Galaxy Resources Limited (ASX:GXY) Update On Jiangsu Lithium Carbonate Plant
Perth, July 15, 2011 AEST (ABN Newswire) - Galaxy Resources Limited (
ASX:GXY) (PINK:GALXF) wishes to advise that construction and fabrication labour shortages in China's Jiangsu region have contributed to a revised commissioning schedule of the Jiangsu Lithium Carbonate Project (the Project or Jiangsu), to be staged over the next five months.
The Project's EPCM contractor, Hatch Engineering (Hatch) has now provided Galaxy with a revised schedule and budget plan for Jiangsu, which indicates the Project is 76% complete.
The new schedule indicates that the back half of the Jiangsu plant - which includes purification, drying, micronising and bagging will be completed with commissioning to commence during Q3 2011. The front half of the plant - which includes calcination, sulphation, leaching and precipitation - is expected to be completed with commissioning to commence during Q4 2011.
The Project schedule has been pressured by a significant tightening of the skilled labour market in China's Jiangsu region, which has resulted in delays to construction and equipment delivery. As highlighted in Galaxy's March 2011 quarterly report, economic advancement in China's western provinces this year has resulted in a sharp reduction in skilled labour returning to east coast projects like Jiangsu post-Chinese New Year.
Labour shortages have also adversely impacted equipment and plant suppliers and their ability to deliver to the Jiangsu Project on time. In addition to labour constraints, some late changes to the plant design from the local approval process, an increase in plant power capacity and alterations to equipment delivery timeframes added pressure to the Jiangsu schedule and budget.
Project Review
The Company has been waiting for the Project's EPCM contractor, Hatch Engineering (Hatch), to complete a thorough review of the Project schedule and budget during the last few months.
Hatch's revised schedule and budget plan indicates that the back half of the Jiangsu plant will be completed with commissioning to commence during Q3 2011. Once operational, the back half of the plant (including purification) will produce some battery-grade and higher-grade lithium carbonate product for the market. Galaxy will purchase industrial grade lithium carbonate for feedstock until the remainder of the plant is commissioned.
As per the revised schedule, the remainder of the Jiangsu plant - including calcination, sulphation, leaching and precipitation - will be completed with commissioning to commence during Q4 2011.
Project Capital Forecast
The revised capital budget has been adjusted to A$99.8 million (RMB 689 million) from the previous estimate A$72.5m, representing a 36% increase in Australian dollar terms.
Most of the increase relates to a rise in material requirements (such as concrete, steel and process equipment) which have emerged as design details were finalised. The balance relates to the higher cost of materials and labour, as well as inflationary pressures and scope changes to the Project.
Comments
Mr Tan said the previous estimation of material quantities and design changes was the result of the Company's strategic decision to build the Jiangsu plant on an accelerated basis, paralleling both the design and construction process. In addition, the market demand for higher purity lithium (>99.5%) persuaded the company to add a secondary purification circuit to the original design.
Mr Tan said no further capital raising will be required to complete the construction and start up of Jiangsu as a contingency was incorporated in the previous A$120 million raising last quarter.
The Company has limited debt, having discharged the CDB/RZB senior loan facility and replaced it with a commercial fixed asset credit line with the local China Construction Bank. Loan drawings from this facility will fund the completion of the Jiangsu project.
We are on a clear path to completion and Galaxy will continue to work hard to ensure the Jiangsu project is completed within the revised timeframe and budget," said Mr Tan.
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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