-- Successful $37.5 million raising strengthens balance sheet -- Global lithium demand continues strong growth -- Jiangsu ramp up continues as planned -- Focus on Sal de Vida as next stage of strategic development -- Retirement of US$4 million of Chinese bank debt -- Further $1.1 million in annual corporate cost reductions PERTH, Australia, Sept. 23, 2013 /CNW Telbec/ - Galaxy Resources Ltd (ASX: GXY) ("Galaxy" or "the Company") is pleased to provide an update on ongoing strategic initiatives, following the successful raising of $37.5 million under the recent entitlement offer. With the successful raising completed, Galaxy is now driving production levels and cost reduction initiatives at Jiangsu to achieve break-even cash flow status this year. The Company is now in a position to recommence detailed analysis of the best structure technically and financially to pursue the future development of the Sal de Vida brine project. With a strengthened balance sheet, the Company is also now in a much stronger financial position, allowing it to commence its debt reduction initiatives. "As the proud owners of the largest lithium carbonate production facility in the Asia Pacific region and one of the best low cost lithium and potash brine projects in South America, and with the balance sheet now strengthened Galaxy can continue it's progress towards becoming a leader in the rapidly growing global lithium industry. "Lithium demand growth remains robust, driven by strong fundamental demand. The consumer electronics sector continues to step up its demand, with each generation of mobile and portable devices having ever-larger energy storage capacities, while requiring ever-higher quantities and qualities of lithium battery materials. Technological developments in hybrid and electric vehicles continue to progress, along with accelerations in consumer adoption, as evidenced by significant sales growth from leading firms such as Tesla Motors with their Model S vehicle, as well as the market penetration of hybrid vehicles, which in 2012 attained a 3% share of all vehicles sold in the United States. Lithium market share of other end user applications such as power tool and energy storage continue to grow. Governments around the world are increasingly recognizing the environmental and economic advantages inherent in moving to electric vehicles for a larger share of private and public transportation needs, with continued rollout of preferred policies, such as in China, the recent renewal of the 'New Energy Vehicle' subsidy scheme for new purchases of electric vehicles," Mr Tse said. The Company confirms that production levels at the Jiangsu Lithium Carbonate Plant ("Jiangsu Plant") continuing to increase according to the recent timetable advised to the market, and the Company remains confident of achieving a cash flow break-even status this year. The Jiangsu Plant has a nameplate production capacity of 17,000 tonnes per annum of lithium carbonate, which at full production has the potential to generate annualized revenues in excess of US$100 million. Funds received from the entitlement offer have been used to commence certain debt reduction initiatives, with US$4 million of Chinese bank debt now repaid. Discussions will continue regarding possible further reductions in outstanding corporate liabilities, which is in line with the restructuring plan as previously agreed with the convertible bondholders. Galaxy's Corporate Adviser, Deutsche Bank, has been assisting the Company in a comprehensive strategic review to assess reductions in corporate and other overhead costs. Recently, the Company has implemented certain personnel retrenchment with a 50% reduction in corporate office headcount, which will reduce a further $1.1 million from its annualized corporate costs, as part of its ongoing focus to deliver a robust financial structure. Full redundancy entitlements have been met for departing staff. "We will concentrate on maintaining strong financial discipline and ensuring that cost control is a principal strategic objective. Sadly this means that we have had to make some head count reductions in the Perth office." Mr Tse said Galaxy will also now be looking at the optimal way of developing the Sal de Vida Lithium and Potash Brine Project ("Sal de Vida") which is situated in the northern part of Argentina - in a region also known as the Lithium Triangle, where Chile, Argentina and Bolivia meet, and which presently accounts for 60% of global lithium production. Sal de Vida has excellent potential as a low cost lithium and potash from brine facility. The Company has received strong feedback from both current large investors and new institutions joining the Company in the recent capital raising that, with strong and sustained, profitable operations at Jiangsu, the future development of the Sal de Vida Project is an important initiative strategically in the further value enhancement of Galaxy. Galaxy's Definitive Feasibility Study for Sal de Vida, completed in April this year, indicated that the project had potential annual revenues of ~US$215 million & operating cash flow before interest and tax of US$118 million. A pre-tax (Net Present Value (NPV) at a 10% discount rate, was estimated at US$645 million, representing an IRR of 23%, and a post-tax NPV at a 10% discount rate was estimated at US$380 million, representing an IRR of 19%. The Company will now focus on ensuring the right development structures and partners are in place for the Sal de Vida Project, and ensure that analysis of the project both technically and financially is disciplined in order to successfully take the project through to the construction and production phase. 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 a lithium producer listed on the Australian Securities Exchange (Code: GXY). Galaxy has built an advanced and fully-automated Lithium Carbonate production facility in Jiangsu Province, China ("Jiangsu Plant"). The Jiangsu Plant has a name-plate capacity of 17,000 tpa, is primarily focused on producing battery grade lithium carbonate, and is aiming to become the largest producer in the Asia Pacific region and the fourth largest in the world. Galaxy is currently advancing plans to develop the Sal de Vida Lithium and Potash Brine Project ("Sal de Vida") in Argentina, which is situated in the Lithium Triangle, a region where Chile, Argentina and Bolivia meet, and presently accounts for 60% of global lithium production. Sal de Vida has excellent promise as a future low cost production facility. The Company also owns the Mt Cattlin Spodumene Mine near Ravensthorpe in Western Australia and the James Bay Lithium Pegmatite Project in Quebec, Canada. Lithium compounds are used in the manufacture of ceramics, glass, electronics and are an essential ingredient in producing battery materials such as cathode and electrolyte, in the manufacture of long life lithium-ion batteries, which are used in consumer electronics, power tools, electric bikes, hybrid and electric vehicles. Anticipating the growing demand in coming years, Galaxy is positioning itself to become a major producer of lithium products. 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. SOURCE Galaxy Resources Limited Corporate Andrew Meloncelli Company Secretary Galaxy Resources Ltd Tel (office): +61 (0) 8 9215 1700 Email:email@example.com Media Contact Shane Murphy FTI Consulting Tel (office): +61 (0) 8 9485 8888 Tel (mobile): + 61 (0) 420 945 291 Email:firstname.lastname@example.org To view this news release in HTML formatting, please use the following URL: http://www.newswire.ca/en/releases/archive/September2013/22/c9502.html CO: Galaxy Resources Limited NI: MNG CHM -0- Sep/23/2013 00:02 GMT
Galaxy Strategy Update
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