GALENA SECURES $90M PROJECT EQUITY FOR ABRA
ASX Announcement 30 January 2019
HIGHLIGHTS:
- International lead and zinc smelting company, Toho Zinc to invest $90M for a 40% ownership interest in Galena’s currently wholly-owned subsidiary AMPL, which owns Abra Base Metals Project
- Toho to assist AMPL to potentially procure a contribution to project financing debt through the attractive programs available from policy financing for Japan-related projects
- Toho and Galena each have a right to off-take their percentage share of Abra production on arms-length, benchmark terms, and then on- sell to third-parties
- Initial tranche of $20M to be paid on closing of the transaction and a further $10M to be paid on completion of the Abra DFS, with these tranches mainly applied to commence Abra project development works
- Final $60M tranche to be paid on confirmation of project financing debt
- Abra permitting and DFS works remain on-track and results of PFS optimisation expected to be released in coming weeks
GALENA MINING LTD. ("Galena" or the “Company”) (ASX: G1A) is pleased to announce that it has executed a Terms Sheet with Toho Zinc Co., Ltd. (“Toho” or “Toho Zinc”) setting out the proposed terms for Toho’s investment of $90 million in 3 tranches for a 40% ownership interest in Galena’s currently wholly-owned subsidiary, Abra Mining Pty Ltd (“AMPL”) (the “Transaction”) subject to the satisfaction of agreed conditions and execution of binding documentation. Assuming each tranche of Toho’s investment is completed, Galena will retain a 60% controlling shareholding in AMPL and will appoint three out of five directors on its board. AMPL is the owner of the Abra Base Metals Project (“Abra” or the “Project”). As part of the Transaction, Toho proposes to assist AMPL to potentially procure part a contribution to project financing debt through attractive programs available from policy financing for Japan-related projects.
Managing Director, Alex Molyneux commented, “This is a great transaction that provides the equity required to develop Abra, recognising the strategic value of the Project. Furthermore, Toho is a key player in the global lead and zinc industry and an experienced miner so we look forward to the benefits of a true partnership in the development of Abra.”
The Transaction is subject to a number of conditions as set out later in this announcement. Based on timelines for confirmatory due diligence works and third-party regulatory approvals, Galena currently anticipates the definitive documentation to be executed and the first payment to be made in April 2019.
KEY TERMS OF THE TRANSACTION
The key material terms of the Transaction are:
- Investor – Toho Zinc or a wholly-owned subsidiary (directly or indirectly).
- Investment and investment structure – $90 million total investment to be made via the subscription of new ordinary shares in AMPL such that Toho owns 40% of AMPL on completion of the full investment and Galena retains 60%.
- Tranched payment – $20 million will be paid on initial closing of the transaction (for 8.89% of AMPL); $10 million will be paid once Galena issues a definitive feasibility study for Abra (“DFS”) (for a further 4.44% of AMPL); and $60 million 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 draw down for the full amount of project financing debt have been satisfied (for a further 26.67% of AMPL, taking Toho’s total ownership in AMPL to 40.00%).
- Toho funding support – Toho will assist AMPL to procure, by leveraging the attractive programmes available to it from its relationships with Japanese lenders, a contribution to project financing debt.
- Repayment of historical shareholder loans to Galena – As part of the Transaction, AMPL will repay $10 million of historical shareholder loans back to Galena.
- Off-take –Galena and Toho will each enter into off-take agreements with AMPL to purchase their respective share of AMPL’s high-grade high-value lead-silver concentrate on arms-length, benchmark terms. Each party will have rights to market and on-sell their respective share of purchased off-take.
- AMPL shareholders agreement – Toho and Galena will enter into a shareholders agreement to jointly manage AMPL. Such agreement will have terms and conditions typically associated with an incorporated mining joint-venture of the nature proposed. AMPL’s board will consist of five directors, three to be appointed by Galena and two by Toho. The Chairman of AMPL will be selected from within the three Galena representatives.
- Exclusivity – Subject to certain exclusions (including continued discussions with respect to project financing debt), Galena has granted Toho exclusivity to pursue the Transaction until 31 March 2019 (or such other date as the parties may agree).
ACTIVITIES REPORT FOR QUARTER ENDED 31 DECEMBER 2018
ASX Announcement 29 January 2019
HIGHLIGHTS:
- Updated Resource, Reserve and mine model for Abra:
- Updated JORC Mineral Resource estimate (Indicated plus Inferred) at 5.0% lead cut-off of 37.4Mt at 7.5% lead and 18g/t silver
- Updated JORC Probable Ore Reserve estimate of 10.3Mt at 8.8% lead and 24g/t silver
- 9% increase in lead metal grade in Ore Reserve and 7% increase in contained lead metal together with 18% increase in contained silver compared to previous Ore Reserve
- Revised mine model material of 16.4Mt at 8.2% lead and 22g/t silver, compares favourably to mine model material previously assumed for PFS, with one extra year of mine-life and ~6% higher lead grade on average over life of mine
- Appointment of high-profile experienced underground miner to the Board, Mr Tony James
- Formal commencement of DFS for Abra, with completion anticipated in mid2019
GALENA MINING LTD. (“Galena” or the “Company”) (ASX: G1A) reports on its activities for the quarter ending 31 December 2018 (the “Quarter”), largely focused on advancing its wholly-owned Abra Base Metals Project (“Abra” or the “Project”) located in the Gascoyne region of Western Australia, targeting commencement of construction in 2019.
ABRA BASE METALS PROJECT
Abra comprises the granted Mining Lease, M52/0776 and is surrounded by the Exploration Licence E52/1455, together with several co-located General Purpose and Miscellaneous Leases.
Definitive feasibility study (“DFS”)
On 11 October 2018, Galena formally commenced its DFS works for Abra with the appointment of leading Australian engineering consulting and contracting company GR Engineering Services Limited (“GR Engineering”) (ASX: GNG) to undertake key portions of the DFS related to plant design, capital cost and operating cost estimation, process and non-process infrastructure evaluation. During the past eleven years GR Engineering has completed more than 40 design and construction projects and over 160 feasibility studies including several ‘flagship’ Australian base metals projects.
The DFS works continued during the Quarter and remain on-track to be completed mid-2019.
Updated Resource, Reserve and mine model
On 18 December 2018, the Company announced completion of an updated JORC Code compliant Mineral Resource estimate (“December 2018 Resource”) for Abra, which was independently prepared by Optiro Pty Ltd (“Optiro”). In addition, Galena has prepared an updated JORC Code compliant Ore Reserve estimate (“December 2018 Reserve”) and a revised mine model assessed on the new Resource.
Key highlights of the work included:
- Updated JORC Mineral Resource estimate (Indicated plus Inferred) at 5.0% lead cut-off of 37.4Mt at 7.5% lead and 18g/t silver.
- Updated JORC Probable Ore Reserve estimate of 10.3Mt at 8.8% lead and 24g/t silver.
- 9% increase in lead metal grade in Ore Reserve and 7% increase in contained lead metal together with 18% increase in contained silver compared to previous Ore Reserve.
- Revised mine model material of 16.4Mt at 8.2% lead and 22g/t silver, compares favourably to mine model material previously assumed for PFS:
- Approximately one-year extra life of mine vs. 14-years assumed for PFS.
- ~6% higher average lead grade over life of mine.
- Overall ~169kt additional lead metal.
- Higher average silver grade and ~16% more silver metal.
- Revised assessment of Resource geometry and revised mine model material results in ~13km less lateral development than assumed for PFS.
Given the potential for the combination of increased metal and lower development metres to materially improve the economic outcomes of the PFS, Galena intends to release an optimised PFS in early-2019 based on the revised mining model
The December 2018 Resource and December 2018 Reserve incorporates all of the exploration data gathered during the 2018 Resource Infill and Development Program, which was physically completed in the prior quarter.
Commercial initiatives in support of Abra development – project financing
During the Quarter, the Company continued discussions and facilitated due diligence engagement with a number of parties regarding project financing. Such parties include traditional project financing banks and strategic counterpartie
ABRA FINAL PERMITTING ON-TRACK
ASX Announcement 3 January 2019
HIGHLIGHTS:
- Acceptance of Works Approval applications for all mining, processing and tailings storage by WA Department of Water and Environmental Regulation
- Acceptance of Mining Proposal application by WA Department of Mines, Industry Regulation and Safety
- Several miscellaneous and general purpose leases granted for plant and infrastructure
- Several minor and / or less time critical permits granted for waste water treatment plant, native vegetation clearing, and construction of production water bores
- On-track to be fully permitted within Q2 CY2019
GALENA MINING LTD. ("Galena" or the “Company”) (ASX: G1A) has now had its application for a Works Approval for construction of the proposed processing plant and tailings storage facilities accepted by the Western Australian Department of Water and Environmental Regulation (“DWER”) for its wholly-owned Abra Base Metals Project (“Abra” or the “Project”) located in the Gascoyne region of Western Australia. In Galena’s opinion, according to estimated application processing times, this latest Works Approval will be the last major approval to be gained for Abra to be fully permitted and its acceptance at this time puts the Project on-track to complete permitting within the second quarter of the 2019 calendar year. As such, we provide this general update on Abra permitting and approvals.
Managing Director, Alex Molyneux commented, “We believe this latest DWER Works Approval application will be the final ‘gating’ permit to having Abra fully permitted. It is very pleasing to have it accepted as it confirms we’re on-track to have permitting completed in Q2.”
STATUS OF MAJOR PERMITS
Galena has received notification that its application for a Works Approval for construction of the proposed processing plant and tailings storage facilities has been accepted by the Western Australian DWER for Abra. This application is in addition to a DWER Works Approval application for mine construction that was accepted in September 2018. Furthermore, the Mining Proposal, Mine Closure Plan and Environmental Management System applications were lodged and accepted by the Western Australian Department of Mines, Industry Regulation and Safety (“DMIRS”) in October 2018.
The latest DWER Works Approval application is the final major approval to be submitted and based on current estimated processing times at the various departments, it is anticipated to be the final approval received to put Abra in a position to be fully permitted.
As previously stated, based on previously completed base line environmental studies, Abra does not require EPA approval.
Galena now expects to finalise permitting for the Project within the second quarter of 2019 calendar year.
TENEMENTS AND LEASES
As previously stated, the Abra deposit sits entirely within a granted Mining Lease (M52/0776) and is surrounded by a contiguous Exploration Licence (E52/1455). In addition, in the last three months the Company has been granted a number of General Purpose and Miscellaneous Leases to support future construction and operation of the Project. General Purpose Lease G52/292 has been granted immediately adjacent to the Mining Lease to its north and includes the sites for the proposed processing plant and tailings storage facilities. Three additional Miscellaneous Leases have been granted for an upgraded airstrip and other ancillary infrastructure.
BOARD OF DIRECTORS
Mr Adrian Byass
BSc Geol Hons, B. Econ, MAIG & FSEG
+20 years in the mining industry both in listed and unlisted entities globally, Non-Executive and Executive Director of various listed and unlisted mining entities, which have successfully transitioned to production in bulk, precious and speciality metals around the world. Currently on the Boards of ASX phosphate, zinc, nickel and lithium companies.
Mr Jonathan Downes
BSc Geol, MAIG
+20 years’ experience in the minerals industry and has worked in various geological and corporate capacities. Experienced with nickel, gold and base metals, he has also been intimately involved with numerous private and public capital raisings.
Mr Downes is on the board of several ASX-listed companies; he was a founding director of Hibernia Gold (now Moly Mines Limited) and Siberia Mining Corporation Limited and is a non-executive director of Corazon Mining Limited.
Mr Oliver Cairns
Corporate Financier specialist with extensive experience at management and Director level; on both AIM and ASX listed companies. Mr Cairns has experience in capital markets, M&A, IPO, corporate governance, IR experience across the resources and industrial sectors.
Mr Tim Morisson
B. Econ, MBA
+20 years in the finance industry and capital markets. A partner of Empire Equity which is a Perth based boutique investment advisory company. Tim has extensive experience in ASX and resource-related companies.
SENIOR MANAGEMENT
Mr Edward Turner
B ASc (Geol), MAIG
30 years experienced geologist throughout Europe, South America, Africa and Australia in a range of roles encompassing base, precious and specialty metals for leading mining companies. Technical strengths include exploration, underground mining, resource estimation, feasibility studies and development level work.
Mr Troy Flannery
BEng(Min), MAppFin, FCMMC
Mr Flannery has been working in the mining industry for over 20 years including 5 years in corporate and 16 years in senior mining engineering / project development roles. He has a degree in Mining Engineering, Masters in Finance & First Class Mine Manager’s Certificate of Competency.
Mr Flannery has worked at numerous mining companies, mining consultancies & contractors (including BHP, Newcrest, Xstrata, St Barbara Mines & AMC Consultants).
Mr Stephen Brockhurst,
Mr Brockhurst is the founding Director of Mining Corporate Pty Ltd and has 15 years’ experience in the finance and corporate advisory industry and has been responsible for the preparation of the due diligence process and prospectuses on a number of initial public offers. His experience includes corporate and capital structuring, corporate advisory and company secretarial services, capital raising, ASX and ASIC compliance requirements.
Mr Brockhurst has served on the board and acted as Company Secretary for numerous ASX listed and private companies. He is currently a Director of Roto-Gro International Limited and International Goldfields Limited and Company Secretary of Jacka Resources Limited, Lindian Resources Limited, Volt Resources Limited, Estrella Resources Limited and Cabral Resources Limited.