Page 42 - pd238 May16 mag-web_Neat

LATIN AMERICA DOWN UNDER PREVIEW

Mt Cattlin is slated to produce 100,000 tpa but thanks to the rise in lithium prices, the JV expects to exceed the target by at least 20,000 tpa

shareholders had already put in enough. Under the definitive agreement an- “In Q4 the market started getting very

And with the Jiangsu plant underper- nounced in September, General Mining tight,” Tse said. “Greenbushes, the only

forming we focused on that because it spent $25 million to earn a 50% stake in other spodumene producer in the world

had debt of $US110 million attached – the operation with Galaxy receiving $6 stopped third party supply of lithium car-

which a new owner would take on – and million a year for three years after pro- bonate in China, just at the time Chinese

it was the largest consumer of capital; $1 duction started and a 50% share of oper- electric vehicle demand began to take

million a month. ating cash flows. off.

“Also, we knew that, if needed, we “We wanted to restart Mt Cattlin but “Prices are currently up to $US20,000/t

could rebuild a plant at a later date but without committing the cash needed for small contracts and even $US13,000/t

it would be very difficult to discover the because Galaxy shareholders had put for large, long-term contracts. That is

quality of deposit we had in Mt Cattlin enough into Mt Cattlin. So, General Min- compared to $US6,500/t in early 2015.

and Sal de Vida.” ing raised the capital and took the op- “The next five years will see a widen-

The plant was eventually sold to Si- erating and financial risk. Galaxy is es- ing supply gap and we believe it will be

chuan Tianqi Lithium Industries Inc for sentially free-carried for its 50% of cash 2022 before the market is in balance,

a net price of $US173.2 million in April flow and a $6 million annual minimum even considering the handful of projects

2015. payment.” in construction or post-DFS within that

“From that, we were able to settle a Rising lithium demand made negotiat- five year window. Then, from 2022, the

lot of the debt, renegotiate further with ing new off-take contracts even easier market will grow at a more steady state.”

bondholders and restructure the convert- than the original operation. Many ASX-listed lithium plays have

ible bonds into straight debt,” Tse enjoyed strong share price ap-

said. preciation on the back of such

The balance sheet tidying exer- compelling fundamentals but

cise also meant Galaxy had more Galaxy is one of the few that

than $50 million cash to consider can translate that to immediate

how it would re-establish itself cash-flow. Mt Cattlin’s stated

around Mt Cattlin and Sal de Vida. production is 100,000 tpa but

And, as fortune would have it, the Tse said with off-take contracts

company would do so in a rapidly for 120,000 tpa, the JV partners

rising lithium price environment. expect 150,000 tpa to be an

“We recognised in early 2015 achievable target.

that the lithium market was be- “The economic study by Gen-

ginning to tighten as Chinese de- eral Mining assumed 100,000

mand continued to rise.” tpa production but there is ca-

In February 2015, the company pacity for 200,000 tpa,” he said.

announced it was working on a JV “We have already signed off-

with General Mining Corporation A 2013 DFS pointed to a capex of $US369 million but Galaxy take for 120,000 tpa and will like-

which would bring Mt Cattlin back believes the resources downturn and devaluation of the ly process 150,000 tpa this year.

into production. Argentinian peso could deliver cost savings And, there is more margin for the

PAGE 42 MAY 2016 AUSTRALIA’S PAYDIRT