Further to my post above -
I said this was from Bell Potter but it was actually their summary of a Citibank research note. I have copied the first page/summary of the Citibank research note below for those that are interested.
With regard to the conversation in the posts above re funding of SDV, AT was quite clear at the AGM that GXY wanted to bring in a partner to SDV with brine processing experience. The Citibank note mentions this also "Galaxy highlighted that it is still looking for a strategic partner to develop and de-risk
the project further."
So I would think that the most likely scenario for funding the balance of the SDV development would be sale of part of the project to a partner. At least this is clearly what GXY are hoping to do.
Citibank summary:
Galaxy today announced execution of a non-binding agreement with POSCO to sell
northern tenements of Sal de Vida project for US$280m. The tenements represents
~28% (1.58Mt LCE) of the total JORC M&I resources of entire SDV project at
5.67Mt LCE.
The company will continue to develop southern tenements (4.09mt LCE of resource
and 1.14mt LCE of reserves). The proceeds from the deal will support the
development of SDV project (capex guidance of US$474m in recently updated
feasibility study). The company can further support SDV development from the
operating cash as Mt Cattlin generates ~U$100m of free cash every year.
The current transaction multiples from POSCO deal implies an exit valuation of
~US$1b or A$3.3/share for the SDV project on 100% basis vs our base case
valuation of U$590m or A$1.9/share. Our SDV valuation is based on just 1.14mt of
reserves in southern tenements so there is no impact to our base case valuation
from the deal.
Galaxy highlighted that it is still looking for a strategic partner to develop and de-risk
the project further. We see this deal as a good outcome for GXY allowing them to
largely fund SDV without compromising on the intrinsic value of the project. From an
industry perspective, this deal continues to highlight the supply build up as there is
likely to be two projects developed at SDV now.
We rate GXY Buy/High Risk with $4.30/share target price.
