Galena Mining: An Exciting Lead-Silver Producer in the Making

Galena Mining Limited (ASX: G1A) is an emerging mid-tier mining company developing the high-grade Abra lead-silver project in Western Australia. With construction now 75% complete, Abra is on track to pour its first metal in Q1 2023, becoming one of the world's largest and purest lead producers.

Led by an experienced management team, Galena offers investors:

• Exposure to in-demand commodities lead and silver
• Industry-leading costs and profit margins
• Significant exploration upside
• Re-rating potential as the project advances

Abra Lead-Silver Project: Construction 75% Complete, On Track for 2023 Production

The Abra base metals project, located in the Gascoyne region of WA, is Galena's flagship asset. Abra will be an underground mine producing a high-value lead-silver concentrate. With A$181 million of funding secured, construction is now 75% finished and the first production is scheduled for Q1 2023.

75% of Construction Completed: Galena provided an update on construction progress at Abra in October 2022.

Key infrastructure now in place includes:

• 16,000 solar panels and power station
• Box cut and portal access completed
• 2km of underground decline development
• Processing plant foundations poured

The company has pre-sold 60% of Abra's lead production to offtake partner Toho Zinc Co of Japan, providing cash flow confidence. Abra is fully funded through to production, with a A$30 million cost overrun facility also secured.

Large, High-Grade Resource: Abra's deposit contains 34Mt at 7.2% lead and 18g/t silver, making it one of the world's highest-grade undeveloped lead resources. The deposit comprises distinct lead-silver lenses over 1.5km of strike and 600m depth.

Initial 13 Year Mine Life: The initial mine plan covers 13 years at a rate of 1.3Mtpa, producing 30kt lead and 550koz silver per annum. This plan only covers 45% of the known resource, pointing to significant upside as drilling continues.

Industry-Leading Concentrate Quality: Abra's concentrate will contain 75% lead and very low impurity levels, making it a coveted blending product for smelters globally. The high quality attracts premium pricing and will drive low operating costs.

Low Costs and Strong Margins: Abra's All-In Sustaining Costs (AISC) are forecast at US$0.50/lb lead after silver credits. With current lead prices around US$0.90/lb, this allows an operating margin of 40-50%.

Upside from In-Mine Exploration: Only 180 drill holes have delineated Abra's resources to date. Considerable potential exists to expand the resource, initially focusing on extensions to high-grade lead-silver lenses.

Re-Rating Potential as Project Advances

Galena's share price has lagged the project's de-risking to date. However, as Abra progresses from construction into production in 2023, Galena should re-rate toward industry averages. Catalysts for a re-rating include:

• Project financing closed (done)
• Construction milestones met (underway)
• Ramp up to nameplate capacity
• Exploration success from underground drilling platforms

Attractive Entry Point Ahead of 2023 Production

With construction now 75% finished, Galena's share price offers an attractive entry point for exposure to Abra's upcoming production profile. As the project transitions to an operating cash flow generator, Galena's valuation should reflect the quality of this globally significant new lead-silver operation.

Exposure to Lead - An Essential and Depleting Commodity

Lead is an indispensable industrial commodity that faces a supply cliff in coming years, driving favourable market dynamics for new producers like Abra.

Essential for Batteries: Over 80% of lead demand stems from lead-acid batteries used in vehicles and energy storage. This includes conventional auto batteries as well as the stop-start batteries in hybrid vehicles. The main uses are:

• Conventional and hybrid car batteries - 50% of demand
• Energy storage for solar/wind farms - fast-growing segment
• Back-up power supplies for telecoms and computing

Supply Crunch Coming: Global lead mine production totals just 4.8Mtpa and is forecast to decline after 2024 as reserves deplete. Very few new lead projects exist globally. Abra's 30ktpa output will be globally significant in addressing the looming supply gap.

Pricing Outlook Strong: Lead prices have averaged US$0.90-1.10/lb over the past decade. With demand steady and supply declining, conditions are favourable for prices to remain robust. Abra's low costs will ensure strong margins are maintained.

Rising Demand from Asia: Lead-acid batteries account for 80% of lead demand in China. With auto sales rising, lead consumption is projected to grow 2-4% annually. Abra is ideally placed to supply this Asian demand growth.

World Class Joint Venture Partner

Toho Zinc, Galena's Joint Venture partner at Abra, is one of Japan's largest and most reputable base metals companies. Toho's 40% project interest and offtake support provide third-party validation of Abra's quality.

Toho is Japan's Top Lead Producer: Toho produces over 500ktpa of lead, or around 4% of global output, from mines and recycling operations. The company brings global market knowledge and technical expertise.

Major Offtake Secured: Toho has committed to purchase 60% of Abra's lead production, equivalent to 20ktpa. This offtake provides cash flow certainty for debt financing.

Toho Brings Financial Strength: With a market capitalization of US$1.3 billion, Toho provides financial backing to ensure Abra's successful development. The US$30 million cost overrun facility is jointly funded by Toho and Galena.

Exploration Upside Across 1,400km2 Land Package

While Abra alone offers a long 13 year mine life, Galena controls significant additional exploration ground covering 1,400km2. Known lead-silver occurrences and untested geophysical targets provide substantial upside beyond Abra.

Highly Prospective Region: The Abra deposit lies in the Edmund Basin, considered vastly underexplored for base and precious metals. Major discoveries like the DeGrussa copper-gold mine highlight the region's potential.

A cluster of Lead-Silver Deposits: Galena's tenements contain over 20 additional known lead-silver occurrences similar in mineralization style to Abra. These provide walk-up drill targets to expand resources.

Major Geophysical Anomaly: Galena's Woodlands project features a 35km x 10km gravity anomaly indicating a potential buried intrusive complex with copper-gold potential beneath the cover. This huge target is yet to be drill tested.

Under-Explored at Depth: Historical drilling was ineffective in testing targets at depth. Modern geophysics and deeper drilling by Galena has proven far more effective, as shown by Abra's rapid resource growth.

Experienced Board and Management

Galena is led by a highly experienced management team and board with track records of successfully building and operating mining projects.

MD Tony James: Tony James has 30+ years of industry experience including building the Higginsville Gold Mine in WA. His background gives investors confidence in the successful delivery of Abra. Technical Director Troy Flannery: Metallurgical expert Troy Flannery has designed processing plants for major companies including Rio Tinto and Xstrata across commodities like lead, zinc, copper and gold. Chair Jonathan Downes: Jonathan Downes has founded and led numerous mining companies including Ironbark Zinc, Gascoyne Resources and Havelock Mining. His financing record will be valuable as Galena grows. COO Tim Manners: Operations specialist Tim Manners has managed underground mines for groups like MMG and Perilya. His operating skill will be vital as Abra transitions into production.

The collective experience of Galena's board and management minimizes execution risk as the company progresses Abra into its next development phases.

Investment Highlights

There are several reasons why Galena Mining could be a good investment opportunity. With construction on track for the first metal in early 2023, Galena is positioned to emerge as a mid-tier producer of a globally scarce commodity in lead. As Abra moves into the cash-generating phase, Galena warrants increased investor attention.

• Exposure to the lead market ahead of a forecast supply crunch
• Construction risk now passed with Abra 75% built
• Industry-low cost driving strong cash flow margins
• Exploration of upside through regional targets
• Re-rating potential as the project transitions into production

Production Growth

• Abra is fully funded and on track to pour the first metal in Q1 2023, becoming a significant new lead producer globally. The initial mine plan supports the production of 30kt lead and 550koz silver per year.

Quality Product

• Abra's lead concentrate grades 75% lead, much higher than the industry average, making it a desirable blending product for smelters. This allows for premium pricing.

Low Costs

• Abra's forecast all-in sustaining costs of US$0.50/lb after silver credits are at the bottom end of the industry cost curve. This provides flexibility and strong profit margins.

Favourable Lead Market Outlook

• Lead demand is underpinned by batteries for vehicles and energy storage. Supply is constrained with few new mines planned. Prices should remain robust.

Exploration Upside

• Only 45% of Abra's identified resource is in the current 13 year mine plan. Considerable potential exists to expand the resource and mine life through further drilling.

Re-rating Potential

• Galena's share price has lagged behind the project's de-risking. As Abra enters production in 2023, Galena should re-rate higher in line with peer multiples.

Experienced Team

• Galena's board and management have track records of building and operating successful mines before. This provides confidence in their ability to execute.

In summary, exposure to a high-margin new lead mine with expansion upside, at the bottom of the cost curve, could make Galena an attractive investment as Abra enters production.

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