GALAXY GOING DOWNSTREAM, page-12

Absolutely agree. AFR article this morning puts it all perspective.

Punchline:
Share buyback is on the table
$50m - $60m for a 40% stake in a processing plant in china to tie up all of the spod produced at Mt C
Merger with Alliance on the table
SDV has received some strong offers, but didn't want to loose control of project
SDV technical optimisation of flow sheet looking very promising
Chinese processors are struggling to get money out of china to fulfil orders

AFR: 29/5/2017 - Galaxy to back lithium processing plant in China

Galaxy Resources is poised to make the leap fromlithium exporter to battery chemicals producer with a processing plantinvestment in China. The move will see spodumene concentrate from the company’s Mount Cattlin mine in Western Australia shipped to China for processing into either lithium carbonate or lithium hydroxide. It comes as Galaxy confirmed it had taken astrategic stake in another WA lithium exporter, Alliance Mineral Assets,because of Mount Cattlin’s limited mine life and the exploration potential associated with Alliance’s Bald Hill mine.

Galaxy Resources is poised to make the leap fromlithium exporter to battery chemicals producer with a processing plantinvestment in China.

Galaxychairman Martin Rowley also revealed the board continued to weigh up a sharebuyback as part of a strategy to counter short sellers and was in talks with three parties about the sale of a minority stake in the company’s $US474 million ($684.4 million) Sal de Vida lithium project in Argentina.

Oneof parties will make a site visit to the brine extraction project high in theAndes mountains next week in a twist to Galaxy cancelling JPMorgan’s 12-monthcampaign to find a buyer for a stake in Sal de Vida in April.

Mr Rowley said the move intolithium processing was “happening now” with debt-free Galaxy’s balance sheetbolstered by the final settlement in February of the $US280 million sale toKorean steelmaker POSCO of a package of tenements near Sal de Vida.

Galaxy is seeking a minoritystake in a processing plant alongside a Chinese partner after telling investorsat its annual general meeting in Perth on Tuesday there were signs of aturnaround in the bearish lithium market.

It estimates a 40 per cent stake in a processingplant with capacity to produce 25,000 tonnes a year of lithium carbonate orhydroxide will cost in the ballpark of $US50-$60 million.

Mr Rowley said it didn’t makesense to build a processing plant in WA at a much higher cost when MountCattlin’s remaining mine life was about five to six years.

“But we can participate in a new or existingfacility for that time and then work on getting a substitute [mine] asset fromsomewhere, which is the likes of Alliance,” he said.

“If Alliance turns out the waywe want, there is a possibility of some merger or something … we haven’tthought about it yet and we still have a lot of work to do.”

Galaxy is eyeing a 15-year minelife to underpin its operations in WA and chemical processing ambitions inChina after the early move on Alliance also put it front and centre for anyfloat of Cowan Lithium, a private company spun out of Alliance and owner oftenements adjacent to Bald Hill and other close to Mineral Resources’ MountMarion lithium mine.

Mr Rowley said the was“fantastic exploration upside” attached to Alliance’s Bald Hill operations.

“They [Alliance] have been on atight budget getting their plant up and operating and haven’t done anyexploring so their mine plan is deficient,” he said.

“They recognise that themselvesand they would agree. Having this money we can target some proper explorationto change mine plan to a longer life.”

It is understood a numberestablished battery chemicals makers in China, including existing customers,have approached Galaxy about taking a minority stake and locking in all of thecompany's spodumene concentrate production.

Mr Rowley said US PresidentDonald Trump's trade war had added to the current weakness in lithium markets,with customers in China telling him last week they were having trouble gettingmoney out and accessing US dollars.

The trade war has also stirredincreased US interest in Galaxy's James Bay project in Canada after Mr Trump'sdecision to declare lithium a strategic metal highlighted the dearth of miningand processing in North America.

Mr Rowley said Galaxy hadrejected "strong value" bids for a majority stake in Sal de Vida -where 15 hectares of trial extraction ponds are under construction - during theJPMorgan sale process because it didn't want to give up control of the project.

The co-founder of First QuantumMinerals, one of the world's largest copper producers, said he had beensurprised by some of the companies interested in the lithium sector and Sal deVida.

"Major mining companiesthat are not in lithium have been looking, oil and gas companies, iron orecompanies, copper companies," he said.