Galaxy Resources to sell Jiangsu Lithium Carbonate Plant to Sichuan Tianqi
Galaxy Resources (ASX: GXY) should trade higher after signing of a binding Share
Purchase Agreement with Sichuan Tianqi Lithium Industries Inc. (SHE:
002466) for the sale of Galaxy's Jiangsu Lithium Carbonate Plant.
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 of US$108 million of Chinese bank debt.
The final enterprise value and therefore cash consideration is subject to any working capital adjustments at Galaxy Jiangsu between the date of execution of the SPA and the closing date.
Closing of the transaction will transform the balance sheet of Galaxy from a material negative working capital balance to a positive net cash balance of approximately A$62 million.
This will enabling the Company 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 also retains its Mt Cattlin operations in Western Australia and James Bay in Quebec.
Galaxy expects that completion of the SPA will take approximately 3 months as the transaction is subject to Galaxy and Tianqi shareholder approvals, as well as regulatory approvals in China for Tianqi.
Tianqi 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 is capitalised at around $75 million, so will be trading below cash backing with assets to boot after the transaction is finalised.
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