Galena just got $90m to kickstart Abra mine development and its shares are flying
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Explorer Galena Mining has leapt out the gate after locking in a company-making $90 million deal that sent the stock up 40 per cent to a record high of 35c per share .
ASX-listed companies usually put out their big news as early as possible in the morning when all eyes are the ASX’s market announcements platform, but Galena (ASX:G1A) evidently does things a little differently.
The explorer popped out an announcement an hour after the market closed on Wednesday saying it had secured a $90 million investment from Toho Zinc, a $47 billion Japanese lead and zinc smelting company.
Toho has invested the money for a 40 per cent interest in Galena’s subsidiary Abra Mining, which owns the world class Abra base metals project.
Galena boss Alex Molyneux tells Stockhead that there wasn’t a “special science” to the timing of the announcement.
“[Companies] usually drop their bad news in the afternoon, but that’s just when we got it done,” Mr Molyneux says.
“We had to agree on the release with Toho, and the Toho put their own release out so by the time both parties had put out their releases it was late afternoon.”
This is a BIG deal
A pre-feasibility study released last year estimated an impressive net present value (NPV) of $528 million and an internal rate of return (IRR) of 50 per cent for the high value, high grade Abra project.
IRR and NPV are used to estimate the profitability of a potential operation – the higher they are above zero, the better they are.
The Toho deal is a super significant one to get Abra — which has estimated construction costs of about $154 million — up and and running, Mr Molyneux says.
“One, it basically provides all of the equity we need for the project, so the remaining financing will likely come from project financing debt,” he says.
A deal with such a large company also de-risks the remainder of the financing process.
And two, this cash starts to arrive in Galena coffers soon which means development works at Abra can start early.
“Theres two tranches that arrive as soon as the deal closes, and then as soon as we publish the [definitive feasibility study] DFS,” Mr Molyneux says.
“We can actually use those to start early development works.
“We will be doing some development before the DFS is complete and the [remaining] project finance is in place.”
With this funding in place, Galena continues to target construction of Abra this year, with initial production in 2021 and the first full-year of steady-state commercial production in 2022.
“When you’re building a mine you can’t time the market, but it’s certainly a very tight lead market right now and we are keen to get moving,” Mr Molyneux says.
“Just since the start of January the physical lead stocks on the LME have dropped another 20 per cent.
“This deal helps us get moving sooner rather than later.”