Galena Mining has agreed to sell a stake of 40% in its subsidiary Abra Mining, the owner of the Abra Base Metals Project in Australia, to Toho Zinc for A$90m ($65.5m).
The Abra Base Metals Project, which is claimed to be among the largest, undeveloped lead deposits in the world, is located about 200km north of Meekatharra in the Gascoyne Region of central Western Australia.
Galena said that it is aiming to break ground on the base metals project this year. Initial production from the base metals deposit, which is estimated to hold reserves of 10.5Mt, grading 8.1% lead and 20g/t silver, is expected to be achieved in 2021.
The company is targeting the first full-year of steady-state commercial production from the base metals project in 2022.
Under the terms of the transaction, Toho Zinc, which is a Japanese lead and zinc smelting company, will help Abra Mining to potentially get a part of the project financing debt from policy financing programs that are available for Japan-related projects.
Toho Zinc and Galena will each hold a right to off-take their equity share of production from the Abra Base Metals Project on arms-length, benchmark terms, and then on- sell to third-parties.
Galena managing director Alex Molyneux said: “This is a great transaction that provides the equity required to develop Abra, recognising the strategic value of the Project.
“Furthermore, Toho is a key player in the global lead and zinc industry and an experienced miner so we look forward to the benefits of a true partnership in the development of Abra.”
The payment by Toho Zinc will be made in three tranches with the first tranche of A$20 m ($14.55m) to be paid on initial closing of the deal. The second tranche, of A$10m ($7.27m), will be paid after Galena issues a definitive feasibility study for the Abra Base Metals Project.
The final tranche, of A$60m ($43.65m), will be paid once project financing debt for the project has been confirmed on terms acceptable to both the partners.
Galena expects the first payment to be issued in April 2019 with the transaction to be subject to various conditions and approvals.