Banter and General Comments, page-331

Hey @Facthunter I think you're referring to the below comment by Alan which is regarding the $23 million which he points to being made of 2 items.

1. A tax installment.
2. A deferred settlement amount.

I also underlined the comment he made regarding the US$257 million expected to be released subject to the transfer deeds being received at Salta and Catamarca by the end of this month.

"Moving on to Sal de Vida. As you all know, we signed a binding agreement with POSCO to sell the tenement package for the northern area from USD 280 million. In early October, POSCO transferred $257 million of the $280 million into an escrow account at HSBC. These funds will be released to Galaxy once the tenement transfer deeds are received by the Salta and Catamarca mining courts, which is expected to be completed by the end of October.

The $23 million difference between the purchase consideration and the amount in the escrow account is made up of two items, firstly, a tax installment payable by Galaxy and the deferred settlement amount that will come to Galaxy, hopefully, by the end of November."

---snip---

Hey @ljcamp you're thinking about the same things I have been. Does it really make sense to have JP Morgan working this deal if it is possibly so easy?

Though I am sure they probably need someone crunching the numbers to find what we are looking for.

One thing that comes to mind is that of POSCO wanting to make a leap into lithium, and they are already purchasing supply from Mt Cattlin.

I am not sure if many of you remember back to when Galaxy disposed of the Jiangsu converter, but we did a similar thing. As in, Tianqi provided spodumene to process from Greenbushes.

And then, once that worked well, they ended up buying our converter for a deal that I have still to this day never understood how it was so good.

Where am I going?

Hold my hand and come with me.

A few times a day I will search for news articles about POSCO as once the transfer is completed, just like previously we heard from them before Galaxy said anything.

I stumbled across this article...

Posco acquires tenements in Argentina for lithium extraction

You can click on that title and should be able to see the entire article.

One thing I honed in on was this:

South Korean steel giant Posco signed a contract to acquire mining tenements in Argentina from Australian lithium miner Galaxy Resources for $280 million, the company said Monday.

The contract gives Posco full mining rights for an area of 17,500 hectares in a northern sector of the Salar del Hombre Muerto salt flat. As large as one-third of the city of Seoul, the land contains salt water capable of producing 25,000 metric tons of lithium a year, if extracted.

With the contract, Posco will be able to secure 55,000 metric tons of lithium a year starting from 2021, the company said.

---snip---

Notice how they are talking about the contract being for the northern tenements of Sal De Vida but then in that last paragraph the reporter advises that "With the contract" POSCO will be able to secure 55,000mt per year?

Unless maybe they are just adding that to their agreement with Pilbara under stage 2?

Or is it possibly poor translation?

I'm kinda getting away from where I mentioned Jiangsu and the try before you buy, and now we are shipping to POSCO to use supply from Mt Cattlin.

POSCO have some pretty impressive ambitions when it comes to lithium production, and they want to be able to be doing that on a scale similar to current majors by 2021.

What easier way could their be than to take over Galaxy for say for arguments sake AU$2.5 billion?

They get their AU$400 million back, which makes it only $2.1 billion, which in theory means it only costs them $5.12 per share.

But wait, there is more...

There is also the $60 million that Alan Rule mentions, which is a further discount on that buy price of AU$85 million which takes to purchase price down to $2 billion or costing them $4.87 a share.

But wait, there is more...

Mt Cattlin Yield Optimisation upgrades will have completed which increases the amount of supply being pumped out which further reduces the cost of taking over the company.

So everyone gets their roughly $6 per share, the transaction ends up costing POSCO less than $2 billion (or $4 something a share) and they end up with an already established lithium supplier as their new lithium division.

Would they keep the current team, I am not sure... How needed are they?

I'm sure management would also want to make sure that their options are included as part of the transaction so they are paid handsomely upon departure.

I've been asking myself if the above is reasonable...and also do-able.

Everytime I think about it, the answer is YES it's reasonable and do-able.

The institutions would probably take it, they make an instant profit, get their bonuses and if they want can go and invest in POSCO or end up with almost 3 times what they currently have to go play elsewhere.