GXY 0.00% $5.28 galaxy resources limited

SDV + Mt Cattlin v Pilgangoora, page-16

  1. M92
    392 Posts.
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    Thanks for posting. We need to clarify a few things regarding projections vs. facts.

    OPEX Cost
    The commonly quoted opex cost of US $207/t is an average based on a 36 year mine life (as per the PLS DFS, Table 4) and assumes steady state production. To think that this will be achieved from day one is a very enthusiastic assumption.

    GXY, with previous experience, know-how, and an existing production facilities are currently at US $389/t (granted full production capacity Mt Cattlin has not been reached yet, this will reduce in the coming quarters). Mica readings are now well below industry standards (1.53% in the February delivery), and the grade has been improved as evidenced by the new contract pricing arrangements and independent testing (5.71% in February, with a target of 6%). This has taken 3-6 months to achieve.

    CAPEX Cost
    The proposed 2 Mtpa plant of PLS will cost AUD $214M. Current cash at bank for PLS as per the latest Quarterly if $65M, with a further $26M of expenditure expexted in Q2 this year. This leaves PLS with ~AUD $40M by the end of H1 2017. This is a shortfall of ~ AUD $170M before the 2 Mtpa production plant can be built. As per the PLS DFS, a 4 Mtpa is out of the question until year three (2020/2021), and will require an additional AUD ~$128M.

    Timelines
    Mt. Cattlin was successfully commissioned in 3 months (October 2016 to December 2016), with ramp up still continuing into this quarter (~6 months). Again, this is an existing plant with operators who know what they are doing. As per the latest Quarterly Announcement from PLS, commissioning has slipped by 3 months and they estimate 3 months for commissioning a brand new production plant - Enthusiastic assumption based on the realities of operating. Again based on the Quarterly, ramp up appears to be going well into Q2 of 2018, which is confirmation by the PLS board themselves that the target production of 314 kT/pa will most likely not be achieved until towards the end of H1 2019.

    DSO/Mining License
    Should provide early cash flow, but when is the key question. The offtake is still conditional and is pending key approvals still. Mining License was due some time ago, and I am sure it will arrive soon.

    I am trying to point out that the transition from explorer to developer is inherently difficult as evidenced by the 100+ lithium companies on the ASX who are yet to transition from the explorer stage, and we now have real life experiences showing how the transition from developer to producer is no easier, even once you have full funding and a production plant in place.

    Happy to stand corrected on any of the above figures. They are off official company announcements.

    M92
 
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