Robbo65,I will give a quick reply now.My preference would be to...

Robbo65,

I will give a quick reply now.

My preference would be to get the mine up and running as quick as possible and try and avoid as much dilution as possible.

Consequently, my preference would be for Mt Cattlin to be mined first and processed somewhere else at an existing plant if possible. (It may not be possible to do so). If a plant was to be constructed at Mt Cattlin it could be done so using the cash flow generated by the mine operation with the economic justifiation for the plant based on the economic savings the processing plant will generate.

This avoids the up front dilution to the extent Mt Cattlin requires additional shareholders funds to construct the plant.

The prefeasibilty study indicates that "Mining is assumed to be by contract". Therefore, only the A$6 million for "Mining Prestrip and other (provisional)" would be required of the estimated A$40 million capital included in the Prefeasbility study.

If Galaxy were to construct both the mine and plant upfront using bank finance, it would need to:
1. complete a bankable feasibilty study:
2. upgrade the resource;
3. Negotiate offtake agreements covering a considerably period after commencement of the mine (3,5 or 10 years); and
4. Negotiate Finance;
5. Finalise a construction contract for construction of the plant.

Even after it has finalised these agreements, its financial return will still be subject to significant risk based on the commodities prices of tantalum and spodmuene and the terms of the offtake agreement.


In contrast, a toll treatment agreement with an existing mine, needs only GXY to negotiate an offtake agreement and a toll treatment agreement covering a startup period (say 1,2 or 3 years). Based on 1MTPA and the above prices, GXY would generate between A$90 and A$135M operating surplus over the first three years if it could negotiate a toll treatment price of only A$32.93.

The toll treatment price may not be at that price and therefore the surplus may not be that amount. However, it is certainly worth considering.

GXY would also have to allow for tranport costs of the ore from Mt Cattlin to any existing processing plant. Greenbushes is about 200 kms from MtCattlin. I still think the operating surplus for MT Cattlin will be high after taking this into account. (For example I have seen an analysis report for rail and shipping FMG iron ore from the Pilbara to the coast as equal to A$5.20 per tonne, well within Mt Cattlin's operating surplus.

Finally, Mt Cattlin gets 85% of its expected revenue from Spodumene with only 15% for tantalum. Over the last three years I have invested in another company, Gippsland (GIP), which has a predominantly tantalum, tin and felspar mine located in Egypt. It has only recently negotiated an offtake agreement for the Tantalum and will be finalising its financing arrangements in the new year. However, it has been a very frustrating three years with the original Bankable Feasibilty study been completed in 2004, revised again in 2007. Over that period they nhave had different financers who appeared like they would finance the project only for things to continue to drag on. I would hate to see the same thing happen to Mt Cattlin. If it is an option, then the best way I can see to avoid these delays is to first consider a toll treatment agreement and then used the cash flows from this operation to fund any plant.

Regards

SP