Galaxy offloads Mt Cattlin project

Galaxy offloads Mt Cattlin project

Stuart McKinnon
February 9, 2015, 8:28 am
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Galaxy offloads Mt Cattlin project

UPDATE 1.30pm: General Mining will re-start Galaxy Resources' Mt Cattlin spodumene and tantalum project near Ravensthorpe under a three-year lease agreement.


Under the terms of the deal, General Mining will pay Galaxy a $2.5 million annual lease fee and a 10 per cent production royalty over three years.


It can elect to buy the project outright at any time during the three years, in exchange for $30 million and a 3 per cent net smelter royalty to Galaxy.


The company plans to begin tantalum production at Mt Cattlin within six months.


Galaxy chairman Martin Rowley said the agreement was in line with the company's new focus on reducing debt and realising value for its assets.


"As well as the sale of the Jiangsu plant in China, management has been looking closely at ways of reducing fixed and overhead costs in order to preserve its cash resources and further strengthen Galaxy's financial situation," he said.


"The proposed arrangement with General Mining at Mt Cattlin will result in these assets becoming a net cash generator instead of a loss to the company."


General Mining said the deal was in the interests of both companies because of the "deep background" that its director, Michael Fotios, had in developing and operating tantalum mines in WA and in the specialised area of marketing tantalum-based products.


"For disclosure purposes, Mr Fotios currently has a loan agreement in place to fund General Mining's ongoing operations," the company said in a statement.


Galaxy put Mt Cattlin on care and maintenance in July 2012 because of delays with the ramp-up of its lithium processing plant in China, which it has since agreed to sell.


Last week, Galaxy was forced to lower the asking price for the plant because Chinese buyer Sichuan Tianqi Lithium Industries baulked at the previously agreed $US230 million asking price. The new price has been wound back to $US173.2 million.


However shares in Galaxy have been suspended while it looks to provide further clarity with respect to required regulatory approvals and expected timeframes for the sale.


Galaxy shares last traded for 2.5 cents. General Mining shares soared 2.2 cents, or 733.33 per cent, to 2.5 cents at the close.