East Coast Research, a division of "Shares In Value", a pay-site for stock research, is spruiking G1A this week, however, as I often do, I read the report backwards (it's 39 pages long) and smiled at the very last item, the "Disclosures":

Disclosures: East Coast Research has been commissioned to prepare the Content. From time to time, East Coast Research representatives or associates may hold interests, transact or hold directorships in, or perform paid services for, companies mentioned herein. East Coast Research and its associates, officers, directors and employees, may, from time to time hold securities in the companies referred to herein and may trade in those securities as principal, and in a manner which may be contrary to recommendations mentioned in this document. East Coast Research receives fees from the company referred to in this document, for research services and other financial services or advice we may provide to that company. The analyst has received assistance from the company in preparing this document. The company has provided the analyst with communication with senior management and information on the company and industry. As part of due diligence, the analyst has independently and critically reviewed the assistance and information provided by the company to form the opinions expressed in the report. Diligent care has been taken by the analyst to maintain an honest and fair objectivity in writing this report and making the recommendation. Where East Coast Research has been commissioned to prepare Content and receives fees for its preparation, please note that NO part of the fee, compensation or employee remuneration paid will either directly or indirectly impact the Content provided.

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Of course the fees received would not impact the Content provided. Perhaps the idea of getting further similar work from the same company in the future might have some impact? A reasonable person might expect it would.

FWIW, the cover letter that accompanied the link to the report (I subscribe to SIV) went a little like this:

Galena Mining (ASX: G1A)

A cash flow positive lead-silver producer

Galena Mining Limited (ASX: G1A) is a Perth-based base and precious metals company. Along with the JV (60:40) partner Toho Zinc (a leading producer of lead in Japan), it is currently focussed on the development of Abra Base Metals Mine (Abra) project. This is the first mine to be constructed in the Edmund Sedimentary basin (located in the Gascoyne region of Western Australia). It is one of the world’s largest and cleanest undeveloped deposits of high grade lead-silver deposits, with only c. 5-10% of detrimental components compared to typical lead-silver concentrates produced in the world. With the expected annual throughput of 1.3Mtpa producing 80-90kt of lead andc.500koz of silver, the company is set to deliver an annual average EBITDA of A$90-95m.

DFS reveals strong project economics; G1A is a pioneer in the region

Galena are pioneers in the untapped Edmund Basin region, where resources are located c.230m below the surface and have high value and high-grade deposits. The Abra site also assures impressive exploration potential with copper-gold mineralisation beneath the lead-silver deposit. Abra’s latest mineral resource estimate (MRE) study highlights 34.5Mtpa of resources @ 7-7.5% lead grade and 17-17.5 g/t silver. In addition, Galena’s published Definitive Feasibility Study (DFS) demonstrates exceptional project economics, with a pre-tax NPV of A$553m and an IRR of 39%.

Offtake agreement and supply deficit strengthen project viability

In Oct 2019, Galena and IXM S.A. (a Swiss-French base metal commodity trading company) established a 10-year offtake agreement for the supply of high-grade lead- silver concentrates. Galena will supply 65ktpa, covering 60% of Abra's output, at a premium to benchmark pricing and has the option to sell surplus production beyond the agreed offtake volume in the open market. This safeguards Galena from market volatility. In addition, according to the Silver Institute, the global silver market witnessed a second consecutive annual structural deficit in 2022 amid soaring demand and reduced production. Similarly, the demand supply gap for lead is expected to remain high in the foreseeable future due to the depletion of reserves and the lack of new mines. This provides G1A with a significant market opportunity for its surplus product.

Valuation range of 0.31-0.43

Using the DCF approach and conservative assumptions on commodity prices, we have valued Galena at A$0.31 per share in a base-case scenario and A$0.43 per share in a bull-case scenario. The target price range represents a Price/NAV of 0.25x, providing enough cushion for investors. We expect it to get re-rated as the scepticism on monthly production volume recedes. In addition, we expect the market fear of further equity dilution will fade away as accelerated production will push cash flows higher. The key risks remain to be higher cash burn in the untested region, capital raising risk and commodity price volatility.

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I will not provide the entire 39 page report (which is dated 04-Aug-2023), however it wouldn't surprise me to see a link to it come up at some point on the Galena Mining website (at https://www.galenamining.com.au/site/investor/broker-research), considering that they (Galena Mining) paid for the report.

They closed at 11.5 cps today, so ECR's target range of 31 to 43 cps would be a decent gain from here if they get there.

G1A did present at D&D in Kal yesterday (Wednesday 9th August 2023). Here's a link to that presentation: https://www.galenamining.com.au/site/pdf/2b7acc87-b589-485c-ad35-963d8419b807/Diggers-and-Dealers-2023-Presentation.pdf

Disclosure: I am not currently invested in G1A, and have no current intention of investing in G1A. One of the reasons for that is Tony James, their MD.

Here's what Commsec says about Tony James: Mr James has over 30 years mine operating and project development experience predominantly in WA. He joined Galena on 15 October 2018 as a non-executive director before becoming Managing Director / Chief Executive Officer on 16 June 2021. Mr James has had previous experience at Managing Director level of three ASX listed companies with two of those companies guided through a merger and takeover process to the benefit of the shareholders. He has strong mine operating background (examples being the Kanowna Belle Gold Mine and the Black Swan Nickel Mine) and a strong feasibility study / mine development background (examples being the Pillara Zinc/Lead Mine and the Trident/Higginsville Gold Mine).

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Yep, two of those companies were good rides for their shareholders. I didn't invest in those. I instead "invested" in (speculated in) the third one, Carbine Resources, and that one didn't end well at all for shareholders. Tony simply moved on to the next company. One of the attractions of Carbine was Tony James, and his prior success with running companies that were taken over at a nice premium for shareholders. However, Tony and the rest of Carbine's management were either incompetent or dishonest with shareholders because the reality (from costs to the ownership of the assets) were a far cry from what we were being told, up until the truth came out, which is exactly when Tony quit and moved on.

I first bought shares in CRB in late 2014 (at 3.1 cps) on the basis that their Mount Morgan gold/copper project was supposed to be a long life project with a short term payback based on an ultra-low AISC:

• 9.5 YEAR ORE RESERVE BASE CASE & 20 YEAR EXPANDED CASE
• 2 YEAR PROJECT PAYBACK PERIOD
• $549/AU OUNCE AISC 

I've just copied that directly from page 6 of a CRB company presentation (presented at the Noosa Mining and Exploration Conference) in July 2017: http://www.carbineresources.com.au/wp-content/uploads/2017/07/170721-1-CARBINE_MOUNT_MORGAN_PRESENTATION_NOOSA-final.pdf

That's a rediculously low All-In Sustaining Cost (AISC) for gold, however it clearly involved copper by-product credits and a number of assumptions that were WAY off, particularly about the cost of extracting the gold and the copper. In reality the costs were going to be so high that the project was nowhere near economically viable. And they didn't even own the land - they just had a conditional agreement to buy the land, and that fell through as well.

It was all a crock...

I bought more CRB shares from 2014 through to 2017 at prices ranging from 3 cps to a high of 24 cps - which was damn near their peak that year; they peaked at 25.5 cps but the chart above only has monthly data points, not weekly or daily, so it doesn't look like it got that high in 2017, but it did. I sold the lot at 3 cps in Feb 2018 when everything turned pear-shaped and Tony had quit and wasn't available for comment. The company never made any money, but they spent a heap. So not investing. Speculating. And not successful speculation either, on my part. But I learned a couple of lessons, and one was to start a blacklist of managers I would never trust again, and Tony James is at the top of that list.

Dr Paul Dalgleish is in second place. After running RCR Tomlinson into Administration, Dalgleigh left with a $1m payout and became the MD of Tempo Australia, which has now changed its name to GreenHy2 or something equally rediculous and goes under the new ticker code H2G. Dalgleish joined Tempo (now H2G) in April 2019 (as a consultant), became their CEO in July 2019 and was then given a seat on the board (as MD) soon after. They were already on the slide before he joined, but they describe Dalgleish on their website (link below) as a "turnaround specialist", and he hasn't managed to turn their share price trajectory around:

He did initially generate some positive interest, getting their share price back up to a short-lived peak of just over 10 cps, but they're now down at 1.2 cps and he's still their MD and CEO, so his position on my blacklist remains well-deserved.

Of course, my main lessons were more important than that list, and they included taking all estimates with a grain or three of salt, and to always assume that what a company that is not yet in production tells you - in terms of costs, timelines, price forecasts, etc. - is going to be optimistic and come with plenty of positive spin. With many companies, you can hope for the best but prepare for the worst, but with speculative project developers, if you prepared for the worst, you'd never go anywhere near them, so if you're going to dabble in that end of the market it's best to expect 8 or 9 out of 10 of these guys to lose you money, and hope the one or two out of 10 who multi-bag are going to more than compensate for the losses, but that often does not occur unfortunately. You can narrow the odds with some research and well-founded and researched assumptions and guestimates, but there are no guarantees, and the reality is that most explorers and project developers never make money, ever. And the ones that do often have people running them that have done it before somewhere else. And Tony James has, at Mutiny Gold (acquired by Doray Minerals, who were themselves acquired by Silver Lake Resources) and at Atherton Resources, formerly Mungana Goldmines, who were aquired in December 2015 by Auctus Minerals, who changed the company name to Auctus Resources. But he definitely didn't do that at Carbine Resources.

Here's Galena's 5 year chart:

Tony joined the G1A Board back in mid-October 2018, when they were trading at under 20 cps, and the SP doubled almost immediately - to over 40 cps, and then he took on the MD & CEO roles in mid-June 2021 - when they were trading at around 25 cps and falling, and look at them now... under 12 cps.

Further Reading:

(22) Experience | Tony (TJ) James | LinkedIn

Board & Management - Medallion Metals

Tempo in turmoil turns to former boss of failed RCR for help (afr.com)

RCR Tomlinson investigations wind down (afr.com)

EXECUTIVE TEAM | GreenHy2 - Paul Dalgleish

The Demise of RCR Tomlinson - A Case Study By CFSG

Carbine cans Mount Morgan (businessnews.com.au)

https://www.swansonreed.com.au/ato-release-decision-impact-statement-on-auctus-resources-pty-ltd-case-administrative-recovery-of-rd-offset/ That last one is probably getting a little too deep into the weeds but it concerns a ‘self-assessed’ claim for an R&D tax offset refund of $2,269,336 made by Auctus Resources Pty Ltd (then known as either Mungana Goldmines or Atherton Resources if my research is correct) for the 2012-13 financial year. The refund payment was made by the Commissioner of Taxation (the Commissioner) to Auctus Resources using an automated process. However, Auctus Resources’ R&D activities registered within the claim were later found not to be eligible activities. The ATO then sought to recover the R&D offset from Auctus Resources, and the ATO initially lost a case in 2020 when the Federal Court held that the Commissioner could not apply section 8AAZN of the TAA to receive repayment of the payment made to Auctus Resources, finding that the initial payment could not be classified as an “administrative overpayment” as the section defined it. The Commissioner then made an appeal to the Full Federal Court which was allowed. The Full Federal Court decision was made in favour of the Commissioner. Auctus Resources subsequently applied to the High Court for special leave to appeal the decision but was refused.

If the ATO had not ultimately won their appeal, it would have had major implications because all such payments that had been previously made automatically and then recovered by the ATO upon closer examination of the applicable company tax return details would have then had to have been refunded BACK to the companies by the ATO because they would have been recovered illegally.

I note the circumstances of "Auctus Resources Pty Ltd v Commissioner of Taxation [2020] FCA 1096" can no longer arise because refundable R&D tax offsets have since become part of the taxation assessment and the Commissioner is able to issue an amended assessment for the repayment of any overpaid tax offset refunds.

I don't know if Tony James was the MD of the company when they made that initial $2.27m R&D tax offset claim that was subsequently found to be for activities that were not eligible for that tax offset. I know it was for FY13, but I don't know which year the tax return was lodged. Also, the CFO would probably be more to blame for that than the MD/CEO, but anyway, that's just one rabbit-hole I ended up down tonight.