Galaxy Resources Limited (ASX:GXY) Successful Completion Of A$65 Million Institutional Capital Raising
Perth, Oct 7, 2009 AEST (ABN Newswire) - Emerging lithium producer, Galaxy Resources Limited (ASX:GXY)(PINK:GALXF), today announced the successful completion of an institutional capital raising of A$65 million as part of the funding process for the Mt Cattlin mine at Ravensthorpe and the Jiangsu Lithium Carbonate Project in China.
The Company will place 51 million Shares to sophisticated and institutional investors at a fixed issue price of A$1.28, which is approximately the 30 day average trading price on ASX immediately prior to launching the capital raising roadshow on 11 September 2009. The placement is subject to shareholder approval, at an Extraordinary General Meeting on 14 October 2009.
The joint lead managers of the raising were State One Stockbroking Ltd and Helmsec Global Capital Ltd.
Galaxy Managing Director, Mr Iggy Tan, said there was strong Australian and International institutional investor support for the Company and the capital raising, which was almost three (3) times oversubscribed, "We are delighted with the response which reflects a strong endorsement for the lithium market and the Company's strategies to fast track development of our Ravensthorpe mine and China production facilities," Mr Tan said.
"The capital raising will complement the A$160 million Creat equity and debt funding package for the development of all our projects".
The Company's intention is for the funds to reduce the project debt, available through the recently announced Creat full debt facility of A$130 million, to a conservative level of around 60% as the project meets expected cash flows.
Lithium Market Update
Mr Tan said the recent encouraging announcement by Sociedad Quimica y Minera de Chile S.A. (SQM) to reduce its lithium price levels, with the purpose of accelerating demand growth, to create incentives for research of new lithium uses leading to sustainable long-term development of the lithium market, was a positive.
"We are pleased that SQM has taken decisive steps to allay consumers concerns about the future availability of lithium to meet the expected surge in demand, as a large number of proposed new electric vehicle models are made ready for market over the coming five years", Mr Tan said.
Galaxy notes that SQM's production profile is predominantly technical grade product of 99.0% Li2CO3 which is used in the chemical, glass and ceramic industries. Technical grade product has softened as a result of a change in market demand over the past 12 months.
Mr Tan said Galaxy believes that the rechargeable battery sector in countries like China, Galaxy's target market - has been more resilient and is expected to sustain strong growth. Galaxy has already factored in the reduction of demand and pricing in its financial modeling for the project.
Galaxy will be producing 100% battery grade product (grade > 99.5% Li2CO3), which currently attracts a price premium of around 10-15% over the technical grade. The Company's project model assumes conservative technical grade pricing with modest growth of 2% p.a. over life of project. Upside for premium product (battery grade) has not been included in Galaxy's calculated project Net Present Value. The demand for battery grade product is expected to be growing strongly by the time Galaxy commences production in Q4 2010.
SQM and other South American brine producers have less than 20% market share in China, which is predominantly supplied by lithium carbonate produced from local hard rock deposits as well as Australian-sourced spodumene.
Following on the Letters of Intent received from new customers/market entrants in the battery grade lithium carbonate sector, Galaxy is currently in discussion to secure off-take agreements with selected parties in China, Europe and Japan.
About Galaxy Resources Limited
Galaxy Resources Limited (ASX:GXY) (OTCMKTS:GALXF) is an international S&P / ASX 200 Index company with lithium production facilities, hard rock mines and brine assets in Australia, Canada and Argentina. It wholly owns and operates the Mt Cattlin mine in Ravensthorpe Western Australia, which is currently producing spodumene and tantalum concentrate, and the James Bay lithium pegmatite project in Quebec, Canada.
Galaxy is advancing plans to develop the Sal de Vida lithium and potash brine project in Argentina situated in the lithium triangle (where Chile, Argentina and Bolivia meet), which is currently the source of 60% of global lithium production. Sal de Vida has excellent potential as a low cost brine-based lithium carbonate production facility.
Lithium compounds are used in the manufacture of ceramics, glass, and consumer electronics and are an essential cathode material for long life lithium-ion batteries used in hybrid and electric vehicles, as well as mass energy storage systems. Galaxy is bullish about the global lithium demand outlook and is aiming to become a major producer of lithium products.
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