Galaxy brings Goldman into its defence orbit [AFR Paywall], page-4

• by
  
• Sarah Thompson
  
• Anthony Macdonald
  
• Joyce Moullakis

The price divergence between global and local lithium stocks has spurred some Australian listed companies into action.

Street Talk understands one of those is Galaxy Resources which has brought Goldman Sachs into its tent as a defence adviser.

This column is not suggesting Galaxy has received an approach or is about to. But against the current backdrop, it makes sense for Galaxy to shore up its advisory team.

Certainly, shares in Australian lithium players haven't experienced the same boost as their global rivals in 2017, which in theory could make this market a happy hunting ground.

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Kidman Resources' market capitalisation is hovering at circa $213 million, making it easy prey for a large global predator. Galaxy's shares rallied as high as $2.46 in May this year and on Thursday were changing hands at $1.755, giving the company a market cap just shy of $700 million.


In March, Galaxy was among several Australian lithium aspirants named in a presentation released by US lithium giant Albemarle that ranked the asset quality of the world's lithium mines.

Albemarle and other majors, which have traditionally produced lithium from brines, have been prowling Western Australia for hard rock lithium assets they can take a stake in, or take out completely.

While brine-based lithium is cheaper to produce, sources have said Asian battery manufacturers have stated a preference for the higher quality lithium derived from hard rock assets, driving brine-based companies and upstream players to look at deals they would not have previously considered.

Chile's SQM acquired half of Kidman Resources' Earl Grey lithium project for $US110 million in July, and a number of Chinese lithium and chemicals companies have stakes in West Australian projects. Local miners have also talked of battery and car manufacturers being keen to secure supply.

Galaxy has the hard rock Mt Cattlin mine in WA but its wider geographic footprint and production diversification may broaden its appeal. It also has the James Bay hard rock development project in Canada and the Sal de Vida brine development project in Argentina.

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Galaxy's chairman Martin Rowley knows the Goldman resources team well. The investment bank is also the defence adviser for First Quantum, which Rowley co-founded and was a director of until earlier this year.