Ann: Galena Raises $20 million and Updates Production Guidance, page-213

In all seriousness, holders are rightly considering whether to average down, stand pat or get the hell out? I don;t want to unfairly scare HC retail in jumping prematurely or too cheap, but as I look into the Abra numbers more methodically they just don;t make bank with Taurus debt unless revenue keeps rising with Pb and/or lower AUD.

People rightly ask "why did the insiders tip more money into this 15c CR if G1A is at such a risk of going under" and the explanation is two-fold imo. As I've already said, there was no choice, because without projecting confidence to the brokers/market with more skin things risked spiralling out of control and they needed $20M this month to stay solvent or lose the lot. Secondly, there is always hope higher prices will paper over poor performance and the company will have a happy ending. Pray for higher prices...

I don;t have time to post enough detail right now, but working through various updates and guidance has fixed some errors and increased confidence in the range of likely financial outcomes (even if I have no confidence in the production outcomes). The fine print is illuminating.


Payable Pb is really a bit less than 92% actually, because there is a fixed 3% Pb deduction plus a variable 95% payable of Pb in the con.
C1 cash costs guided by G1A included smelter charges, logistics etc and are reduced by silver credits.
AISC include some non-cash D&A, but 'All Cash Expenditure' is basically C1 + sustaining capital + royalties + G&A

Putting that info together on the mid-point of Pb production and C1 cash costs guided or reported we get the following. The mid-point is important (assuming it's real and lipstick) because majority of costs are fixed so cash costs will thus vary a lot with rise/fall in Pb production.

My instincts are to deduct smelter charges, shipping costs, royalties from gross revenue (92%) revenue more accurately reflects what hits Abra's bank account to pay the bills. That is complicated by the fact cash costs include smelter, shipping etc in included in reported C1 cash costs, and that royalties are not but paid sometime in the future after Pb smelter company has paid revenue into the bank (have Mar23 Qtr royalties been accounted yet for in the $8.3M revenue figure?). Anyway, seems easiest to re-jig the spreadsheet so it follows payability, C1 cash costs and non-C1 costs items through in a clear manner consistent with guidance.

I also re-jigged the CY23 and Mar-Mar24 production to assume the possibilities of higher grades similar to July22 Update (ie ~7.5% once mining moves away from the Abra Fault). Given the complex orebody, problems already encountered and guidance of 7-7.5% Pb for stead state this seems unlikely but never say never ( and never say I'm not fair ) For the Mar-Mar24 12 months, I have assumed less than 1.3Mtpa pro-rate perfection simply because Apr was a wash (literally) and May can't skip straight to nameplate when they haven't even got any stopes blasted yet. Maybe than can overclock the plant and get up to 1.2Mt to Mar24 but I very much doubt it will all go that well...


Putting it all together I get the following table. There is a bit of rounding and adjustments (ie royalties lowered because net smelter return isn;t really net smelter because smelter/logistics is in c1 costs as discussed) but the figures all balance against various reports as proof of concept.


July22 Update had an average $262M Gross Revenue over 11 full years mine life (table $266M), Mar23-Mar24 guided $214M revenue and $205M "Abra Expenditure" which is equivalent to my All Cash Exp calculation. The large drop from EBITDA (a non-cash figure) to free cashflow was reported in the July22 Update at $100M down to $64M post-tax (2024-32, being the very best full production sateadtstate years). My table has Abra freecash averaging $62M pre-tax on July22 Update, but my average has more accurate costs from reported cost categories ground-up (long story).

Please take time to consider, test or replicate the table because it is very important to where G1A is heading (subject to Pb price and AUD). Abra and G1A is going backwards under almost every realistic situation now with higher costs, lost production and lower guided production despite lifting Pb to US95c. One presumes guidance reflects everything going right, though it's possible they are finally promising gravel to surprise by delivering diamonds (I wouldn;t punt that possibility myself).

Debt repayments don;t start until beginning CT24 but interest payments don't stop. Cannot see how they will not get to end CY23 and ask for 'one last CR please' because we have hit our stride and proven the deposit can be economically mined and pay back debt (possibly). Can't see how they can wait until revenue from mar24 quarter, when they have or will run out of cash first?

So long as production hits it's straps and the orebody proves much better behaved I expect Taurus to re-jig debt from 4 up to 8 years in return for higher interest rates and more royalties. Otherwise, it's put Abra into administration, wipe out shareholders and then sell 100% back to the Japs or whoever without the crippling debt load and Taurus tries to get their money back that way? Obviously a lot depends on the Pb price, because if it goes up enough Abra makes enough cash, if Pb goes down then so does Abra but quicker. G1a owns 60% with a MC $70M, so Abra has a MC of $120M for 100% and an Equity Value of $280M including debt. That just seems too high for a marginal deposit despite having a shiny new plant and all the infra capex put into it.

At some share price, G1A will be worth the risk-reward but with another CR almost certain year end that's a dangerous game itself. Lower share price = more dilution = lower share price in a vicious cycle... exacerbated if quarterly news shows the mine isn;t keeping up with the new guidance. 15c was an easy Sell call and clearly the new resistance after update and CR. 11c not so easy but you can see the risks I laid out. All things considered i expect G1A into the single digits soon as investors continue to sell some/all taking losses and risk off the table. Who is the natural buyer for these shares i don;t know? Can't imagine many funds risking their money on this type of punt...

GLTAH