Galaxy Resources is poised to make the leap from lithium exporter to battery chemicals producer with a processing plant investment in China.
The move will see spodumene concentrate from the company’s Mount Cattlin mine in Western Australia shipped to China for processing into either lithium carbonate or lithium hydroxide.
Galaxy chairman Martin Rowley also revealed the board continued to weigh up a share buyback as part of astrategy to counter short sellersand was in talks with three parties about the sale of a minority stake in the company’s $US474 million ($684.4 million) Sal de Vida lithium project in Argentina.
One of parties will make a site visit to the brine extraction project high in the Andes mountains next week in a twist to Galaxy cancelling JPMorgan’s 12-month campaign to find a buyer for a stake in Sal de Vida in April.
Mr Rowley said the move into lithium processing was “happening now” with debt-free Galaxy’s balance sheet bolstered by the final settlement in February of the $US280 million sale to Korean steelmaker POSCO of a package of tenements near Sal de Vida.
Galaxy is seeking a minority stake in a processing plant alongside a Chinese partner after telling investors at its annual general meeting in Perth on Tuesday there were signs of a turnaround in the bearish lithium market.
It estimates a 40 per cent stake in a processing plant with capacity to produce 25,000 tonnes a year of lithium carbonate or hydroxide will cost in the ballpark of $US50-$60 million. Mr Rowley said it didn’t make sense to build a processing plant in WA at a much higher cost when Mount Cattlin’s remaining mine life was about five to six years.
“But we can participate in a new or existing facility for that time and then work on getting a substitute [mine] asset from somewhere, which is the likes of Alliance,” he said.
“If Alliance turns out the way we want, there is a possibility of some merger or something … we haven’t thought about it yet and we still have a lot of work to do.”
Galaxy is eyeing a 15-year mine life to underpin its operations in WA and chemical processing ambitions in China after the early move on Alliance also put it front and centre for any float of Cowan Lithium, a private company spun out of Alliance and owner of tenements adjacent to Bald Hill and other close to Mineral Resources’ Mount Marion lithium mine.
Mr Rowley said the was “fantastic exploration upside” attached to Alliance’s Bald Hill operations.
“They [Alliance] have been on a tight budget getting their plant up and operating and haven’t done any exploring so their mine plan is deficient,” he said.
“They recognise that themselves and they would agree. Having this money we can target some proper exploration to change mine plan to a longer life.”
It is understood a number established battery chemicals makers in China, including existing customers, have approached Galaxy about taking a minority stake and locking in all of the company's spodumene concentrate production.
Mr Rowley said US President Donald Trump's trade war had added to the current weakness in lithium markets, with customers in China telling him last week they were having trouble getting money out and accessing US dollars.
The trade war has also stirred increased US interest in Galaxy's James Bay project in Canada after Mr Trump's decision to declare lithium a strategic metal highlighted the dearth of mining and processing in North America.
Mr Rowley said Galaxy had rejected "strong value" bids for a majority stake in Sal de Vida - where 15 hectares of trial extraction ponds are under construction - during the JPMorgan sale process because it didn't want to give up control of the project.
The co-founder of First Quantum Minerals, one of the world's largest copper producers, said he had been surprised by some of thee companies interested in the lithium sector and Sal de Vida.
"Major mining companies that are not in lithium have been looking, oil and gas companies, iron ore companies, copper companies," he said.lithium have been looking, oil and gascompanies, iron ore companies, copper companies," he said.
