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Galena Mining Ltd. (“Galena” or the “Company”) (ASX:G1A) announces achievement of the key objectives from the 2020 Abra Drilling Program and has subsequently completed an updated JORC Code 2012 Mineral Resource estimate (“April 2021 Resource”) for the Abra Base Metals Project (“Abra” or the “Project”) located in the Gascoyne region of Western Australia. The April 2021 Resource has been independently prepared by Optiro Pty Ltd (“Optiro”).
Managing Director, Alex Molyneux commented, “The objectives associated with the 2020 Abra Drilling Program were successfully completed. The Project now has over 100 kilometres of drilling in its database, and the geological confidence and understanding of the deposit continues to improve. Almost all of the new holes were drilled within the previous Mineral Resource envelope and over 75% of those holes achieved expected or better results. This Mineral Resource update will now feed into an optimised mine plan, and mine development will allow for underground drilling to continue Resource development, particularly the conversion of significant Inferred Mineral Resources associated with the Core Zone
mineralisation, which remains open in several directions and also hosts the interpreted copper-gold zone.”
Table 1 (below) states the Abra April 2021 Resource at a 5.0% lead cut-off grade.
2020 ABRA DRILLING PROGRAM AND OBJECTIVES
The completed 2020 Abra Drilling program included 57 drill-holes totalling 24,834 cumulative linear meters and was designed to achieve three specific objectives. These objectives were mainly focussed on the original Mineral Resource estimate and potential grade and continuity risk
of certain areas within that estimate, and they were:
(i) Lead-silver orebody infill drilling – Some infill drilling that had previously been planned to take place from underground once the decline was in place was pulled forward into the 2020 Abra Drilling Program. This aimed to further tighten the drill-hole spacing over the first four years of proposed production to 20 by 20 metres and up to 30 by 30 metres or better, compared with a more variable drilling density of up to 40 by 40 metres and up to 60 by 60 metres in that area previously.
(ii) Drilling into selected lead-silver ‘metal rich’ zones – Some drill-holes successfully targeted selected areas within the Abra lead-silver mineralisation where higher concentrations of metal (in both grade and thickness) were projected from previous drilling campaigns, in particular drill-hole AB147, which became the best high-grade lead-silver drill-hole ever at Abra, and the follow-up drill-holes that were added to the program in its vicinity (see Galena ASX announcements of 19 October 2020, 18 November 2020, 22 January 2021 and 24 February 2021).
(iii) Gold-copper exploration – Some of the drilling, in particular drill-hole AB195 (see Galena ASX announcement of 22 February 2021) successfully targeted the newly interpreted gold and copper drilling targets to the south and south east of the leadsilver mineralisation and at depth (see Galena ASX announcement of 29 June 2020).
The first two of these objectives enable the Company to optimise mine planning, which is now underway.
MINERAL RESOURCES
Geological model
Abra is located in the Gascoyne region of Western Australia within clastic and carbonate sediments of the Proterozoic Edmund Group. Abra is a base metals replacement-style deposit, where the primary economic metal is lead. Silver, copper, zinc and gold are also present within
the established lead mineralised zones but are of lower tenor.
Abra can be divided into two main parts, the upper “Apron Zone” and lower “Core Zone”.
The Apron Zone comprises stratiform massive and disseminated lead sulphide (galena), with minor copper sulphide (chalcopyrite) and zinc sulphide (sphalerite) mineralisation within the lower conglomerate unit (KCLC) of the Edmund Basin Kiangi Creek Formation and the Upper
Carbonate Unit (UID) of the Irregully Formation. The Apron Zone is characterised by flat-lying alteration zones containing jaspilite (Red Zone), barite (Barite Zone), silica-sericite (Micrite Zone), siderite and dolomite (Carbonate Zone), and haematite and magnetite (Black Zone). Distinct stratiform alteration domains can be defined within the Apron Zone and have assisted in the definition of the distribution of the lead mineralisation and construction of the lead mineralisation lodes. The Apron Zone extends for over 1,200 metres along strike and 750 metres down dip, dipping gently south.
G1A:AU
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.
Lead Price Forecast: Top Trends That Will Affect Lead in 2024
On the supply side, lead is typically mined as a by-product of zinc, silver and to a lesser extent, copper. Demand changes and mining disruptions for these metals can play an outsized role in shaping lead sector dynamics.
As 2024 approaches, the Investing News Network (INN) is looking back at the main trends in the lead space in 2023 and what’s ahead for prices, supply and demand in the new year. Read on to learn what experts see coming.
How did lead perform in 2023?
Although they started off the year above the US$2,300 per metric ton level, lead prices quickly shed nearly 11 percent in the first three weeks of 2023 on concerns about weak demand.
Lead touched US$2,300 again in June, which analysts at Wood Mackenzie attributed to the suspension of operations at Newmont’s (TSX:NGT,NYSE:NEM) Peñasquito polymetallic mine in an “already tight” lead concentrate market.
“Strong OE automotive figures were also supportive on the demand side of lead's market fundamentals. However, the wider macroeconomic picture has been less robust recently, particularly in China,” the firm states in a June report.
Although lead prices would test the US$2,300 level again in September, Peñasquito’s return to production in October pushed the metal back down to around US$2,064. Confirmation of the mine's restart coincided with lead prices weakening notably in relation to other London Metal Exchange (LME) prices, as per Wood Mackenzie.
Lead prices hit their lowest point of the year on December 7, coming in at US$1,973.
Lead's price performance in 2023.
Chart via TradingEconomics.
A December report from the International Lead and Zinc Study Group (ILZSG) shows that in the first 10 months of 2023, global supply of lead exceeded demand by 41,000 metric tons.
Worldwide lead mine production rose by 1.5 percent and lead metal production was up by 2.8 percent over the same period in 2022, while consumption of the metal rose by a mere 0.3 percent.
The January launch of production at Galena Mining’s (ASX:G1A) Abra lead-silver mine in Australia, notes the ILZSG, contributed to the rise in mine production. The first major lead-only mine to be brought into production since 2005 has an annual lead production capacity of 95,000 metric tons.
China, which is both the world’s largest producer and consumer of the metal, increased its imports of lead concentrate by 22 percent compared to the first 10 months of 2022, while its exports of refined lead metal grew by more than 64 percent. In the ILZSG’s October 2023 forecast, the group attributes the growth in Chinese demand for lead to a 13.4 percent increase in lead-acid battery output over the first seven months of 2023.
What factors will move the lead market in 2024?
Heading into 2024, what supply and demand factors are expected to drive prices for lead?
"On the supply side, prospects of mine expansions and the potential restart of operations in European smelters will be key factors to watch,” Adrià Solanes, associate economist at FocusEconomics, told INN via email.
The ILZSG forecasts that global lead mine supply will rise by 2.9 percent in 2024 to 4.71 million metric tons, compared to 3.3 percent growth in 2023. Increased lead supply is seen coming out of Australia, the second largest lead-producing country, as well as other top producers such as India and Russia.
Market participants will also be keeping an eye on Peru’s federal elections in April. The country is the world’s fifth largest lead producer, and has a strong project pipeline. However, political instability and ongoing protests against mining projects could have a negative impact on mining investment in the country, states research firm BMI.
New sources of mine supply for lead in 2024 include Adriatic Metals’ (ASX:ADT,LSE:ADT1,OTCQX:ADMLF) Vares silver mine in Bosnia and Herzegovina, which is expected to begin production in January, barring any further delays.
Looking over at global refined lead supply, the ILZSG sees a 2.3 percent increase to 13.14 million metric tons in 2024; that's compared to a 2.7 percent increase on the books for 2023 and a 1.7 percent decline in 2022. The restart of Trafigura’s Stolberg smelter in Germany is expected to contribute to increased refined lead supply for 2024.
As a by-product metal, global supply of lead is also tightly tied to zinc mine production. A too-low price environment for zinc can prompt miners to curtail operations as the cost of production eats into their margins. In 2023, zinc has been the second worst-performing metal on the LME after nickel due to a massive supply overhang amid stilted demand.
With economic uncertainty still weighing on global markets, that supply imbalance is expected to remain. “Regarding the global market balance, the Group anticipates that global supply of refined zinc metal will exceed demand in both 2023 and 2024 with the extent of the surpluses forecast at 248,000 tonnes and 367,000 tonnes respectively,” states the ILZSG.
What about global demand for lead? “Demand-wise, much will depend on the strength of the automotive sector, the health of China’s industrial sector and the pace of monetary easing in western economies,” said Solanes.
Looking at the global automotive market, an S&P Global Mobility report shows a projected 8.9 percent rise in new light vehicle sales for 2023 over the previous year. However, in 2024 that figure is set to drop to only a 2.8 percent increase.
The rising cost of living in many countries due to growing inflation and higher interest rates will still be front and center heading into 2024, which will no doubt hamper consumer demand for vehicles.
"2024 is expected to be another year of cagey recovery, with the auto industry moving beyond clear supply-side risks, into a murkier macro-led demand environment," Colin Couchman, executive director of global light vehicle forecasting for S&P Global Mobility, states in the firm's report.
As the largest consumer of lead, China’s economic health is also a factor for consideration. The World Bank is forecasting 5.2 percent annual growth in 2023 for China, the world’s second largest economy, and calling for slower growth of 4.5 percent in 2024 and 4.3 percent in 2025. The weakest segment of China’s market has been its property sector, with investment down 9.4 percent in 2023. Lead has several important applications in housing and infrastructure.
However, demand for refined lead metal in China is forecast to grow by 2.4 percent in 2024 after projected demand growth of 1.9 percent in 2023, according to ILZSG data. That’s compared to a significant 2023 decline of 6.4 percent in the US; a recovery of 3.1 percent is forecast in the country for 2024.
On a global scale, demand for refined lead metal is set to increase by 2.2 percent in 2024 after a 1.1 percent increase in 2023. Demand for lead is also expected to rise in India, Japan and Korea.
Despite these increases in demand, the ILZSG “anticipates that global supply of refined lead metal will exceed demand by 35,000 tonnes in 2023. In 2024, a larger surplus of 52,000 tonnes is expected.”
What other key trends and catalysts should investors look out for in the lead market in 2024?
“Stimulus policies in China will be a key short-term catalyst of demand for the metal. Timely and substantial support to the industrial and property sector would boost lead prices,” Solanes explained.
In mid-2023, China’s National Development and Reform Commission announced economic stimulus measures to spur growth in the auto, property and consumer goods sectors. Market participants will be watching for any impact they may have for the lead sector, as well as additional measures that may be on the horizon in 2024.
Over the longer term, the transition away from fossil fuels to renewable energy sources presents an avenue of demand in the lead market. “The main underlying trend to monitor is the switch to green and electric energy, as lead-acid batteries are widely used to power both low-voltage and renewable energy systems,” added Solanes.
Don’t forget to follow us @INN_Resource for real-time news updates!
Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.
The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
