To say it has been a whirlwind 12 months or so for Galena Mining is an understatement. Around a year ago the company existed only in the minds of a small cadre of executives and mining professionals. However, in this short space of time Galena has been brought to life, purchased its first asset at an incredibly marked-down price, listed on the ASX after an unprecedented IPO and immediately begun resource definition drilling at its asset, the renowned Abra base metals deposit in the Gascoyne region of Western Australia.
The spark which led to the creation of Galena was provided by three founding directors, who swiftly began to build a talented executive team. Adrian Byass, Jonathan Downes and Oliver Cairns have have several decades of experience between them in terms of identifying new assets and floating new companies.
This founding trio soon appointed Edward Turner as Galena’s CEO, a geologist of 30 years with a wealth of knowledge attained from roles encompassing base, precious and specialty metals for leading mining companies across the globe.
Putting it simply, Turner tells RGN: “Our aim is to prove up a high-grade resource at the Abra deposit and get that into production.
“We expect to make a large profit from a mine life of 10-15 years.”
A globally significant asset
The Abra development is a vast lead-silver-copper-gold-zinc deposit hosted over a 600 metre by 600 metre area within the Jillawarra sub-basin of the Mesoproterozoic Edmund Basin, and is possibly the largest undeveloped lead deposit in the world.
Despite being first discovered in the 1980s and receiving a considerable amount of exploration attention from several interested parties, curiously the deposit remains undeveloped until now.
“Previously it was perceived to be a large mid to low-grade world-class deposit, that’s what attracted the previous Chinese buyers,” reveals Turner.
However, while the value of the deposit has always been there for all to see, the strategies of those attempting to develop it have fallen short of taking Abra from a world-class prospect into a fully-producing asset.
Often, previous owners approached the project with a high-production strategy, based on yielding low to mid-grade ores in massive quantities. This method invariably led to spiralling costs, which in the case of Chinese miner HNC was compounded by crashing metal prices in 2008.
“But, we identified that within that large deposit there is a lot of high-grade mineralisation, and if we can mine at a lower production rate per annum, there will be much lower capital expenditure on the processing facilities and the profit margin will be much higher on the production.
“The deposit covers such a large area that previous owners were almost blinded by the size of it and didn’t really try to identify the higher-grade sections of the deposit.”
Furthermore, the timing of Galena’s ascent into the Abra deposit is playing a vital role in its development. The company was able to acquire the assets for just $3.5 million, a snip of the $117 million paid by HNC in the preceding transaction.
Unfortunately, the value of the Abra deposit quickly depreciated under the weight of the global financial crisis and stooping metal prices, to the dismay of the Chinese owners.
Now, 10 years later with favourable macro-economic conditions returning and new forces shaping supply and demand currents in the commodity market, Galena is well poised to finally realise the true value of the metal in the ground.
Recognising this building value, Galena’s directors formed the company with the sole intention of acquiring the Abra deposit and advancing it via a cost-effective strategy based on a lower production rate at a higher grade, which would go a long way to guaranteeing a low capex project with high profit margins.
The executives also laid out a clear timeline with regards to heading to the investor market and this was realised on September 7th last year when Galena’s IPO on the ASX raised $6 million in an over-subscribed affair.
“It [the IPO] was very significant because it happened after such a short period of time, and was one of the most successful floats on the ASX last year,” reveals Turner.
“Our share price has already gone up 600%, so the market has realised there is a lot of value in the asset. It was done in a very short amount of time and we were even drilling within two weeks of the listing.”
Resource definition drilling
Immediately after listing Galena began preparations for drilling, including the set up of temporary camps at the resource, which were constructed by Longreach Camps, a well-established national outfit.
This rapid move into further drilling activity at Abra is symbolic of the wider pace of development at Galena, with the impressive assay results also providing a tangible validation of the company’s strategy.
Following the completion of work by its capable partner DDH1 Drilling, Galena subsequently released assay results from a 12-hole infill programme that confirmed the presence of high-grade lead mineralisation across each hole.
The pick of the bunch from the assays was a result of 31.4m @ 14.5% lead and 2.7% zinc within a broader 64.0m interval at a grade of 10.6% lead and 1.5% zinc, from a depth of 408m.
“These results prove our geological model for the controls on the high-grade mineralisation is correct,” Turner proclaims.
“We are looking at it from a different perspective to previous companies and these holes were designed to test the model and thereby intersect some of the best high-grade mineralisation within the deposit, and each hole has been successful so far.”
As previously alluded to, prevailing market conditions in the lead industry are also playing into the hands of Galena. Lead prices of late have reached a 6-year high, driven by a rapidly expanding global vehicle fleet.
Turner explains how an increasingly wealthy Asian consumer market is driving this growth in the automobile industry, which is still dominated by traditional carbon-burning engine cars with lead acid batteries despite a slow transition towards hybrid engine and electric vehicles (EVs).
Lead demand has risen 45% in just over 11 years and should continue to rise as the automobile industry gains greater traction across global consumer markets, while a lack of new lead mines in the pipeline is contributing to a constrained supply dynamic.
Therefore, these supply-demand factors have put Galena in a very satisfying situation as it sits on possibly the largest undeveloped lead mine in the world.
With high-grade metal in the ground and lead prices heading skywards, the company has a strong platform on which to deliver on its aims and make a significant profit over the next 10-15 years.
Operating in Australia, the world’s number one lead exporting country will also only serve to increase Galena’s chances of success going forward.
“It’s a huge advantage,” says Turner. “All of our consultants, engineers, geologists, metallurgists, environmental experts, have previous experience and are world leading in their expertise at getting these sorts of deposits into production efficiently and cost-effectively.”
Of this highly specialised supply chain, Turner gives special mention to the work of Paul Lyons Aviation and SGS Laboratories, who provided assaying services from its Perth office.
Galena will complete a resource estimate in February 2018, providing the foundation stone for the next phases of the project. A pre-feasibility study is due in September followed by a bankable feasibility 12 months later.
Finally, with the Abra deposit being within an already granted mining lease, Galena will be in a position to get into production by late 2020, which signals the fruition of the Abra development and the achievement of Galena’s aim, just three years after the company was born.