Galaxy Resources Limited (ASX:GXY) Quarterly Report For The Period Ending 30 September 2009
Perth, Oct 29, 2009 AEST (ABN Newswire) - Galaxy Resources Limited (ASX:GXY) is pleased to provide shareholders with the September 2009 Quarterly Report which outlines the progress made by your company during the quarter. The Company is now fully funded and will hold a significant cash position to support the development of both the Mt Cattlin and Jiangsu projects.
Galaxy announced on 25 August 2009, that it has signed a binding Share Subscription and Debt Facility Agreement for financing its project with Creat Group Co Ltd, a private sector investment company based in Beijing, China.
At an Extraordinary General Meeting on 14 October 2009 shareholders approved the issue of 34 million shares (equating to 19.9% of the expanded Galaxy capital) to Creat Group Co Ltd as part of the funding package for the development of Galaxy's projects. As part of the agreement, Creat will provide Galaxy with 100% debt finance of approximately A$130 million for the purpose of developing the Company's project. The first drawdown (A$24 million) from Creat is expected on 23 November 2009.
Under the Agreement, Creat is entitled to nominate one Non Executive Board member to the Galaxy Board. At the Extraordinary General Meeting on 14 October 2009, shareholders approved the appointment of Dr Yuewen Zheng as Non Executive Director.
Creat has no off-take requirements and Galaxy is therefore free to market its own product, positioning itself well to maximise the benefits of anticipated increasing lithium carbonate prices. The Board is delighted to have secured the interest and commitment of Creat as a strategic investor to provide long term financing arrangements for the Company's lithium projects.
Additional Equity Raising
At an Extraordinary General Meeting on 14 October 2009 shareholders approved the issue of 51 million shares as an excluded offer placement to sophisticated and institutional investors to raise an additional A$65 million. The Placement will complement the Creat debt funding package for the development of Galaxy's project. On 21 October, Galaxy received all the funds from this placement and issued 51 million shares.
Whilst initially the Company has the opportunity to use the Creat full debt facility to finance the project, the Board's intention is that the equity finance raised by the Placement will be used to reduce debt to more conservative levels once the operations stabilise. Prior to this, the cash raised by the Placement will provide contingency finance for servicing the debt facility and to fund any additional costs incurred as a result of possible delays and overruns during construction, commissioning and start up of the Project.
The additional equity funds raised by the Placement will allow Galaxy to minimise risk during the most vulnerable phase of the Project development. On achieving steady state positive cash flow for the Project, the final target debt to equity ratio will be around 60% which is a very conservative risk profile. The Board believes that this is a prudent approach to funding the Project.
Foreign Company Structure Established
The Company established a wholly owned investment subsidiary, Galaxy Lithium International Limited, registered in Hong Kong during the quarter.
The Hong Kong investment company will be used as the vehicle to establish the Wholly Foreign Owned Enterprise (WFOE) in the Peoples Republic of China (PRC) which will develop the Jiangsu Lithium Carbonate Project.
SIGNIFICANT EVENTS DURING THE QUARTER
- Project now fully funded following binding Share Subscription and Debt Facility Agreement with Creat Group Co Ltd (Creat).
- Full A$130 million project debt finance established with Creat.
- Under this agreement, 34 million shares will be placed with Creat raising A$29 million.
- Additional to the Creat placement, 51 million shares will be placed to sophisticated and institutional investors raising A$65 million. The placement was completed subsequent to the end of September.
- Shareholder approval of the Share Subscription by Creat and the additional placement occurred on 14 October 2009.
- The foreign company structure was established.
- The approvals process for both the Mt Cattlin Lithium Project and the Jiangsu Lithium Carbonate Project are progressing well.
- Galaxy signed a sale and joint venture agreement with General Mining Corporation (GMC) for the exploration and development of the Shoemaker hematite iron ore project.
- Galaxy signed a 100% purchase agreement for a block of tenements north of Mt Cattlin resource from Vistarise Limited for A$100,000.
- Galaxy also significantly extended its tenement footprint near the Mt Cattlin Project through an agreement to acquire an 80% interest in a block of tenements from Traka Resources Limited for A$145,000.
- The Engineering, Procurement and Construction Management (EPCM) contract for the minerals processing plant at Mt Cattlin was awarded to the DRA Pacific, Mintrex, BEC Engineering Joint Venture.
- Reserve Statement for Mt Cattlin was released.
- The Jiangsu DFS study was conducted by Hatch Engineering in China.
- The final Jiangsu DFS outcome was released subsequent to the September quarter and confirmed the estimated project returns.
For the complete Galaxy Resourves Quarterly Report for the period ending 30 September 2009, please click the link below:
http://www.abnnewswire.net/media/en/docs/61661-ASX-GXY-466510.pdf
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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