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Galileo Resources PLC: THE INVESTMENT CASE
INVESTMENT OVERVIEW

Cash flow from zinc mining is now only a matter of months away for Galileo Resources

A JORC resource is expected early next year, after which Galileo will apply for a mining licence
Cash flow from zinc mining is now only a matter of months away for Galileo Resources
INVESTMENT OVERVIEW: GLR The Big Picture
Star has a conceptual resource of 90,000 tonnes of contained zinc

It’s not that long since Galileo Resources PLC (LON:GLR) took full control at the Star Zinc project in Zambia, after former partner BMR got into difficulties and had to de-list from Aim.

For a while, BMR’s demise was something of a headache for Galileo and for Colin Bird, the serial mining entrepreneur who stands behind Galileo. There had been problems with the licence already, dating back to the time before Galileo went into partnership with BMR, and now the rug was being pulled out again. But Bird can plumb a deep well of experience when it comes to mining in Africa, and he knew full well that BMR’s difficulties also presented an opportunity for Galileo.

READ: Grades at Galileo’s Star zinc project indicate upside could be greater than previously thought

A deal was struck with the now private BMR to take Galileo’s holding in Star up to 95%, giving Galileo complete control, allowing for the 5% held residually by the Zambian government.

At the same time, Galileo also acquired the wider Kabwe project, which has a good zinc exploration prospect at Kashitu, although one part of Kabwe was set aside for a deal with another of Bird’s companies, Jubilee Metals (LON:JLP)

Still, it may yet turn out that Star and Kabwe end up being reunited in some sense, as the existing zinc and vanadium tailings project at Kabwe, which was of such interest to Jubilee, is only two hours drive away from the workings at Star.

If it turns out that the mineralisation at Star doesn’t warrant its own processing plant, then trucking to the existing facilities at Kabwe would make perfect sense.

“It’s a tremendous little situation,” says Bird.

“As it stands, Galileo will be in a position to supply feed to Kabwe for 10 to 15 years.”

And that also suits Jubilee, since it wouldn’t solely be relying on a secondary feed from third parties to keep the plant up to capacity.

“If you can get US$600 per tonne after transport and you can produce ore at the rate of 100 tonnes per day, then you can build up a tidy little revenue,” says Bird.

“And while we’re doing that we can explore Kashitu.”

Optimism

So, on current plans, it looks as though cash flow from Star is likely to come through in April or May of next year.

Initially, mining costs will be low, since the lateritic material on the surface can just be scraped away. After that, the mining will get a bit more serious when Galileo hits the willemite ore that contains the bulk of the zinc since that will need to be blasted.

With all that as a backstop, Galileo is certainly sitting in a better position than it has done for some years, approaching cash flow and with a long-term future laid out ahead of it.

But there is another possibility too – that the resource base at Star grows to a point where it justifies its own processing facility.

At the moment the grades are certainly favourable, running in places at over 20% zinc. With the current tonnage ringing in at 250,000 tonnes, that amounts to around 90,000 tonnes of contained zinc. On those numbers, it’s probably still a little small,

“Can it stand its own processing plant?” muses Bird. “Maybe it can, maybe it can’t.”

The latest official release from Galileo sets out the details of the 90,000-tonne conceptual target, but also looks ahead to a full-blown JORC resource, due out early next year. The talk still is of signing an off-take agreement with Kabwe.

Bird calls it “a major advantage” for Star that it doesn’t initially need to construct its own processing plant.

What happens down the line, when operations are up and running and when the results start coming in from Kashitu remains to be seen. But with cash flow now on the near horizon, it will likely only be a matter of time before the market starts to wake up to the value on offer from Star.

 

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