blow out

UPDATE 2.30pm: Shares in lithium producer Galaxy Resources hit a new yearly low after the company announced cost blowouts and delays in the construction of its Jiangsu lithium carbonate project in China.

The company warned the budget for the plant had blown out by 36 per cent from $72.5 million to $99.8 million.

"Most of the increase relates to a rise in material requirements (such as concrete, steel and process equipment) which have emerged as design details were finalised," the company said in a statement.

"The balance relates to the higher cost of materials and labour, as well as inflationary pressures and scope changes to the project."

Galaxy also announced a revised schedule for construction with the back half of the plant now expected to be commissioned in the next quarter and the front half of the plant commissioned in the fourth quarter.

"The project schedule has been pressured by a significant tightening of the skilled labour market in China's Jiangsu region, which has resulted in delays to construction and equipment delivery," the company said.

"Labour shortages have also adversely impacted equipment and plant suppliers and their ability to deliver to the Jiangsu project on time.

"In addition to labour constraints, some late changes to the plant design from the local approval process, an increase in plant power capacity and alterations to equipment delivery timeframes added pressure to the Jiangsu schedule and budget."

However Galaxy said the plant was already 76 per cent complete and no extra capital would need to be raised to finish the project.

Galaxy managing director Iggy Tan said the plant was on a clear path to completion and the company would continue to work hard to ensure it was completed within the revised timeframe and budget.

Galaxy shares closed off three cents, or 4.35 per cent, at 66 cents after hitting a fresh 52-week low of 64.5 cents in earlier trade.


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