dini, I am going to sound like a GOM, but this game is not a...

dini, I am going to sound like a GOM, but this game is not a get-rich-quick scheme. Unless you are very lucky.

It takes on average a decade for a significant mine development to progress from discovery, to producing. Some are quicker (a minority), some take longer (OZL’s West Musgraves have been discovered around 20 years ago, and only now is in the position to be developed, with first production by the second half of this decade.

GAL is at Year 0 on this journey, having made their “discovery hole” fairly recently. So far, the discovery seems to be constrained in certain directions, evidenced by our own drilling and potentially that of our neighbours. Some directions appear open, and the share price will NOT move substantially unless the “openness” in these directions are proven through future drilling and assays.

I believe the market cap of ~$200mil is fair value for what GAL have found so far. The SP could only go in two directions, (1) astronomical if they prove that the resource extends well beyond what is currently drilled (backed up by good grades and widths), or (2) back to 15c if they dont find extensions to the current discovery. Look at what happened to LEG, their market cap went ballistic after the original Mawson find, subsequent drilling were less impressive and they are back to where they were before the discovery hole.

I still believe in the GAL story. I still believe there is value here. I am lucky, I invested well before the recent SP run, and can afford to be patient. But, for the SP to run above $1.50 to the previous heights of near $2.00, they need to prove up something substantial. The SP run-up to $2.00 was driven by the market getting exited and ahead of itself, possibly with a good amount of FOMO (fear-of-missing-out) amongst punters.

For what is is worth, the NPV of West Musgrave - one of the world’s largest undeveloped nickel deposits, is hardly above $1bill. For GAL to get close to the level of resource definition to define the economic value of what they have, will require many multiples of dollars of what they currently have in the bank. Which means substantial dilution of current shareholders - unless you have the free cash to join in every cap raise that is bound to happen over the next 3-5 years. Again, referring West Musgrave, GAL would need to spend at least another $100mill to do a resource to reserve conversion, and develop the engineering for a mine and processing plant. That will get them to FID, and a potential AT LEAST $500mill and up to develop the mine and infrastructure/processing.

My short-term target on GAL’s SP is $2.00, taken into account future dilution that will have to happen. Which is I think what we see in the market today, and why run to above$2.00 will have to be supported by a substantial find.

Again, this is not investment advice, but opinion. Do your own research.