Galaxy Resources Limited (ASX:GXY) Receives Debt Funding Interest For Battery Project
Perth, Aug 31, 2011 AEST (ABN Newswire) - Galaxy Resources Limited (
ASX:GXY) (PINK:GALXF) is pleased to advise that the Company has received approaches by five major Chinese banks regarding funding of the Company's proposed Lithium-Ion Battery Project (Battery Project) in China's Jiangsu Province.
Galaxy said certain Chinese Banks have registered interest in providing the Company with indicative funding of up to US$100 million as a fixed asset loan facility and up to US$45 million in working capital. The required level of funding would be determined by the final project investment level, which was still being established.
The Chinese Government's recently-endorsed 12th Five Year Plan (2011-2015) targeted renewable energy usage and a significant boost to electric vehicle ownership. The consequence of this plan will be a significant rise in lithium-ion battery demand. Galaxy's Battery Project falls into a strategic mandate area for China and therefore is considered an "encouraged" industry for the country.
Galaxy Resources Managing Director Iggy Tan said: "The level of interest from local Chinese funding institutions was very encouraging. The Company will continue to progress the debt funding discussions with these particular Chinese funding institutions."
"The completion and commissioning of our Jiangsu Lithium Carbonate Plant remains our priority, nonetheless, investigating funding options for the Battery Project is important preparation and continues the focus on our project pipeline. The Company will not consider making this decision until the Jiangsu Lithium Carbonate plant is completed." Mr Tan said.
Galaxy announced on 27 July 2011, it had secured a technology license with US-based lithium-ion battery producer K2 Energy Solutions Inc. Under the agreement, K2 Energy will provide Galaxy with battery technology expertise, licensing and commercial support during the construction and operation of the proposed Battery Project.
Battery Project Feasibility Study
Galaxy completed a feasibility study for the Battery Project in Q4 2010. The study found that production of 350,000 e-bike batteries per annum would generate expected annual revenue of A$68 million and average pre-tax net cash of A$30 million per annum. The non geared, net present value (NPV) of the project at a discount rate of 10% was estimated at A$187 million, with a project capital cost of around A$134 million. The internal rate of return (IRR) would be around 29%.
The battery project EPCM contractor, M+W Group (Germany) is currently finalising the detailed design and an Environmental Impact Assessment (EIA) Report for submission the Environmental Protection Board, Jiangsu Province. The factory lay-out and master plan has also been finalized, which will be included in the Safety Impact Assessment (SIA) and Project Approval (PA) processes.
Company Cash Position
Galaxy said it had re-paid and refinanced its previous CDB/RZB loan into various fixed assets and working capital credit lines with China Construction Bank of at least US$60 million. The credit facilities are in various stages of final approval by CCB, with US$37 million already approved. The capital requirements for the completion of the Jiangsu Lithium Carbonate Plant - including start up costs - will be drawn from the various credit facilities. The benefit of these new loan facilities is that interest is only charged on outstanding draw downs and no facility security is required.
The Company's current cash position is A$54 million which will be used to fund Mt Cattlin operations, Jiangsu operations and corporate expenses during the ramp-up phase.
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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