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Despite disruptions from supply issues, COVID-19 pandemic and mine closures, prospects are high for lead in the upcoming years.
Despite COVID-19, the electric vehicle (EV) market in 2021 hasn’t shown signs of slowing down.
In fact, in the first half of the year, over 2.65 million new EVs were purchased globally, up 168 percent from the same period in 2020. As EV demand continues to grow, the commodities needed to enable the electrification of modern society should remain in high demand.
Prominent metals in EVs include lithium, copper and lead. They make up significant components in EV batteries and numerous other parts of the build, and all of this means they should continue to see significant demand. Simply put, current EV technology requires 12 volt lead-acid batteries to run essential components, like safety auxiliary systems, lithium-ion battery management computers and autonomous and communication systems.
When you combine outside factors like pro-EV government policies, the general public’s growing awareness for this technology, and the shift to green technologies in many established industries, it becomes clear why projected demand for lead is expected to grow over the next few years.
What’s driving the lead economy: An overview
Market analysts report that the automotive lead-acid battery market could rise to approximately US$23.7 billion by 2028, with an estimated compound annual growth rate (CAGR) of 3.1 percent from 2020 to 2028. Much of this increase can be attributed to lead’s role in the EV and hybrid industry and the future of transport.
While in most current consumer EVs lithium-ion batteries are the primary battery, the cars are also equipped with lead-acid batteries. The lead-acid batteries in EVs serve a similar function to those in internal combustion engine vehicles — powering electrical systems such as lights, windows, navigation, air-conditioning and airbag sensors.
Lead as a commodity in the green revolution is also driving global movements towards the overall electrification of the world. Global demand for electrical power will increase by well over 50 percent over the next couple of decades. Most of this increase is expected to be met by renewable energy sources, and that will create more demand for energy storage systems (ESS).
With the increased popularity of electric alternatives to power, transportation and energy, companies and international powerhouses are seeing the substantial economic necessity of investing in mining and base metals commodity players. Companies need to act fast in finding sources of metals like lead to fuel the demand of a rapidly growing sustainability-focused world.
Lead’s market outlook over the next decade
Since demand is high, lead is experiencing similar challenges to other base metals, including diminishing supply. Most large mines are coming to the end of their life, and smaller mines are also producing less pure lead, which is creating a “green” issue.
However, world leaders like China and Australia are held up as the primary sources for viable lead resources in the world. For example, major Australian player Galena Mining (ASX:G1A) operates its own Abra base metals project, located in the Gascoyne region of Western Australia, which is home to one of the largest lead and silver deposits in the world.
Galena Mining leverages advantageous positioning with its 2019 bankable feasibility study for the development of a mine and processing facility. The results of the study include a 16 year lifespan producing high-value, high-grade lead-silver concentrate with potential lead production estimated at 95,000 tonnes per year.
Players like Galena see the economic upside of the lead industry, which is currently experiencing a higher rate of technical development in lead batteries than ever before. Wood Mackenzie's Farid Ahmed projects that "these developments have the potential to narrow the performance gap with lithium-ion — its principal rival for the burgeoning ESS sector."
Unlike other commodities, lead can be recycled infinitely while maintaining its quality, meaning its use in batteries is more environmentally friendly than metals that cannot be recycled in this way. The growing demand for lead in lead-acid batteries for EVs and for use in ESS, as well as its ability to be reused, make it a potentially important part of the green future.
Looking into the future of lead mining
Lead production is expected to grow at a CAGR of 2.5 percent by 2025 to reach 5.2 million tonnes (Mt).Combined production in China, Australia, Russia and Canada is expected to increase from a forecasted 2.8 Mt in 2021 to 3.1 Mt in 2025.
At the same time, these production projections could still see issues with increased demand and undersupply. With limited economic lead mines and recent mine closures — such as the 2019 closure of Glencore's (LSE:GLEN,OTC Pink:GLNCY) 120,000 tonne per year smelter in New Brunswick — major players need to pivot to advance their hold in the lead market.
Notably, Galena has also made show significant strides in its lead player positioning as its major partnerships include IXM, a Swiss base metals trading company; Toho Zinc (TSE:5707), Japan's largest zinc and lead smelter; and GR Engineering Services (ASX:GNG), with which Galena has signed a plant construction contract. Even with mine closures and major disruptions from COVID-19, companies like these are putting in the work to meet the push for a greener world and the demand for vehicle battery, ESS and recyclable applications.
Lead is making a comeback. As an important component in lead-acid batteries for EVs, ESS applications and the overall green revolution, companies and investors alike are looking to this commodity. Despite disruptions from supply issues, COVID-19 and mine closures, prospects are high for lead in the upcoming years.
This INNSpired article is sponsored by Galena Mining (ASX:G1A). This INNSpired article provides information which was sourced by the Investing News Network (INN) and approved by Galena Mining in order to help investors learn more about the company. Galena Mining is a client of INN. The company’s campaign fees pay for INN to create and update this INNSpired article.
This INNSpired article was written according to INN editorial standards to educate investors.
INN does not provide investment advice and the information on this profile should not be considered a recommendation to buy or sell any security. INN does not endorse or recommend the business, products, services or securities of any company profiled.
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Capitalizing on its low-risk Tier 1 asset in a Tier 1 jurisdiction, strengthened by partnerships with one of the world's top base metals trading firms.
- Completed a bankable feasibility study (BFS):
- 16 year lifespan producing high-value, high-grade lead-silver concentrate
- Pre-tax NPV of A$553M at spot prices
- C1 direct cash cost to be among the lowest for global primary lead producers at US$0.44/lb
- Estimated pre-production capital expenditure of A$170M
- Higher NPV, longer mine life and lower C1 direct cash cost compared to PFS
- Major partnerships include Toho Zinc, Japan's largest zinc and lead smelter and IXM SA, one of the top three base metals trading firms in the world.
- The Abra project is located in the Gascoyne Region of Western Australia, home to one of the largest undeveloped lead deposits in the world and the highest-grade lead concentrate available globally.
- The Abra project carries a JORC estimate of 16.7 Mt at 8.5 percent lead and 24 g/t silver in the indicated category and 24.4 Mt at 6.5 percent lead and 14 g/t silver in the inferred category.
- The Abra project has been named the world's lowest cost primary lead mine by Wood Mackenzie, a leading mining research and consultancy group.
- Initial construction activities have been commenced, with the project being "shovel ready" to commence the plant construction and deployment of the mining contractor.
- US$110 million of project financing debt facilities have been procured from leading mining-specialist lending fund Taurus Funds Management.
- Galena's management team brings decades of experience in the mining and base metals industry and has a proven track record of success throughout all stages of an exploration, from development to production.
Galena Mining (ASX: G1A) owns the Abra base metals project located in the Gascoyne region of Western Australia — home to one of the largest lead and silver deposits in the world set to produce the highest-grade, cleanest lead concentrate available globally. The company is capitalizing on its low-risk Tier 1 asset in a Tier 1 jurisdiction, strengthened by and leveraging partnerships with Japan's largest zinc and lead smelter, as well as with one of the top base metals trading firms in the world.
Galena recently completed a bankable feasibility study (BFS) for the development of a mine and processing facility with a 16 year lifespan producing high-value, high-grade lead-silver concentrate. Lead production is estimated at 95 kilotonnes per year while silver mining is projected to yield 805 kilo ounces annually. According to a pre-development capital expenditure estimate of AU$170 million, the BFS modelled a pre-tax net present value for Abra of AU$553 million, and an internal rate of return of 39 percent. Additionally, the project's excellent location, infrastructure, and low technical risk saw this mine named as the world's lowest cost primary lead mine by Wood Mackenzie, a leading mining research and consultancy group.
Galena's major partnerships include Toho Zinc (TSE: 5707), Japan's largest zinc and lead smelter and IXM SA, one of the world's top three base metals trading firms. Toho is providing AU$90 million project equity and has a long-term agreement to purchase 40 percent of Abra's production, while IXM has entered into a 10 year take-or-pay offtake contract to purchase the remainder.
The CEO of Galena Mining, Alex Molyneux, commented, "We have secured firm offtake arrangements for all of Abra's production with Tier 1 buyers and these arrangements reflect the premium value of Abra's high-grade concentrate product. The IXM arrangement in particular demonstrates a higher value over and above the assumptions used in the feasibility study."
The Abra project carries JORC Mineral Resource estimates of 16.7 million tonnes (Mt) at 8.5 percent lead and 24 g/t silver in the indicated category and 24.4 Mt at 6.5 percent lead and 14 g/t silver in the inferred category. This mineral resource estimate published in December 2019 was substantially upgraded following drilling during 2019. Despite being at the construction phase, Galena continues to actively drill to optimise Abra. As of late 2020, there are three drill rigs operating at Abra drilling 1,400 to 1,800 cumulative metres per week. The lead-silver orebody remains open in multiple directions and there have been exciting copper and gold intersections where mineralisation remains open at depth.
All permits for the Abra project have been obtained from the appropriate Western Australian regulatory bodies. The project is also subject to an existing land use and heritage agreement with the Jidi Jidi Aboriginal Corporation. The Abra property is well-serviced by public roads and highways, and all the necessary infrastructure has been developed to transport lead-sulphide concentrates to the Port of Geraldton, Abra's primary export port.
The first tranches of equity investment from Toho have been used to undertake initial construction activities at Abra. This means the project now has a mined boxcut, production water facilities, the first module of its permanent accommodation village and various completed site infrastructure. It is "shovel ready" for the commencement of plant construction and deployment of the mining contractor.
The company's management team brings decades of experience in the mining and base metals industry and has a proven track record of success throughout all stages of an exploration, from development to production. Both CEO Alexander Molyneux and CFO Craig Barnes previously worked for Paladin Energy (ASX: PDN), a publicly traded uranium production company that operates two mines in Namibia and Malawi.
Taurus Fund Management, one of the world's largest investment management firms, has provided the project with US$110 million in project financing debt. Galena's CEO Molyneux commented, "The US$110 million of debt funding completes an efficient and fulsome funding package to bring the outstanding Abra base and precious metals project to fruition in a way that provides robust shareholder returns."
The Abra Base Metals Project is located in the Gascoyne region of Western Australia, approximately 110 kilometres from the DeGrussa copper mine owned by Sandfire Resources (ASX: SFR).
Bankable Feasibility Study
Galena has recently completed a bankable feasibility study (BFS) for the development of a mine and processing facility with a 16 year lifespan producing high-value, high-grade lead-silver concentrate. Lead production is estimated at 95 kilotons per year while silver mining is projected to yield 805 kilo ounces annually.
According to a pre-development capital expenditure estimate of AU$170 million, the BFS modelled a pre-tax net present value for Abra of AU$553 million, and an internal rate of return of 39 percent.
Ongoing Project Drilling
As of late 2020 there are three drill-rigs operating at Abra drilling 1,400 to 1,800 cumulative metres per week for infill and optimisation drilling.
Recently announced drilling results included the best high-grade lead-silver drill-hole ever at the project (hole AB147). It revealed that the mineable domain is approximately 30 metres closer to the surface than originally predicted. Significant intersections from AB147 included:
- 5 m at 9.6 percent lead and 34 g/t silver from 266.2 m
- 9 m at 7.3 percent lead and 20 g/t silver from 288.1 m
- 5 m at 15.1 percent lead and 22 g/t silver from 321.8 m
- 9 m at 17.1 percent lead and 26 g/t silver from 366.2 m
"We're astounded at the success of hole AB147 in targeting a potential 'metal rich' combination of grade and thickness on the northern part of the eastern limb of Abra's Indicated Resource area, which is shallow and close to the current plan for early decline infrastructure. We have added a number of follow-up holes around AB147 to the drilling program with the intention to bring this area into the early years of the mine plan as an optimisation," said Galena Mining's CEO and Managing Director Alex Molyneux.
The Abra project has received all major permits and approvals and has begun construction. The company plans to use the conventional underground mining method of long-hole open stoping with paste backfill. Shallow dipping areas will be mined using the room and pillar method. The processing plant will employ single-stage primary crushing and semi-autogenous grind million comminution to produce high-grade lead-silver concentrate.
Next steps for Galena include receiving another AU$60 million in investment tranches from Toho, hitting construction milestones and optimizing drilling results from a comprehensive drill program that was conducted in August. The company is also focused on active exploration of the Abra property to identify additional base and precious metals mineralization in the Edmund Basin.
The Jillawarra properties are located 20 to 80 km west of the Abra Base Metals Project within the Jillawarra sub-basin of Gascoyne, Western Australia. The Jillawarra sub-basin hosts several base metal resources, as well as manganese and gold prospects, which have been explored since the 1970s. The majority of the drilling performed on-site has investigated 100 to 200 meters below surface.
Galena has launched a continued exploration program that aims to identify additional mineralization of both base and precious metals. The primary prospective corridor lies within the fault between the Quartzite Well and the Lyons River, which extends east-west along the entire tenement package and indicates many of the same geological markers associated with the world-class Abra base metals project. Galena continues to target its Jillawarra assets through geophysics and an active drilling and exploration program.
Alexander Molyneux - Managing Director and CEO
Alexander Molyneux is an executive and financier with 20 years of experience in the metals and mining industry. Between 2015 and 2018, Molyneux was CEO of Paladin Energy, one of the world's largest uranium companies, where he optimized its operating business and completed a US$700 million successful recapitalisation of the company and a re-listing on the ASX. Well-known for his breadth of experience in the mining industry, Molyneux serves on a number of public company boards, including: Metalla Royalty & Streaming, Argosy Minerals and Tempus Resources.
Troy Flannery - Abra Project CEO
Troy Flannery offers more than 20 years in the mining industry, including five years in corporate and 16 years in senior mining engineering and project development roles. Flannery has a degree in mining engineering as well as a master's degree in finance. He has achieved the First Class Mine Manager's Certificate of Competency. Flannery has worked at numerous mining companies, mining consultant agencies and contractors (including BHP, Newcrest, Xstrata, St. Barbara Mines and AMC Consultants).
Adrian Byass - Non-Executive Chairman
Adrian Byass has more than 20 years of experience in the mining industry both in listed and unlisted entities globally. He has served as non-executive and executive director of various listed and unlisted mining entities, which have successfully transitioned to production in bulk, precious and specialty metals around the world. He currently serves on boards of ASX phosphate, zinc, nickel and lithium companies.
Craig Barnes- Chief Financial Officer
Craig Barnes has over 20 years of experience in senior finance and financial management within the mining industry and previously the financial services industry. Barnes has considerable experience in project financing, mergers and acquisitions, joint ventures, treasury and implementation of accounting controls and systems.
Before joining Galena, Barnes held the position of CFO of Paladin Energy for more than five years and was part of the team that successfully completed the company's capital restructuring in 2018. Prior to that, he was the CFO of DRDGOLD and its affiliated subsidiaries for more than seven years, and he played a key role in the successful transformation of the company from an underground miner with two ultra-deep underground operations into a profitable tailings retreatment business.
Tony James -Non-Executive Director
Tony James offers more than 30 years of mine operating and project development experience predominantly in Washington. James is highly regarded for his work in building and operating base metals and offers expertise in both finance and mine construction. James has previous experience as a managing director of three ASX-listed companies with two of those companies successfully guided through a merger and takeover process to the benefit of the shareholders. He has a strong mine operating background (examples being the Kanowna Belle gold mine and the Black Swan nickel mine) and a strong feasibility study and mine development background (examples being the Pillara zinc and lead mine and the Trident Higginsville gold mine).