Drilling Results - GAL delivers its thickest intercept yet

Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 2,161,544 GAL shares and the Company’s staff own 14,000 GAL shares at the time of publishing this article. The Company has been engaged by GAL to share our commentary on the progress of our Investment in GAL over time.

GAL just delivered its thickest platinum/palladium intercept to date.

72 metres at 1.16 g/tonne 3E.

And it's open in two directions...

Our long term exploration Investment Galileo Mining (ASX:GAL) has again expanded its Callisto palladium-nickel discovery in WA.

GAL has discovered another new sulphide zone at its Callisto project — its latest drillhole revealing thick sulphides that remain completely open to the north and east.

The market liked the news, with GAL’s share price snapping up 30% after dropping from $1 in mid January down to as low as 51c prior to yesterday’s news.

We wonder if that was the bottom given yesterday’s result.

These latest drill results add weight to GAL’s view that the five kilometres of untested strike length to the north of its initial discovery is highly prospective for further discoveries.

GAL intercepted 72 metres of sulphides — it’s widest intercept to date — which bodes very well for the potential discovery of more mineralisation and possibly identifying its source of the mineralisation.

Below is our “artist's” impression showing what “finding the source” means.

Imagine mineral deposits like GAL’s as “offshoots” from a kind of “underground volcano” that have been pushed towards the surface as the underground volcano “erupts”.

The “source” is where the “offshoots” came from, and offshoots should get thicker towards the source.

Find the source and you will likely find a big deposit AND be better able to find other near surface intrusions:

(apologies to any geologists out there - this image is for illustrative purposes only).

We can now be confident that the potential source mineralisation is in the north / east direction,

since that is where the mineralisation is most predominant and is where we’d geologically expect to see most mineralisation.

As you can see in the map below, the latest hole (NRDC394) was drilled right in the centre of interpreted host rock along the northern drill line. This suggests that the mineralisation and such thick intercepts may continue along strike.

Also, this drillhole was on the northernmost drill line completed to date, adding to the case that mineralisation extends further north - additional drilling hitting more mineralisation would confirm this.

This cross section shows the completed drillhole (NRDC394) on the far right, along with GAL’s planned drillholes and prior results.

As marked on the cross section, that 72 metre intercept graded:

• 1.16 g/t 3E 0.20% copper and 0.24% nickel from 498m deep in hole NRCD394. The 3E (Pd+Pt+Au) comprised 0.95 g/t palladium, 0.16 g/t platinum, 0.05 g/t gold.

This included a higher grade interval of:

• 39 metres grading 1.46 g/t 3E (1.19 g/t palladium, 0.20 g/t platinum, 0.06 g/t gold), 0.26% copper and 0.28% nickel from 503m.

After tracking GAL’s announcements and the “red worm” that represents mineralisation strikes, this latest image makes it look like a worm that has swallowed a beach ball...

WIth every hole drilled, GAL can better target its future drilling to get a more complete understanding of the mineralised zones at Callisto.

Yesterday’s drilling results further support the idea of there being multiple mineralised rock units in the area and that the source of these rocks may exist further to the north and east.

What we want to see now is confirmation that mineralisation continues along strike and that the same geology continues as we go north-east.

The larger the project, and the higher the grades, the more valuable it becomes when looking ahead to eventual development.

Of course to get to that stage, GAL would first need to compile an initial JORC resource that shows strong economics (i.e. size and grade).

We think that the company already has more than enough drilling data to define a resource, and would support that company doing so, however it is not something that GAL has flagged yet.

Keep in mind that GAL still has five kilometres of untested strike length to the north of Callisto that is highly prospective for further discoveries.

To date, discoveries made at Callisto – which sent the company’s share price up almost 900% at its peak – have been made over a relatively small area spanning just 500m or so.

GAL described yesterday’s result as firm confirmation that it has only just started to comprehend the full extent and potential of the Callisto discovery.

For context, here’s the Callisto discovery area with all holes drilled to date and the approximate strike distance (roughly to scale) to the north that still remains untested:

That means there’s a lot more drilling and a lot more newsflow still to come...

With $20M in the bank at the end of the last quarter, GAL is fully funded to implement all its planned drill programs. This means it can ride out market volatility without having to raise additional cash.

Prior to yesterday’s announcement, GAL’s share price was trading at lows not seen since before it made its initial Callisto discovery last May.

With this latest news, however, it looks like the company’s share price might be back on track.

The stock ended the day up 30% yesterday, to close at 70c, rallying after hitting a post-discovery low of 51c last week.

But even after a strong day yesterday, GAL is still trading below the price of its last capital raise of $1.20/share, which closed oversubscribed, led by cornerstone investments by GAL major shareholders Mark Creasy and the $9BN capped IGO Ltd.

Creasy alone invested an additional $7M in GAL post discovery with ~$2.2M bought on market at an average price of $1.28 per share and then more at the placement last July at $1.20 per share.

Like us, these major shareholders have a long term investment horizon. As they are substantial holders, any sales need to be reported to the ASX - and we haven't seen any selling from them.

So despite the recent share price woes, we expect they will nonetheless be happy with GAL’s exploration progress since the discovery was first announced and will ride out the recent market volatility.

Since its initial discovery last May, GAL has regularly provided positive exploration results and continued to grow the known mineralised zones at Callisto, as you can see in the succession of our 3D models below.

3D Model update

GAL has made two drilling announcements since our last GAL note on 1 February.

Please note - these 3D models are just our interpretation of the publicly released results and several assumptions have been made. The models are for illustrative purposes only and to help explain the upcoming drilling. Investors should not rely on these illustrative models in making any investment decisions.

Adding the data from recent drilling results, we updated our 3D models of the Callisto discovery.

1) Here is an image of GAL’s discovery from our last note in early February.

2) Here is an image of GAL’s discovery after the February 27th announcement (which is discussed further below).

3) Finally, here is an image of GAL’s discovery after yesterday’s announcement.

Clearly, the discovery area and known mineralisation has only gotten bigger.

Yet we note that despite this progress, along with the recently reported “excellent” metallurgical test work results, GAL’s share price was last week trading at its lowest level since making its discovery in May 2022.

Typical of small cap companies, we think the selling since mid January was driven more by macro events and negative market sentiment rather than anything company related.

It is in these types of scenarios where long term investors like us, who are willing to take a multi-year view, can identify opportunities - compared to a short-term trader seeking a quick profit.

Central to all of our Investments, our strategy involves a 3-5 year outlook, giving company management every chance to succeed and execute on their business goals.

Note: this is our Investment strategy, however it may not be right for everyone, and may not suit your risk profile or circumstances. Always seek professional investment advice when investing in high risk small cap exploration stocks.

We hope that execution at the business level leads to a meaningful share price re-rate over the long run.

In this video GAL managing director Brad Underwood discusses yesterday’s results:

Our ‘Big Bet’

“GAL increases the size/scale of its Norseman PGE discovery to a stage where the project/company is acquired by major shareholder IGO Ltd (or another major miner) for over $1BN.”

NOTE: our “Big Bet” is what we HOPE the ultimate success scenario looks like for this particular Investment over the long term (3+ years). There is a lot of work to be done, many risks involved - just some of which we list in our GAL Investment memo. Success will require a significant amount of luck. There is no guarantee that our Big Bet will ever come true.

To monitor the progress GAL has made since we first Invested, and how the company is doing relative to our “Big Bet”, we maintain the following GAL “Progress Tracker”:

See our GAL Progress Tracker here:

Here’s what else has happened at GAL in recent weeks.

Highest palladium-platinum grades to date

On 27 February, GAL reported its highest grade palladium and platinum results from Callisto to date.

Results included:

• 1 metre grading 11.23 g/t 3E (8.42 g/t palladium, 2.74 g/t platinum, 0.07 g/t gold), 0.10% copper and 0.80% nickel from 264m (NRCD317).

This was from within a wide high-grade interval of:

• 34 metres grading 1.87 g/t 3E (1.51 g/t palladium, 0.30 g/t platinum, 0.06 g/t gold), 0.25% copper and 0.28% nickel from 235m.

One thing that we liked about these results was that the disseminated sulphide mineralisation continued to show consistency between drill holes across all sections.

We note that of the 13 drillholes and two metwork holes reported, all but one returned significant 3E (palladium-platinum-gold) grades above 0.5 g/t.

Metwork and JORC Resource potential

While a significant length of strike remains to be actively explored, GAL has delivered an extensive amount of drilling results over the past year.

Given the extent of this data and the positive results, including multiple discoveries at Callisto, we suspect that GAL would already have more than enough data to estimate an initial JORC resource.

Supporting that view was GAL’s recently announced metallurgical test work. This metwork, on a diamond drill composite sample, demonstrated very high recoveries for key metals.

The initial results suggest that the mineralisation may be amenable to the production of a single bulk concentrate — similar to that produced from operating South African PGE mines, which currently produce the bulk of global PGE.

Notably, the metwork results compared well to the $14BN-capped Ivanhoe Mines’ Platreef deposit in South Africa.

It's also worth noting that it took almost 17 years of optimising the flowsheet at Platreef to bring the results up to levels that are not unlike those at Callisto.

So pretty good for an initial metwork result from GAL.

For more on that metwork see our Quick Take on the announcement here.

We certainly took the metwork results as a positive, and we also like that metwork is a required step ahead of a company estimating an initial JORC resource.

That said, while we believe that an initial resource estimate would be viable, we’ve had no indication that GAL intends to do so.

It just keeps drilling and finding more mineralisation - which is not a bad thing.

It is a space that we will be watching closely, as an initial JORC resource booking (that also leaves room for expansion) would leave no doubt around what GAL has on its hands here.

Drilling out a new discovery takes time

As we’ve explained previously, Sirius Resources' 2012 Nova Nickel discovery is a good example of how it can take years to drill out a discovery.

It took Sirius around three years to progress Nova from initial discovery to resource definition and an eventual $1.8BN takeover by Independence Group (now IGO Ltd).

Here is a picture of Sirius’ discovery intercept, and then the eventual resource that was drilled out:

We hope GAL — backed by major shareholders Mark Creasy (the man behind Sirius) and IGO (the now owner of the Nova Nickel Mine) — can do the same with its Callisto discovery over the coming years.

As long term shareholders, we understand that this is not a quick process and accept that the stock can face volatility along the way.

Here you can see GAL’s initial discovery intercept and then an image of how much the discovery has grown already in just 10 months.

Ultimately, the drilling out of a new discovery takes time.

We want to see GAL continue to drill out its project over the next 12-24 months in a similar fashion to what Sirius did at Nova.

What’s next?

Step out drilling continues 🔄

GAL’s extensive drilling program continues with two drill rigs on site (one RC rig and one diamond drilling rig) and plenty of cash in the bank ($20M at 31 December 2022).

We also note that GAL has increased the spacing of its drill program. This means that the location of the drillholes are further away from the known mineralisation.

The increased spacing should mean that each intercept (if it hits mineralisation) will increase the implied footprint of GAL’s discovery more significantly. With over 5km of prospective strike to test we think this is the right approach from GAL.

The current drilling focus is follow up drilling from yesterday’s result.

The next assay that we are looking forward to seeing is from step-out drill hole (NRDD420), which is currently being drilled about 250m east of the last drillhole. This hole will be drilled on an angle back to the west and is all about confirming the geology of yesterday’s result by looking at it from a different angle.

Risks

Of course no investment comes without risk - especially exploration small cap stocks.

We’ve outlined the main risks facing GAL in our Investment Memo:

Our GAL Investment Memo

Click here for our GAL Investment Memo, where you can find the following:

• Key objectives we want to see GAL achieve
• Why we are Invested in GAL
• What the key risks to our Investment thesis are
• Our Investment plan