Ann: Abra Construction 58% Complete, page-55

Galena Mining Limited (G1A) - Abra construction 58% complete (Petra 29/4/2022)

G1A’s quarterly highlighted material construction progress at its 60% owned Abra lead-silver project in WA. Construction is now 58% complete, with remaining spend including working capital standing at A$98m, slightly better than target. While construction and commissioning is a higher risk period for junior miners, G1A is trading at spot FCF yields of 49-60% for its first three years in production. Long term investors will be rewarded similar FCF over its 16-year mine life. With construction ahead of schedule and de-risking, G1A trading at less than half its NPV is a compelling opportunity. BUY, A$0.54/sh PT unchanged.

Abra construction progressing on time and budget

• Excellent progress is being made on the mine decline, with 694m completed during the quarter. Development metres reached 1,134m of the 1,630m in the plan

• The decline is now 155m below surface and 82m above the ore body (Figure 1)

• G1A expects total project expenditure to be A$231m, with A$98m of spend remaining (Figure 2)

• Processing site works continue to advance, with visible progress made during the quarter (Figure 3)

• Concrete works at the crusher are complete (Figure 4)

• GRES, the EPC contractor indicated the plant contract is now 61% complete (based on earned value)

• Plant procurement is 67% complete while on-site plant construction is 35% complete. A total of 1,141m³ of concrete has been poured (46% of project total)

• The second-hand paste-fill plant was dismantled at Higginsville Gold Mine and sent to Perth for refurbishing prior to instalment, where on site civils commenced

• Abra continues to advance towards production in line with plan despite difficult market conditions thanks to adept management and working with Tier 1 contractors, with Byrnecut on mining and GRES on the plant

• First production remains on schedule for March Q 2023

Spot valuation difficult to ignore

• Spot NPV₁₀ for G1A is A$0.75/sh implying 212% upside

• Attributable spot EBITDA of A$90m p.a. at steady state

• Given A$90m in attributable debt at first production, the current market cap implies a spot EV/EBITDA of 2.2x

• Strong payback with a net cash position within 2 years and an initial FCF yield of 49-60% in the first three years

• These metrics are for a WA based asset with a 16-year mine life, operating in the first quartile of the cost curve

• The G1A share price has underperformed the lead price over the last 12 months (Figure 5)