Fair question, I am sure he doesn't lay awake at night thinking...

Fair question, I am sure he doesn't lay awake at night thinking about me... as much as I did last night reading till almost 2am... but I was thinking only of the company... I promise!

The evident tax losses open a door to a thought I have been having recently, when it comes to the value of an acquisition. Let me explain what I am thinking, and hopefully there are others that can plug in a bit of their knowledge.

From what we know, Galaxy considered acquiring Altura which didn't eventuate.

It wasn't until Altura did their announcement back on the 5th of March that anyone expected the company might continue operating. - But why?

If we go back to Galaxy when it came to an arrangement with General Mining, whilst Galaxy had sold the Jiangsu converter to Tianqi the company carried losses not to dissimilar to what they are today. The benefit that Galaxy had was they had Mt Cattlin, a mine that could produce, so any future revenue could be offset by the losses it carried. - Basically, tax free money.

Seeing those losses in the Galaxy report got me excited... Whilst I was bitch'n and moaning about the company selling spodumene at a loss, I wasn't considering a few other factors which rightfully was put to me on this forum. That being the company showed that they are a good employer that continued operations during both a depressed lithium market, and also continued to support their customers. It does make for a good corporate citizen, particularly if you're wanting to expand into new locations such as Argentina and Canada.

But what I wanted to see was a tangible benefit... in which case coming across that ~AU$260 million of losses was it. It has taught me to dig deeper in future.... I cannot believe that I didn't see this value back when the 2019 annual report was released, but historically have seen the value in carried forward losses.

Simplistically the benefit of the losses, is that any production from Mt Cattlin, minus the costs of Australian operations can then be offset by that income and doesn't require company tax of 30% to be paid on it.

The report also tells us that end of 2020CY the company has ~AU$280 million in cash & financial assets.

Combined with the losses, gives a total of ~AU$540 million (~US$420 million)

The company report also tells us something else which is of value when it comes to the treatment of those losses.

Pg 92: The Company and the Australian subsidiary, Galaxy Lithium Australia Limited, formed a tax consolidated group on 1 July 2008 under Australian taxation laws, whereby all entities within the tax consolidated group are taxed as a single entity


As it says... the company and all its entities are treated as one and taxation wise if one of those entities had a loss.... that it can be used to offset income from another part of the group.

What does this have to do with Altura?



Altura has a loss of AU$113 million which from what I can tell they cannot use, and depending on the plan they present to the market if they return, I don't see how their market cap of $200 million can sustain.

The company is currently going through the process of a DOCA, similar to what Alita went through when they went under, and those losses cannot be distributed or sold (kinda) they are only of value to Altura. Though, that doesn't mean that an arrangement cannot be made to acquire the company, with those losses and in Galaxy's case, take the total, cash, assets, and losses to ~AU$653 million.

Forgetting that little brain fart of Altura, with current losses at ~US$200 million, with lithium pricing around $600 to $700 now, which most are expecting will continue to rise if we forget about other cost of the company outside of Mt Cattlin the future might look a little like this... US$ used.

Sell price: $700
Cost of production etc: $400
Profit: $300
Tonnes produced per annum: 200,000tpa

The unapplied losses currently held by Galaxy of US$200 million would take 3 years and 3 months to use up. If you then extrapolate on that by applying costs to run Australian operations, there is a chance that the losses might exceed the life of Mt Cattlin, in which case Galaxy wouldn't need to pick up those additional US$146 million from Altura.

The past 2 years of losses have provided a financial reset for Galaxy.

I wonder if analysts are considering the value of those losses or only looking at the AU$280 million in cash? - Anyone able to see that information in any of the reporting being issued?