"When we look at our outlook for the lead price we feel like where it is now is pretty reasonable over the long term horizon," Moleneux told Fastmarkets in an interview.
The London Metal Exchange's cash lead contract closed the official session on October 29 at $2,267 per tonne, a more than one-year high. The price has since retreated somewhat to close at $2,105 per tonne on Thursday November 7, but Moleneux is happy to be conservative on a long term forecast for the metal.
"We did our DFS [definitive feasibility study] at a price of 92 cents per lb ($2,028 per tonne) in July and we've held that flat. We'd be happy with $1 per lb but it's a high margin project," he said of the Abra mine, located in the Gascoyne region of Western Australia.
Abra is a relative geological anomaly; predominantly a lead mine without much zinc or silver, it is set to have the highest grade concentrate on the market when it starts initial production in 2021 at around 75% lead content. This differs from most lead concentrates, which are usually around 50% purity.
At the International Lead Zinc Study Group meetings in Lisbon, Galena locked in a 10 year contract to supply international traders IXM with 65,000 tonnes of lead concentrates per year from Abra set at a premium to annual benchmark levels, according to Moleneux.
In total, the mine is set to produce 125,000 tonnes of lead concentrates per year when at full production from 2022 onward.
Galena has a 60% equity and offtake right in the Abra mine, with the rest owned by Japanese miner-smelter Toho Zinc, which committed to pay the equivalent of AUS$90 million ($62 million) in February for its stake in order to advance the project.
"At the time of the Toho deal our share price was at 17 (Australian) cents a share and they [Toho] paid the equivalent of 40 cents [a share] in that investment deal, so I would say that gives an indication of the strategic nature of our concentrate," Moleneux told Fastmarkets.
The company has begun construction on surface infrastructure at the mine site, and is financing the rest of the mine development via a banking syndicate led by Société Générale.
"We've just received a whole bunch of term sheets from ten banks and now it's SocGen's job to work with us to fit those together and then finalize," Moleneux said.
At $125-145 per tonne, the Fastmarkets assessment of lead spot concentrate TC, low silver, cif China
has risen to its highest level since June 2016 with the lead import arbitrage into China turning heavily negative.
"Overall we're starting to get feedback that the concentrate market is not going to be as tight next year and the year after as it has been in the last two years, but ours has a unique place in the market, Moleneux said. High-grade, low impurity concentrates could command a premium in the market at a time of renewed scrutiny on tailings disposal
; less heavy metals and less tailings to dispose has a value, Moleneux noted.
But the lead industry needs to do more to promote the metal as an element with a part to play in the shifting global energy landscape, Moleneux said.
Since major automakers began to shift to producing more electric vehicles using predominantly lithium-ion batteries, market perceptions have been negative on the long-term price outlook for lead – the key component in lead-acid batteries used in internal combustion engines.
"If you could just get lead to get its rightful place in certain electrification applications you would have a lead market growing at 3% instead of 1% and it'd be an exciting thing. One of the things about lead is that in a battery sense it's environmentally sustainable because it's recyclable," he said.
Galena has the rights to mine in the region around Abra and has the potential to explore further at its Jillawarra polymetallic project nearby.
At Abra, preliminary drilling indicates a copper-gold resource below the prominent lead deposit.
For now, though, Galena's focus is very much on getting Abra into production.
"It's so exciting, but we're being careful not to do too much exploration on those other assets. We don't have a long term strategy, and that's kind of okay, because the short term strategy is to build the mine," its CEO said.