Galaxy Resources Limited (ASX:GXY) Secures Creat Group As Strategic Investor For Project Finance
Perth, Aug 25, 2009 AEST (ABN Newswire) - Emerging lithium producer, Galaxy Resources Limited (ASX:GXY) is pleased to announce that it has signed a binding Share Subscription and Debt Facility Agreement ("Agreement") for financing of its lithium project with Creat Group Co Ltd (Creat), a private sector investment company based in Beijing, Peoples Republic of China.
Under the terms of the Agreement, Creat will subscribe for 19.9% of Galaxy's expanded capital, at a 30 day volume weighted average market price (VWAP) on the date of initial non-binding MOU execution (10 August 2009, being A$0.88 per share). This placement will result in a raising of at least A$26 million for the Company. The Placement is conditional on Galaxy shareholder approval. An Extraordinary General Meeting will be held early October 2009.
In addition, Creat will provide Galaxy with 100% debt finance of approximately A$130 million for the purpose of developing both the Mt Cattlin Spodumene and Jiangsu Lithium Carbonate Projects. Creat will provide the loan over a period of 7 years at very attractive interest rates for Galaxy.
Under the Agreement, Creat has a "standstill" commitment as well as been granted one Non Executive Board member representation on the Galaxy Board.
Galaxy also intends to raise further equity by way of a placement to sophisticated and institutional investors to supplement the project debt finance. Whilst initially the Company has the excellent opportunity to use the Creat full debt facility to finance the project, the extra equity will be used to reduce debt to more conservative levels when the project meets steady state operations. Prior to this, the cash will act as a buffer for debt service, and to meet possible delays and overruns during construction, commissioning and start up of the project. Full details of the capital raising will be announced in the coming weeks.
One of the advantages of this deal is that no off take product is required by Creat itself and Galaxy is free to market its own product and thereby take advantage of the expected upward pressure on Lithium Carbonate prices.
Managing Director, Iggy Tan said the Agreement signed with Creat was a very positive development for Galaxy and its lithium project.
"We are thrilled to have attracted the interest of Creat as a strategic investor and to provide long term financing arrangements for our lithium project," said Mr Tan.
"The Company made a commitment to finalise the finance for the Project by the end of Quarter 3 (end Sept) and we are proud to have met this commitment, well ahead of schedule".
"This deal provides us with a bedrock Chinese shareholder and enables us to move ahead with the development of both the Mt Cattlin Spodumene and Jiangsu Lithium Carbonate Projects."
Mr Tan said that by raising additional equity through a placement Galaxy will minimise the risks during the most vulnerable phase of the project development.
"On achieving steady state positive cash flow of the project, the final target debt to equity ratio will be around 50-60% which is a very conservative risk profile," he said.
Chairman of Creat Group, Dr Yuewen Zheng said that Creat is very happy to invest in and be associated with a company that is close to production and will be a strategic world player in lithium supply.
"We look forward to mutually beneficial relationship with an obviously progressive company"
About Creat Group
Creat Group was founded in 1992 as a private enterprise and is based in Beijing, Peoples Republic of China. Its business interests include mineral resources, electronics, pharmaceuticals, food, real estate and finance (including three banks).
Creat Group's investments in the mineral resources industry include a zinc-lead mine, a molybdenum-tungsten mine and a gold mine in China as well as a lead and zinc mine in Tasmania, Australia. Now, the company is seeking to develop an international portfolio by investing in overseas resource based companies.
Creat Group is a leading member of ACFIC (All China Federation of Industry and Commerce) which acts as a facilitator for the management of the private sector of the Chinese economy.
The share capital and reserves of Creat Group are approximately USD 800 million and net profits last year were nearly USD 100 million. Creat Group has interests in agriculture, biotechnology, electrical switchgear manufacturing and minority interests in banking and property development.
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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