Ann: Annual Report 2018, page-20

In Q1 2018, Galaxy’s classification
on the ASX changed from a mining
exploration entity to a mining producing
entity. Last financial year I reported we
were in the strongest financial position
in the history of the Company and I am
proud to say that we remain uniquely
placed in our industry with an extremely
strong balance sheet with cash on
hand at the end of February of
US$273 million (after receipt of the
POSCO transaction proceeds) and
zero debt. This, combined with our
world class hard rock and brine lithium
assets in multiple locations globally,
gives us the flexibility to react to
dynamic market conditions quickly
and responsibly.
We remain absolutely committed to unlocking and
creating superior returns for shareholders from our
existing assets together with suitable acquisition
opportunities if and when they arise. We also remain
committed to upholding the highest standards of
operational excellence and corporate social responsibility
across our three global locations in Australia, Argentina
and Canada.

Throughout 2018, Galaxy successfully negotiated a
binding agreement with POSCO to sell a package of
tenements located on the northern area of the Salar del
Hombre Muerto in Argentina for a cash consideration
of US$280 million. In late November 2018, the final
tenement transfer deeds relating to this sale were
executed with POSCO. Transfer registration was finalized
in February 2019 and a total of US$271.6 million
(after deducting Argentinian withholding taxes) was
released to Galaxy. Galaxy and POSCO will now
co-operate to maximize potential development,
operational, infrastructure and logistical synergies.
The cash generated from this transaction is now available
for the continuing development of the SDV project.
A highly experienced Project Director has now been
appointed to lead the development of SDV. The SDV
project team has been further bolstered with the
appointment of several specialists in the fields of process
engineering, permitting and government and stakeholder
relations. Additionally, an independent process advisory
committee has been formed to oversee the current test
work program being conducted to establish the most
economical process route and ensure there is maximum
flexibility with the lithium chemicals that SDV produces.
This flexibility will allow the Company to adapt to
different technologies developed by the battery market
in order to meet the demands of the rapidly growing
electric vehicle (“EV” market.
We are still in discussion with a number of short listed
parties interested in participating in the development
of SDV. However, as stated in my Chairman’s letter to
shareholders last year, any third party investment decision
must recognize true value for SDV and any third party
participant must add something to the project (intangible
or otherwise) that can be readily translated into benefits
for Galaxy shareholders and other direct stakeholders.
Following a successful exploration program at James Bay,
this project now boasts a significant resource base of
40.3Mt @ 1.40% Li2O. Through to December 2018 the
site continued pre-work engineering by Hydro-Quebec
involving the design and construction of a powerline
and connection infrastructure for future power supply to
the project. Galaxy’s Environmental and Social Impact
Assessment (“ESIA” was submitted in October 2018.
We continue to work closely with the Cree Nation
of Eastmain, the Grand Council of the Cree and the
Cree Nation Government. A Pre-Development Agreement
(“PDA” has been signed with the Cree which is reflective
of the very strong and supportive relationship that has
been developed with the Cree.

The strategy for the James Bay project continues to be
the development of an upstream hard rock extraction
and processing facility together with a downstream
conversion plant in North America to produce battery
grade lithium carbonate and /or lithium hydroxide for
the global market.
The lithium business remains strong with a very exciting
future. The trend in vehicle electrification, together with
the exponential growth in battery storage, is expected
to drive significant growth in the demand for lithium
products for at least the next decade. Roskill Consulting
Group Limited (“Roskill” are forecasting that EV sales
worldwide will grow at a 32% compound annual growth
rate (“CAGR” through 2027 reaching 19.6 million
vehicles in annual sales volumes. Bloomberg New Energy
Finance predict EV sales to reach 60.2 million units in
2040, representing a penetration rate of 55% of all new
vehicles sold annually. Roskill expects the annual
demand for battery grade lithium compounds to reach
878,000 tonnes by 2027 representing a CAGR for the
10 years from 2017 of 15.3%. Demand from
EV batteries is expected to represent 64% of the total
consumption of lithium compounds by 2027.

Structural changes in the electrification of transportation
and continued policy and regulatory support is
accelerating investment all the way along the lithium
value chain. Significant barriers remain to new entry
into the battery grade lithium market. These include
major supply side challenges for new projects with long
planning, construction, commissioning and qualification
and the capital availability to finance these projects
(estimated at US$12 billion of investment required).
Galaxy has established strong relationships with reliable
customers for its Mt Cattlin production. These customers
have confirmed that Mt Cattlin material meets their
evolving performance and quality requirements and,
as they expand their conversion capacity, their technical
specifications will be based on continuing to receive
Mt Cattlin product. We remain very confident in the
lithium business model and the business case for the
development of both Sal de Vida and James Bay as
fully integrated projects with the aim that within the
next 5 years Galaxy will be producing 100,000 tonnes
per annum of lithium carbonate equivalent from our
existing projects alone.

Safety and sustainability are core values in our business.
We supply minerals that power innovation and the future.
It is both humbling and inspiring to know that for Galaxy
there is such potential to contribute in a meaningful way
to how the modern world uses energy. At all levels of our
organization there is a willingness to make purposeful
decisions through a lens focused on our wider impact.
The lives and wellbeing of Galaxy’s global workforce,
the acceptance of the ways in which we operate, our
broader contributions to the communities we operate in
and our role as a protector of the environments where our
operations are located underscore the vital importance
of our strong commitment to sustainable growth and
development for the Company into the future.
In January 2019, we welcomed a new Board
appointment, Mr. Alan Fitzpatrick whose experience
includes the role of Director Global Projects Engineering
and Construction for Newmont, Project Director on
Newmont’s US$1.8 Billion Batu Hijau project in
Indonesia, Project Manager for Phase III of BHP’s
Escondida copper project expansion and Principal
Consultant for the US$7 Billion Las Bambas project in
Peru. We are very excited to have been able to add his
45 years of technical experience in the mining industry to
what I consider is a Board with an excellent mix of skills,
acumen and experience.

In closing, I’d also like to extend my thanks and gratitude
to our senior executive management team who have
tirelessly worked to enhance our internal expertise
and establish the core team for the development and
implementation of Galaxy’s ongoing expansion strategy.
Our commitment to deliver operational excellence must be
in tandem with the efforts to build a culture that promotes
innovation, supports the safety and wellbeing of our
employees, partners and clients and brings value to the
regions in which we operate.
I have a strong sense of optimism and excitement about
the future. I am excited about our positive impact on
technological advancement and am inspired about our
potential game-changing impact on business innovation
and the opportunity to make a difference in the lives of
people around the world as we Power the Future.