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Galaxy capital raising


Highlights


    --  Galaxy to raise A$81 million (before costs) via equity
        placement to M&G Investments and China's ECE
    --  Placement of 162.4 million fully paid ordinary shares at A$0.50
        per share, at a 2% premium to the 5 day VWAP ($0.49) up to and
        including trading on 31 October 2012
    --  Proceeds to be used to reduce debt, including maturing Lithium
        One convertible notes, provide additional working capital and
        drive Sal de Vida development
    --  Sal de Vida equity component can be funded from these proceeds
        - assuming a positive DFS and investment decision
    --  Galaxy welcomes continued support from an existing shareholder
        and a new cornerstone investor
    --  Tranche 1 (A$15m) to M&G, unconditional and effective 9
        November 2012
    --  Tranche 2 (A$66.2m) to ECE, subject to due diligence, PRC ,
        FIRB and Galaxy shareholder approvals

PERTH, Australia, Nov. 5, 2012 /CNW Telbec/ - Galaxy Resources Ltd (ASX: GXY) 
("Galaxy" or"the Company") is pleased to announce that it is to raise A$81 
million (before costs) via a Placement ("Placement") to cornerstone investors 
M&G Investments ("M&G") and the East China Mineral Exploration & Development 
Bureau ("ECE").

Under a two-tranche raising, Galaxy will issue 162.4 million fully paid 
ordinary shares at a price of A$0.50 per share, at a 2% premium to the 5 day 
VWAP ($0.49) up to and including trading on 31 October 2012, the day prior to 
the Company requesting a trading halt of its shares.

For the Tranche 1, M&G will subscribe for 30 million Galaxy shares, for gross 
proceeds of A$15 million, increasing its interest in the Company to 19.3%.  
Tranche 1 will be completed under the Company's 15% capital issuance facility; 
will not require shareholder approval or be conditional on due diligence or 
upon the completion of the ECE placement.  The settlement and issue of 
Tranche 1 shares is expected to be completed by 9 November 2012.

Pursuant to an executed Non Binding Indicative Offer ("NBIO"), Tranche 2 
comprises the subscription for 132.4 million Galaxy shares by ECE, for gross 
proceeds of A$66.2 million.  Completion of Tranche 2 will give ECE an initial 
19.8% interest and reduce M&G's interest to 16.4%.  The success of the 
Tranche 2 placement is subject to due diligence by ECE, approval from the 
Jiangsu Provincial Development and Reform Commission and Jiangsu Provincial 
Department of Commerce, registration with China National Development and 
Reform Commission and PRC Ministry of Commerce, approval from the China State 
Administration of Foreign Exchange Jiangsu Branch, Australia's Foreign 
Investment Review Board (FIRB) and Galaxy ordinary shareholders. Once the 
condition precedents have been satisfied the settlement and issue of Tranche 2 
shares is expected to be completed during first quarter 2013. ECE will be 
offered one non-executive Board position following completion of Tranche 2.

The proceeds from the Placement will be used to reduce debt, including the 
maturing Lithium One convertible notes, complete the Definitive Feasibility 
Study ("DFS") and forthcoming pilot plant work at the Company's Sal de Vida 
Lithium Brine and Potash Project ("Sal de Vida") in Argentina; and to provide 
additional working capital.

Based on a positive DFS, the Company is targeting to fund the Sal de Vida 
project through a project debt finance facility of around 70% of the project 
capital cost. On completion of the Placement the Company's cash flow 
management strategy will be to limit the need for any further unnecessary 
dilution for ordinary shareholders.  Accordingly, until the expected Sal de 
Vida development decision is made in Q1, 2013, the Company will limit the 
amount of funds from the Placement applied towards permanent debt reduction in 
order to have available proceeds from the Placement for its equity share ( 
Galaxy 70%, Korean Consortium 30% ) of the development cost of Sal de Vida, if 
necessary.

M&G is an existing substantial shareholder in Galaxy and this further 
investment reflects its support for Galaxy's long term strategy and outlook, 
including the development of Sal de Vida.

ECE, which will become a new cornerstone investor in Galaxy, is a long 
standing state-owned mining exploration and development group, which seeks 
strategic resource investments in China and globally.  ECE already has 
investments in a number of ASX-listed companies and is subordinate to the 
Jiangsu provincial government where Galaxy's lithium carbonate plant is 
located.  ECE does not require any off take arrangements as condition of its 
investment as its focus is as a financial investor supporting Galaxy as it 
develops into a fully integrated global lithium company.

The Galaxy Board has taken this investment opportunity to ensure that the 
Company is well funded amid global credit tightening and an uncertain economic 
environment.

Galaxy Managing Director Iggy Tan said: "We have an opportunity not only to 
raise a substantial amount of money and strengthen our balance sheet 
considerably, but to bring in a new strategic, long term cornerstone investor. 
The fact that two strategic investors were prepared to invest at a slight 
premium to market is a solid indication of the future of our business, and 
validates our forecasts of a significant increase in demand for lithium 
products in the near term."

"In light of the current market outlook, we've taken the opportunity to raise 
money now to give us sufficient and certain funding to carry out our 
development plans. This financing will underpin the DFS and the accelerated 
development of Sal de Vida and give us the opportunity to significantly reduce 
our debt levels," Mr Tan said.

Galaxy expects that the Tranche 1 and 2 Placements will be the last major 
capital raising by the Company because, as mentioned above, the Company has an 
option to direct these placement funds towards Galaxy's equity component 
required for the development of Sal de Vida after a development decision is 
made. The balance of the development funds will likely come from Galaxy's 
joint venture partner and debt funding.

Use of Funds:

 _______________________________________________
|Use of Funds                            |Amount|
|________________________________________|______|
|Sal de Vida DFS & land purchase payments|A$15m |
|________________________________________|______|
|Re-pay expiring L1 convertible notes    | A$5m |
|________________________________________|______|
|Debt Reduction                          |A$31m |
|________________________________________|______|
|Corporate Working Capital               |A$15m |
|________________________________________|______|
|Jiangsu Working Capital Buffer          |A$15m |
|________________________________________|______|
|Total                                   |A$81m |
|________________________________________|______|

Expected Timetable

The expected timetable for the Placement is as follows:

 ___________________________________________________________
|Item                                    |  Expected Timing |
|________________________________________|__________________|
|Issue of Tranche 1 shares               |  9 November 2012 |
|________________________________________|__________________|
|Notice of Meeting for EGM dispatched    | 13 November 2012 |
|________________________________________|__________________|
|Shareholder approval at EGM of Tranche 2| 12 December 2012 |
|________________________________________|__________________|
|Issue of Tranche 2 shares               |Early January 2013|
|________________________________________|__________________|

About M&G Investments

M&G Investment Management Ltd. is a wholly owned subsidary of Prudential PLC. 
M&G Investment Management Ltd. is one of the largest fund managers in the 
United Kingdom. M&G is an existing substantial shareholder in Galaxy Resources 
Ltd.

About ECE

ECE, which was established in 1955, is a major Chinese mineral exploration, 
development and mining group, based in Nanjing. It has over 5,000 employees 
and is one of the few organisations authorised by the Chinese Government to 
carry out geological exploration and scientific research in major State 
classified projects. ECE has discovered more than 160 ore deposits in China 
with a potential value in excess of $10 billion. ECE also holds a significant 
interest in Australian rare earths company, Arafura Resources (ASX: ARU), 
Australian Niobium company, Globe Metals (ASX: GBE), Australian Vanadium 
company, TNG Limited (ASX:TNG) and AIM listed China Africa Resources.

About Galaxy (ASX: GXY)

Galaxy Resources Ltd ("Galaxy") is an Australian-based global lithium company 
with lithium production facilities, hard rock mines and brine assets in 
Australia, China, Canada and Argentina. The Company is an integrated lithium 
mining, chemicals and battery company listed on the Australian Securities 
Exchange (Code: GXY) and is a member of the S&P/ASX 300 Index.

Galaxy wholly owns the Mt Cattlin project near Ravensthorpe in Western 
Australia where it mines lithium pegmatite ore and processes it on site to 
produce a spodumene concentrate and tantalum by-product. At full capacity, 
Galaxy will process 137,000 tpa of spodumene concentrate which will feed the 
Company's wholly-owned Jiangsu Lithium Carbonate Plant in China's Jiangsu 
province. The Jiangsu Plant has commenced production and will produce 17,000 
tpa of battery grade lithium carbonate, the largest producer in the Asia 
Pacific region and the fourth largest in the world.

Galaxy is also advancing plans to develop the Sal de Vida (70%) lithium and 
potash brine project in Argentina situated in the lithium triangle (where 
Chile, Argentina and Bolivia meet) which is currently the source of 60% of 
global lithium production. Sal de Vida has excellent promise as a future low 
cost brine mine and lithium carbonate processing facility.  The Company also 
owns the James Bay (100%) Lithium Pegmatite Project in Quebec, Canada.

Lithium compounds are used in the manufacture of ceramics, glass, electronics 
and are an essential cathode material for long life lithium-ion batteries used 
to power e-bikes and hybrid and electric vehicles. Galaxy is bullish about the 
global lithium demand outlook and is positioning itself to achieve its goal of 
being involved in every step of the lithium supply chain.

Caution Regarding Forward Looking Information.

This document contains forward looking statements concerning Galaxy.

Forward-looking statements are not statements of historical fact and actual 
events and results may differ materially from those described in the forward 
looking statements as a result of a variety of risks, uncertainties and other 
factors.  Forward-looking statements are inherently subject to business, 
economic, competitive, political and social uncertainties and contingencies.  
Many factors could cause the Company's actual results to differ materially 
from those expressed or implied in any forward-looking information provided by 
the Company, or on behalf of, the Company. Such factors include, among other 
things, risks relating to additional funding requirements, metal prices, 
exploration, development and operating risks, competition, production risks, 
regulatory restrictions, including environmental regulation and liability and 
potential title disputes.

Forward looking statements in this document are based on Galaxy's beliefs, 
opinions and estimates of Galaxy as of the dates the forward looking 
statements are made, and no obligation is assumed to update forward looking 
statements if these beliefs, opinions and estimates should change or to 
reflect other future developments.

Not For Release in US

This announcement has been prepared for publication in Australia and may not 
be released in the U.S. This announcement does not constitute an offer of 
securities for sale in any jurisdiction, including the United States, and any 
securities described in this announcement may not be offered or sold in the 
United States absent registration or an exemption from registration under the 
United States Securities Act of 1933, as amended. Any public offering of 
securities to be made in the United States will be made by means of a 
prospectus that may be obtained from the issuer and that will contain detailed 
information about the company and management, as well as financial statements.

 

 

Corporate       Iggy Tan      Managing Director     Galaxy 
Resources Ltd  Tel (office): +61 (0)8 9215 1700    
Email:ir@galaxylithium.com   

  Media Contact         Jane Grieve FTI Consulting Tel (office): +61 
(0)8 9485 8888 Tel (mobile): + 61 (0)488 400 248 
Email: jane.grieve@fticonsulting.com     

SOURCE: Galaxy Resources Limited

To view this news release in HTML formatting, please use the following URL: 
http://www.newswire.ca/en/releases/archive/November2012/04/c4809.html

CO: Galaxy Resources Limited
NI: MNG PVT 

-0- Nov/04/2012 22:30 GMT

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