Galena Mining shares have soared on the release of a series of high-grade assays from a maiden drill program by the lead-focused explorer at the Abra multi-metal deposit in W.A’s Gascoyne region.
The results are a big endorsement of Galena’s strategy to take a new approach to Abra, which was discovered in the 1980s and may well be one of the world’s largest undeveloped lead-silver deposits.
Previous explorers have been mesmerised by the size of the deposit and pursued a low-grade, bulk tonnage development, however the strategy was always weighed down by high capex and dull lead prices over a number of decades.
Galena, which listed on the ASX last September and took its name from the lead sulphide mineral, looks to have finally cracked the code by focusing on high-grade areas that were well known from 38,000 metres of historic drilling but had not been targeted previously.
By doing this the company will effectively turn the project from a very large low-grade play to a large, high-grade project.
The company is also benefiting from a howling tail wind in the form of surging lead prices, which have climbed by 60% over the past two years to reach their highest levels since 2011.
Assay results released this week are from a 12-hole in-fill drill program to upgrade targeted areas to JORC 2012 status and support a pre-feasibility study. All eight holes to be processed so far by the lab returned high-grade intercepts.
Highlights included 31.7 metres at 13.5% lead and 27 parts per million (ppm) silver, within a broader 53.3 metre interval grading 10.9% lead and 20 ppm silver from a depth of 521.1 metres.
Other results include 13.8 metres @ 13.5% lead and 42ppm silver from 596.7 metres, and 22.2 metres at 9.5% lead and 20 ppm silver from 516.8 metres.
Assays from the remaining holes are due within weeks and will pave the way for the release next month of a new mineral resource estimate. There could be scope for further revisions as well, with Galena’s drilling yet to close off the zone of high-grade mineralisation.
Galena CEO, Ed Turner, said: ‘We continue to be very happy with the consistent high-grade results seen from our maiden drilling program at Abra, none more so than 53.3 meters at 10.9% lead, which includes 31.7m at 13.5% lead. This is an exceptional result and is one of numerous results that have exceeded expectations."
“The success encountered in targeting and intersecting the high-grade zones in every drill hole to date validates the concept that Abra includes extensive high-grade mineralisation within a huge lower grade system."
“With another 40% of assays still pending we look forward to reporting the rest of the holes when available. Work is already underway putting together a new high grade 2012 JORC resource which we anticipate will be available in February following which we will move immediately to a pre-feasibility study. These are exciting times for Galena and its shareholders.”
Abra is about 110km from Sandfire Resources’ Degrussa copper mine and about half way between Mt Newman and Meekatharra and well served by infrastructure in the region.
Galena's latest Midas Touch, a 35% spike to 96c on the ASX, saw the Perth-based junior nearing the close of a remarkable early chapter in its short history since it was formed in December 2016.
The company’s 20c listing in September last year, which was a screaming success, was oversubscribed and raised $6 million through the issue of 30 million shares..
Within three months of its IPO Galena’s shares had rallied 280% to 76c and then on to 96c more recently.
This value creation was the result of a smart play by Turner, who recognised a good opportunity last year when Galena managed to snap up 100% of the Abra project for just $3.5million from Chinese miner HNC.
HNC paid $100m for the same tenements back in 2008 and didn’t really do much with them, believing the project to be a huge tonnage but low-grade play.
Turner, who was the exploration manager at the project from 2008-2010, recognised that Abra, one of the largest undeveloped lead-silver deposits in the world, should be the focus of a high-grade, low capex strategy to maximise shareholder value as opposed to the previously envisaged Chinese model of a large-scale, low to medium grade capital intensive program.
Previous economics studies based on historic, JORC 2004 resource estimates for Abra were based on a 4-6 million tonne per year production model of a lead-silver concentrate. Galena’s economic studies are based on a 1 million tonne per year, higher-grade and focused underground scenario, still with an initial mine life target of 10-15 years.
Located 200km north of Meekatharra in the Ashburton Basin of central Western Australia, the tenements are accessible from the Great Northern Highway through public unsealed roads.
Lead has been shipped out of Geraldton from Golden Grove for 25-years and is primarily used in lead-acid car batteries. Demand growth, driven primarily by China, increased 45% from 7.3Mt in 2004 to 10.6Mt in 2015. In the third quarter of 2016 leading industry analysts Wood Mackenzie forecast a 3.1% compounded annual growth rate for lead over the next five years.
Last month the International Lead and Zinc Study Group said global refined lead demand had surpassed supply for the first ten months of 2017, creating a market deficit of 173,000 tonnes during this period. Global demand for refined lead metal jumped 3.6% to 9.837 million tonnes with Chinese usage surging 11.3%, European usage 3,6% and usage in the United States increasing by 5%.
Chinese imports of lead contained in lead concentrates soared 36% to 856,000 tonnes in 2017 and refined lead metal imports to the country totaled 440,000 tonnes. From 2010-2015 global growth was up 28% and between 2011 and 2016 global stockpiles declined 49% from 360,000 tonnes to 183,000 tonnes.
With the current price of lead at $3263 per tonne, not far off post-GFC peaks of $3300, Galena’s game plan of a medium sized, high-grade operation appears to be a winner at a time of near record prices.
