Ann: 2019 Half Year Results Presentation, page-129

Galaxy Resources Ltd (GALXF) CEO Simon Hay on Q2 2019 Results - Earnings Call Transcript

Some parts below that I think are worth reading, big thanks to Reg Spencer for asking the questions I hoped would be asked.

RegSpencer

Okay. Last question from me is just interested in your comments around your assessment of downstream opportunities. Galaxy maybe been 18 months ago or 12 months ago that time were assessing the possibility of toll trading with some customers or new customers. Is that the kind of downstream structure that you would be looking at or might it be something a little bit more significant like an investment in a converter plant or a co-investment with a with current Chinese group? I was just wondering if you could maybe elaborate that on if you're able to.

SimonHay

Yes, sure. It's more likely the latter than the former. Toll trading is never off the agenda especially when this surplus converter capacity available in China. But we are more looking at taking a position in a converter either new or existing. And having some equity participation in that bringing spodumene supply or potentially brine product supply to that converter. So that's more what we're looking at.

RegSpencer

So that wouldn't involve any major expenditure on your part and any further impact on your cash balance and that's more the provision of feed stock for that converters is how you would gain your interest?

SimonHay

That's certainly one of the options we're looking at. Supplying spodumene in as an earning. There may be some investment but that would be some time away. It's not going to be this year. We are looking, as I said, earlier we're looking at progressing discussions in early Q4. So these things will take a period of time before we would be able to talk about any sort of expenditure. So very preliminary, too early to talk about any sort of investment.

RegSpencer

Okay and you may prefer not to comment on this bit, but with Alita looking like in it may be put on care and maintenance they're off taker at Jenks a special electric. My understanding is that they source their feedstock only from Bald Hill. Maybe I'm being presumptuous but in some of the downstream opportunities involving Alita's off take partner which now seems to be void of any feedstock.

SimonHay

Look, I wouldn't want to comment other than to say that's an obvious opportunity we would look at.

NickHerbert

Good morning, gents. Three questions for me, please. I might start on Alita and Bald Hill as well, thanks. Just interested in understanding what in that asset is of interest to you guys? Source exploration, normal blending and what you see in that opportunity that perhaps others haven't? And by extension, it's pretty sizable investment you've made now and that's sort of capital that's not available for developing Sal de Vida or James Bay. So I was just wondering if we take from that that Alita now ranks above those opportunities in a portfolio context. That's question one. Thanks.

SimonHay

Okay, Nick. Look, our original investment was around the resource. You quite right the exploration ground is seem to have some potential. Certainly the product quality is well recognized in the market as one of the best and the opportunities to blend do provide potential synergies. So that is of interest. Look, when you talk about our investment now in Alita, the AUD40 odd million that we've just recently bought, the debt with is much more around protecting our interest. We haven't yet made any decisions about what happens from here on.

So and the next steps for us to really understand that asset in great detail. So I think that is it's too early to say where it ranks in front of the other projects yet, just too early to answer.

HarshaBhatia

Thanks. And just quickly on Sal de Vida. This flow sheet collection later this year, does it involve like CapEx estimates and capacity adjustments as well or is it more around like timing and the particular process Sal de Vida takes? What's the scope of that event?

SimonHay

Yes. The first part is the technology and the flow sheet. So we will have indicative tasks at that stage. They will be relatively high level uncertainty figures of plus or minus 30%. We will move straight in from flow sheet selection into more definitive engineering estimates. We don't expect that to take too long maybe another quarter or so, but yes we will have indicative numbers in Q4. But and more solid numbers probably a quarter later.

RahulAnand

Okay and the second one is around cash receipts and cash flow from operations. So revenue was US$28 million circa and receipts from customers coming in at about US$19 million. Just wanted to touch base and see if there have been delays in payments there? Or is that sort of normal behavior? And nothing to worry about there.

AlanRule

Rahul that was a shipment about a week before the end of the half-year. So by the time we lodged all of the documents and payments came in, that money came in the first week of July.

RahulAnand

Got you, okay. And then finally once you again, Simon, the marketing arrangement that currently exists. I mean you pay a percentage on your achieved prices and one would think that you get some form of benefit in terms of market access. Is that still an economic decision in your eyes and you're still gaining those benefits in this market?

SimonHay

It's a good question, Rahul. Yes, we're in discussions with the marking agent on that as far as I would say at this stage.

RahulAnand

Okay, so just under review.

SimonHay

Yes.

AdamRitter

Okay, thanks. And what's your sense on cash cost of some of these marginal converters. And then are you're getting the sense that people over there are starting to shut down with prices down at these levels or cover that.

SimonHay

Look, it's pretty obvious that the converters are also under pressure. So as I said, they're not fully utilized and where their profit margins are at this stage, we don't have a complete road through. But it's very; very clear they were very forward in their discussions this week about the pressures they are under as well.