Galena Mining's final investment decision will mean full development of Abra Base Metals Project

Galena Mining Ltd’s (ASX:G1A) (FRA:GM6) joint venture company Abra Mining Pty Ltd has made a final investment decision (FID) to complete the full development of Abra Base Metals Project following the satisfaction of key conditions to draw in excess of US$30 million under the Taurus Debt Facilities.   Abra is poised to join the ranks of high-margin Australian base metals producers with first production of its high-value, high-grade lead-silver concentrate scheduled for the first quarter of 2023. With Abra’s accelerated progress towards production, it is transitioning the managing director role to Tony James, a mining engineer with considerable senior underground operational and development experience. Galena’s current managing director Alex Molyneux will remain a director with responsibility for key corporate development initiatives and strategic relationships. Joining ranks of high-margin producers Managing director Alex Molyneux added: “I’m ecstatic that everything is now in place and we’ve been able to make the final investment decision for Abra. “Galena is now poised to join the ranks of high margin Australian producers, benefitting from buoyant base metals markets. “I’d particularly like to thank our hard-working team who have achieved so many project milestones to get to this point and will soon be joined by approximately 260 more colleagues over the construction phase.” Abra's production schedule The Abra project was 17% complete as of May 31, 2021, based on A$27.4 million of project works, which were pulled forward and executed ahead of the FID. Completed project works include: Construction and commissioning of a 280-unit mine site village; Mining of the box-cut; Box-cut ground support works; Installation of production water infrastructure (bores, pumps and water reticulation); Installation of site communications; and Various site clearing, roadworks and civil works. As a result, Abra is largely prepared for deployment of key contractors for the construction of the plant and ancillary infrastructure, and deployment of the underground mining contractor. Further, 90% of contracts (by value) covering the project’s remaining full development works are executed or awarded, further advancing on the completion of permitting, native title arrangements and offtake achieved in 2019. Among the key contracts, an engineering, procurement and construction (EPC) contract has been executed with GR Engineering Services Limited for the supply of Abra’s 1.2 million tonne per annum lead sulphide flotation process plant and ancillary infrastructure under a guaranteed maximum price arrangement to the value of around A$75 million. The underground mining services contract has been awarded to a tier-one Australian mining contractor. Under the current project schedule, procurement of certain long-lead time items will take place immediately. The underground mining contractor is expected to initiate the portal and decline development in the third quarter of 2021 and physical on-site plant construction is expected to commence in the fourth quarter of 2021. Funding package The FID decision has been made following the satisfaction of certain key conditions to draw in excess of US$30 million under the Taurus Debt Facilities. Remaining project development works are funded by more than A$200 million of funds, sourced from: ➢ US$110 million of Taurus Debt Facilities (about A$142 million), made up of: US$100 million project finance facility; and US$10 million cost overrun facility; ➢ A$40 million final equity investment tranche from Galena’s project partner, Toho Zinc Co Ltd; and ➢ The company’s existing cash resources (A$20 million as of May 31, 2021). Toho has also confirmed their final A$40 million AMPL equity investment tranche is expected to be contributed within the next three to four weeks. Galena has entered into a binding offtake agreement with Toho, the leading producer of lead in Japan, to purchase 40% of Abra’s production for an initial period of 10- years from the commencement of production. The company has also made an initial drawdown request under the project finance facility of US$30 million, which is expected to be received by the end of June. The Taurus Debt Facilities are secured against Abra project assets and over the shares that each of Galena and Toho own in AMPL, and drawdowns remain subject to satisfaction of customary conditions precedent. Prioritise needs of Abra project Tony James joined Galena’s board in October 2018 and has been actively involved in Abra Project development initiatives, having also served on the board of directors of AMPL since the establishment of the active joint-venture with Toho in 2019. Molyneux, who started as managing director in August 2018, saw Galena make a full transition from exploration to a company capable of building and operating a successful base metals mine. His key contribution was putting together around A$300 million in development funding from a mixture of strategic equity (Toho Investment Agreement and the investment in Galena by Timothy Andrew Roberts’ Warburton Portfolio Pty Ltd, debt (Taurus Debt Facilities) and public equity. Galena chairman Adrian Byass said: “As a board, we’ve worked as a team to prioritise the needs of our flagship Abra Base Metals Project. “Alex and Tony have worked hand-in-hand to date to achieve significant technical and corporate milestones, and with Abra moving to production I’m pleased we can make a transition that moves our senior mining engineering capability to the fore. “We thank Alex for his significant contributions thus far and wish Tony every success going forward.” Globally significant project Abra Base Metals Project, which is 77.28% owned by Galena, is a globally significant lead-silver project in the Gascoyne region of Western Australia, about 110 kilometres from Sandfire Resources Ltd’s (ASX:SFR) (OTCMKTS:SFRRF) (FRA:S2Z) DeGrussa Project. Based on a pre-development capital expenditure estimate of A$170 million, the feasibility study modelled a pre-tax net present value for Abra (at an 8% discount rate) of A$553 million and an internal rate of return of 39%.