Galaxy looks to future after merger
Nick Evans - The West Australian on May 31, 2016, 2:00 am
Galaxy Resources’ Mt Cattlin lithium mine near Ravensthorpe.
Galaxy Resources chairman Martin Rowley says the lithium miner will waste no time in trying to capitalise on its $216 million tie-up with General Mining Corporation, saying the merged company will consider a Hong Kong listing and look to development options for its Canadian lithium projects.
Yesterday, Galaxy confirmed it had agreed to a friendly tie-up with its partner, offering 1.65 of its shares for each General Mining share on issue. That values General Mining’s half-share of the Mt Cattlin operation at $216 million, well above the $25 million the Michael Fotios-led General Mining agreed to last year for the right to return it to production.
Galaxy’s first attempt to develop Mt Cattlin, and an associated downstream lithium processing plant in China, ended in near disaster in 2013 when design and commissioning failures at the Chinese facility left Galaxy wallowing in debt and Mt Cattlin in mothballs.
General Mining has kicked in $7 million to restart the mine, but has not been required to make the remaining $18 million cash payments originally envisaged.
Mr Rowley said yesterday the eventual remerger of the asset was always part of Galaxy’s thinking, even before General Mining took control of Mt Cattlin’s recommissioning last year.
Mr Fotios ran Galaxy until 2008, and Mr Rowley said he wanted the dealmaker involved to return the asset to production as a pure-play lithium miner. Now the company has reached that stage, he said, a simplified structure would make Galaxy and Mt Cattlin more attractive to investors and well placed to cash in on the expected boom in lithium demand. It had near-term production from Mt Cattlin and earlier stage projects in Canada and South America.
The merger also leaves Galaxy as one of the few lithium miners not substantially owned by a downstream lithium player.
Mr Rowley, also an executive director of global base metals miner First Quantum, said he was open to the possibility of further deals.
“One of the things I’ve learned from building First Quantum up from zero to $15 billion is that there are opportunities, and you get lots of approaches. So we’ll keep that option open,” he said.
“I’ve been talking about whether we should have another listing in Hong Kong, specifically because the Chinese will be very interested in this structure. Whether we will do that I don’t know, but we’ll investigate it.”
Shares in Galaxy jumped 4.5¢ to 44¢, with General Mining up 9.5¢, or 15.5 per cent, to 71¢.
I think we will see a huge run on GXY shares and a 1.65 factor bigger run on GMM shares..;-)
GMM Price at posting:
71.0¢ Sentiment: Hold Disclosure: Held
