROM pad along with successful plant commissioning to date puts Abra on the verge of a quick transition into production. Recruitment and other operational readiness activities are well advanced in preparation for January production”.
Figure 1 – First material being tipped into the crusher during commissioning (Photo 26 November).
Figure 2 – Crushing and screening plant commissioning (Photo 26 November).
The following link will show a short video of the Abra crusher commissioning. https://youtube.com/shorts/iSG58MiW_3o
Update on Abra Project progress
Overall progress continues as planned, with first concentrate production expected in Q1 CY2023, following ore commissioning in January 2023. Practical completion of the processing plant is now expected ahead of schedule in December 2022. The processing plant engineering, procurement and construction has reached 99% complete. Piping and electrical works have made significant progress and at the end of November were 96% and 92% complete, respectively. Mechanical items installation is almost complete at 99%.
In November, the first material was crushed and screened as part of the staged commissioning process. The crushing plant ran at design capacity and all commissioning milestones were successfully achieved. Dry commissioning also progressed in most areas of the plant including water and air services, tailings and concentrate thickening, grinding and reagents. Dry commissioning of the remaining areas will be completed in December. Water commissioning commenced in the tailings and concentrate thickening areas of the plant and the remaining areas are expected to be wet commissioned by the end of December. The remaining commissioning schedule is unchanged from the last update and is shown below in Table 1.
Click here for the full ASX Release
This article includes content from Galena Mining, licensed for the purpose of publishing on Investing News Australia. This article does not constitute financial product advice. It is your responsibility to perform proper due diligence before acting upon any information provided here. Please refer to our full disclaimer here.
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