Galaxy Resources last week signed a binding share purchase agreement with Sichuan Tianqi Industries for the sale of 100% of the Jiangsu Lithium Carbonate Plant. The agreement will be effected by way of the sale of Galaxy’s wholly-owned Hong Kong subsidiary Galaxy Lithium International Ltd.

The basis of the transaction is an enterprise value of US$230 million for Galaxy Lithium with the consideration comprising cash payable to Galaxy of US$122 million, together with the assumption by Tianqi of the entire US$108 million of Chinese bank debt at the Galaxy Jiangsu level.

Closing of the transaction will radically change the balance sheet of Galaxy from a material negative working capital balance to a pro forma net cash balance of about Aus$62 million. This will enable Galaxy to focus on the development of its Sal de Vida lithium brine and potash project in Argentina as its core asset from a position of financial strength.

Galaxy expects completion of the transaction will take about three months as it is subject to Galaxy and Tianqi shareholder approvals as well as regulatory approvals in China for Tianqi.

Tianqi holds a significant range of assets in the lithium sector. It is a leading producer of lithium products in China and has also recently acquired a majority interest in Talison Lithium, which owns the Greenbushes lithium operations in Western Australia.

Galaxy’s managing director Anthony Tse says the transaction is a major step in the financial transformation of the company. “Since becoming responsible for the management of the company, the new Board and executive management team at Galaxy have been entirely focused on the best ways to reduce the interest bearing debt of the company without further diluting shareholders’ equity. Completion of the sale of the Jiangsu project will leave the company in a strong net positive cash position with an increase in shareholders’ equity. This will leave the company in a very strong position to extract the maximum value from its remaining portfolio of lithium assets, in particular the Sal de Vida lithium brine project in Argentina.

“Following divestment of the Jiangsu plant, the company will continue to retain significant exposure to the lithium sector through the Sal de Vida project and with Mt Cattlin in Western Australia and James Bay in Quebec.”
www.galaxylithium.com

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