GXY (ASX) Banter and General Comments

Originally posted by Thesi: ↑

If Galaxy want to be in the driver's seat for pricing as far as I am concerned they need to get into downstream production of lithium chemicals.

As of Friday the value outside of Galaxy's ownership in A40 that we know of is ~$115 million. This does not take into account the various debt arrangements that A40 have structured.

We have seen that Jiangte took extra time to settle their buy in, and who knows if they can come up with further funds to keep their supply arrangement in place. That remains to be seen.

I am not sure if I would be keen to see that amount of dilution at this time when it probably isn't necessary, coupled with the debt that we would then become responsible for. No doubt also none of their shareholders would be open to coming across at the current value either.

I'm not saying I am right but we need to consider this pragmatically and logically in order to receive the best value for Galaxy holders and the investment we currently hold in that company.

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@Thesi can you please confirm the costs of buying a 50% stake in a 20ktpa spodumene converter provided by GXY during the AGM. Was it around US$40m?
One possibility in my mind if GXY was to offer a script offer for A40 would be the need for a significant shift in corporate expansion strategy.
In this hypothetical, it may be an option to use cash to purchase a direct 50% stake in the Jiangti Hydroxide converter. This would give GXY an economic interest in the Converter alongside a partner capable of operating the facility in China. IIRC that converter that A40 has been working on accessing usage of one train (10ktpa) has a total capacity of 30ktpa.
Perhaps a combination of equity post acquisition of around 10% of GXY for Jiangti (To cement the relationship) and US$30m cash could cover the cost of a 50% 30ktpa converter stake. This would enable GXY to fast track the transition from miner to integrated producer not dissimilar to the result of developing James Bay with a partner but at a substantially reduced capex. The Converter could ramp up to account for 270ktpa SC6 by 2021. Leaving enough spodumene supply to service much of the existing offtake commitments.
Obviously GXY would need to clear the A40 debt and allow for working capital + capex (fines circuit) for a combined total of around US$50m
SdV most likely requires a joint venture partner with expertise and any financing required for James Bay would be at a much more attractive rate if GXY is already operating as an integrated producer by that time.
In this hypothetical, GXYs cash spend could be kept below US$80m.
These are very rough numbers to illustrate a point so please don't put any faith in them.
AIMHO