Quarterly Activities and Cashflow Report - June 2012
Quarterly Activities and Cashflow Report - June 2012
Perth, July 31, 2012 AEST (ABN Newswire) - Galaxy Resources Limited (ASX:GXY) is pleased to provide the Quarterly Activities and Cashflow Report for June 2012.

Significant Events

- Merger with Lithium One Inc successfully completed to create a global lithium company

- First lithium carbonate produced at Jiangsu Plant in China

- Jiangsu achieves battery grade lithium carbonate across all grade specifications

- Expect operational cashflows to be positive in Q1, 2013

- Galaxy commences lithium carbonate product sales to technical grade customers during the Quarter

- Temporary halt to Mt Cattlin operations due to 12 months of spodumene stock build up ahead of Jiangsu plant

- Halt at Mt Cattlin will save A$4 million per month of cash burn

- Ramp-up revenues at Jiangsu will not be affected

- Additional A$2.25 million raised through Share Purchase Plan

- Galaxy welcomed global lithium product price increases

- Company cash position (unaudited) A$17.4 million at end-June

- Galaxy has undertakings for additional working capital facilities from several PRC banks for A$45 million during the Jiangsu ramp-up

Corporate Division

Merger with Lithium One Completed

Galaxy successfully completed its merger with Canada's Lithium One Inc in July 2012, subsequent to the end of the Quarter, after Lithium One and Galaxy shareholders granted approval in June 2012.

Lithium One shares have subsequently been delisted from the TSX and the transfer of Galaxy shares to eligible Lithium One shareholders completed.

Through the merger, Galaxy now has access to a global lithium resource base with assets in four continents. The merger has been strategic to Galaxy's goal of building its lithium resource footprint and furthering its downstream development opportunities. It also represents a significant step for Galaxy in realising its overall vision of becoming a vertically integrated global lithium company.

Post-merger, Galaxy's asset portfolio now includes the Sal de Vida lithium and potash brine project (70%) in Argentina and the James Bay lithium pegmatite project in Quebec (100%).

The flagship Sal de Vida brine project is located in the lithium triangle, which is where Chile, Argentina and Bolivia meet and currently contains the source of 60% of global lithium production. Lithium is found in the brine (salty water) below the dry lake beds (called salars) at high altitude. The existing Sal de Vida team will continue to make progress on a project Definitive Feasibility Study (DFS) for Sal de Vida.

Galaxy now owns 100% of the James Bay lithium pegmatite project in Quebec, having previously owned 20% under a farm-in arrangement with Lithium One. James Bay is an extensive high-grade spodumene pegmatite deposit that occurs at surface and has a NI 43-101 compliant resource of 22.2 Mt at 1.28% Li2O.

Following the merger, Galaxy's global partners are now represented within the top three major lithium battery producing countries in the world, China, Japan and Korea ("Lithium Battery Producing Triangle"). Its partners include the top 13 cathode producers in China, Mitsubishi Corporation (Japan)(TYO:8058), Korean Resources Corporation (Korea), LG International (Korea)(KRX:001120) and GS Caltex (Korea).

Together with its processing assets in China, Galaxy now has ample resources to continue to grow its lithium business and drive the long term value of the Company. Galaxy's proven expertise across project development and lithium mining, processing and marketing will allow it to fast track development of Sal de Vida.

Jiangsu Cash Flow Positive in Q1 2013

During the Quarter, Galaxy continued to sell lithium carbonate product from the Jiangsu Plant to technical grade customers. Sales of battery grade lithium carbonate will commence when samples are qualified under long term offtake arrangements. Increased sales of the final lithium carbonate product will boost revenue flows and the expectation is that positive operational cash flows will be achieved during the first quarter of 2013. The Company has undertakings for working capital facilities from several PRC banks to the total of A$45 million for the Jiangsu ramp-up.

The Company's cash position (unaudited) at the end of June 2012 was A$17.4 million.

Share Purchase Plan Completed

Galaxy successfully raised A$2.25 million via a Share Purchase Plan ("SPP"), which was launched in conjunction with the A$30 million Placement to support the Company's merger with Lithium One. The Galaxy Board acknowledged the support of its shareholders in the Share Purchase Plan.

Temporary Halt to Mt Cattlin Operations

Subsequent to the Quarter, Galaxy advised that it would be temporarily halting operations at its Mt Cattlin project in Western Australia.

Recently improved spodumene production rates at the Mt Cattlin mine and processing plant, coupled with the Jiangsu Plant being in ramp-up phase, has resulted in a build-up of internal spodumene inventory levels to approximately 12 months' supply of feedstock for the Jiangsu Plant.

The temporary halt to operations at Mt Cattlin will allow for reduction of spodumene stocks to more manageable levels.

In addition, the temporary halt, commencing end-July 2012, will result in a reduction in group cash outlays of A$4 million per month. Ramp-up revenues at Jiangsu will not be affected by the pause in operations at Mt Cattlin.

Galaxy believes a pause in operations at Mt Cattlin is the best and most financially prudent way to address this imbalance and difference in start-up profiles of the Mt Cattlin and Jiangsu operations.

Now that the Company is producing final lithium carbonate at Jiangsu, it will not sell any more of its spodumene concentrate to third party competitors, preferring to command a price premium by converting all of its spodumene to lithium carbonate at Jiangsu and to maintain Mt Cattlin production as a fully-integrated feedstock for Jiangsu, as per the Company's strategy. Selling spodumene to competitors who convert to lithium carbonate and then compete with Galaxy's final product is not desired.

To view the complete Galaxy Resources quarterly activities and cashflow report, please click the link below:

About Galaxy Resources Limited

Galaxy Resources ASX:GXYGalaxy Resources Limited (ASX:GXY) (OTCMKTS:GALXF) is an international S&P / ASX 200 Index company with lithium production facilities, hard rock mines and brine assets in Australia, Canada and Argentina. It wholly owns and operates the Mt Cattlin mine in Ravensthorpe Western Australia, which is currently producing spodumene and tantalum concentrate, and the James Bay lithium pegmatite project in Quebec, Canada.

Galaxy is advancing plans to develop the Sal de Vida 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 potential as a low cost brine-based lithium carbonate production facility.

Lithium compounds are used in the manufacture of ceramics, glass, and consumer electronics and are an essential cathode material for long life lithium-ion batteries used in hybrid and electric vehicles, as well as mass energy storage systems. Galaxy is bullish about the global lithium demand outlook and is aiming to become a major producer of lithium products.



Galaxy Resources Limited
T: +61-8-9215-1700
F: +61-8-9215-1799
WWW: www.galaxyresources.com.au

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