Hi usc. I'll have a very quick go at a detailed answer - but please DYOR.
1. 31st March GXY gets their half of 50% of the July's first shipment of 60kt at $600/t. Thats $9m. Same again expected July with first shipment. Then negotiate and get the advance on the next 120kt order at higher price. Not sure about GMM's money. They would have already paid the first of $1.5m quarterly instalments. OPEX is not an issue. GMM runs the mine. That is their responsibility - or at least there was only limited liability 50k per month referenced in one document. To be honest this has never been clearly set out and it seemed to suggest that this liability was only prior to the mine opening.
No CR required. This first shipment part payment should clear their debt, then they can bank the rest for SDV. Spodumene and shipment sizes will increase during that year. They said more than 120ktpa. I've seen reference to 150ktpa and had an email a couple of months ago from Nick@ Galaxy that suggested they were shooting at 240ktpa. A fair market price for spodumene right now (based on historic price of 0.6% of lithium) would be $1200/t at current $20k/t price of lithium. From memory - forgive me if I'm wrong - cost of spodumene production per ton was quoted as $40.
Remember we are not part-owned by Chinese companies giving us whatever they deem as fair - we are independent and can set our price without competition - for probably 1.5 years at least we have the non-cartel spodumene market to ourselves.
Between selling the Tantalum/Potash by-products and GMM's payments there is plenty of "petty cash" as well to take care of wages and office parties.
A year of shipments are lined up and will be paid in advance. Mitsubishi is the sales agent at commission. Next shipment is bigger and most probably at a reasonably higher price. Then the next shipment, the next, the next and then open up SDV.
2. No they're not. All NPVs I've seen are based on lower historic output of mine 800kt and $445/t - vs new 1200+kt and $600+ spodumene prices.
By the time spodumene price drops they will have SDV's Brine plant that would still be profitable at a fraction of lithium price. And maybe a string of other assets in tow. A recent Lithium expert Joe Lowry predicts that lithium price to remain strong out to 2023. Demand is likely to go vertical as well.
3. What debt? See 1.
4. Thats all Galaxy have to do now - plan each step. They aren't going to be telling us about it blow-by-blow. GMM runs the mine. Mitsubishi sells the spodumene. GXY will be running numbers, fielding calls from potential JVs. We will hear about it mid-year I reckon. Then get started building it this year with whatever plan is the fastest/most profitable. They should enough money to take on new finance without hitting us up. A JV probably doesn't get a look in unless they front up plant construction as their part of the deal. We'll see. No reason to doubt GXY's management up to this point. They are the most experienced lithium company in Australia with all the contacts you'd want.
Still only thinkin' 0.75?
GXY Price at posting:
24.0¢ Sentiment: Buy Disclosure: Held
