$0.120
Opened: 30-Aug-2022
Shares Held at Open: 2,161,544
What does GAL do?
Galileo Mining (ASX: GAL | OTC:GALMF) is focused on expanding its PGE discovery in the Norseman region, WA whilst also chasing a large scale nickel discovery in the Fraser Range.
What is the macro theme?
Among the rarest metals on earth, PGEs face constrained supply and very strong demand growth amid the ‘greening’ of economies globally.
Palladium, platinum and rhodium are critical components in catalytic converters that turn toxic auto emissions into less harmful waste products.
Nickel and cobalt are critical raw materials in the production of electric vehicle batteries. We expect that the electrification of global car fleets will result in exponential increases in nickel demand.
We hope that GAL will continue to expand its recent PGE discovery, hit more high grade zones, prove commercial potential and ultimately be taken over, possibly by IGO Ltd (8.3% GAL holder) based on its previous track record.
Mark Creasy (26.8% GAL holder) was Sirius Resources largest shareholder when it was sold to IGO in 2015. We really like IGO and would love to one day acquire IGO shares to hold as a dividend play.
Our Big Bet for GAL
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.
Why did we invest in GAL?
New PGE discovery in WA
GAL made a major palladium-platinum discovery in May 2022 at its Norseman Project. The “Callisto” discovery has over 5km of known prospective strike length and has drawn comparisons to South Africa’s Platreef deposits, which are said to contain over 80% of the world's known PGE deposits.
Well-funded for exploration
GAL is an active explorer, running multiple drilling campaigns every calendar year. With $26.4M in cash (at 21 July 2022) GAL is well-funded to expand its new PGE discovery whilst also pursuing additional discoveries.
Tight capital structure & potential to re-rate
Mark Creasy is GAL’s largest shareholder with 26.21% after participating in a recent placement and buying on market. Creasy was behind the Nova Nickel Discovery which was sold to IGO for $1.8B. IGO, capped at $9.1B, who also participated in the raise, is GAL’s second largest shareholder. Together, the pair hold more than one-third of GAL’s shares on issue, leaving not many more shares to go around. This means that it doesn’t take much for GAL to significantly re-rate off positive newsflow.
Experienced management team
GAL’s Managing Director Brad Underwood leads a team that has worked alongside Mark Creasy when they made the Silver Knight Discovery in the same region, Silver Knight’s nickel project was also sold to IGO. The team have experience at all stages of an exploration projects lifecycle from discovery to eventual sale.
Fraser Range nickel potential
GAL still holds highly prospective grounds in the Fraser Range Nickel Belt in WA in a JV with Creasy Group (67% GAL / 33% Creasy). This is the location of the $1.8 billion Nova Nickel Discovery and more recently the Silver Knight Discovery. This was the original reason we Invested in GAL over two years ago and still think the projects have discovery potential.
What do we expect GAL to deliver?
Objective #1: Execute drilling campaigns at Norseman (Callisto) PGE Discovery
We want to see GAL continue to explore the potential for a large mineralised system. GAL has five kilometres of untested strike length along with good potential for more mineralisation of the same style.
Milestones
RC drilling to test for continuity of mineralisation along strike and at depth. We want to see GAL’s deposit extend in all directions (north/south/east/west).
Diamond drilling to test for extensions at depth.
Assay results: (Bull case = over 3.0 g/t, Base Case = over 1.0 g/t, Bearish case = grades start to fall below 1g/t.)
BONUS: High grade zones or massive sulphides discovered.
Objective #2: Collect data to support mine development studies
Collect data to support mine development studies at Norseman Project.
Milestones
Step out drill campaign discovers new zones
Preliminary JORC resource released
Positive Met work results released
Commence an economic feasibility study (economic assessment/scoping study).
Objective #3: Exploration at Norseman regional targets
Exploration across the regional targets at the Norseman project (Jimberlana and Mission Sill) which sit on a combined prospective strike of over 15km.
Milestones
Planning and commencement of exploration programs
Objective #4: Drilling in the Fraser Range nickel province
We want to see GAL run more drilling campaigns in the Fraser Range on its highest priority drill targets over the course of 2022.
Milestones
Target generation works - geophysical/geochemical surveys to put together high priority drilling targets
Drill testing highest priority targets
What could go wrong?
Development risk
Now that GAL has made a discovery, the major risk is that the project is not deemed commercially viable. Having an established discovery is not always enough to get it into production and there is no guarantee the discovery turns into an operating mine.
Financing risk
GAL raised over $20M in July 2022, yet as it does not generate revenues or profits at some point it will need to tap investors for more funds to continue its exploration programs.
Market risk
The economic potential of GAL’s projects are reliant on supportive commodity markets, including positive supply/demand dynamics and supportive market sentiment.
What is our investment plan?
We have held GAL in our Portfolio since May 2020, with an average entry of 24.7c (prior to our participation in the last placement at $1.20).
We DID NOT execute our previous Investment plan to sell 25% after GAL ran to $2 on its discovery announcement.
On a material share price re-rate we would usually look to Free Carry and Take Profit by selling around 25% of our position, but in the case of GAL we held, then also increased our position in the placement at $1.20.
We believe there is more to come in proving out GAL’s discovery in the current drilling campaign. We back Managing Director Brad Underwood to deliver and believe there is a strong chance of a company takeover in the future if positive drill results keep coming in.
We delayed execution of our initial sell down plan, but we may look to execute on a 25% sell down on the next significant re-rate from current levels if/when that occurs.
Disclosure: 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.
