PERTH (miningweekly.com) – The share price of lithium miner Galaxy Resources fell by nearly 12% on Thursday after the company announced that it would close the joint venture (JV) process for its Sal de Vida project, without a deal.
Through the second half of 2018 and early 2019, Galaxy conducted an evaluation of strategic JV opportunities to develop the Sal de Vida project, in Argentina.
However, the ASX-listed company on Thursday said that to date, it has not been able to agree on a transaction structure that would provide an ‘appropriate valuation basis’ which reflected the nature of the Sal de Vida asset, particularly given its $280-million deal with Korean major Posco over a package of tenements to the north of Salar del Hombre Muerto.
Galaxy said that negotiations for a possible JV transaction were ongoing with a shortlist of interested parties, however, the company has resolved to formally close the process.
Given the prevailing market sentiment and the current weakness in short-term contract prices for lithium chemicals, Galaxy opined that it was prudent to remain patient regarding any third-party transactions for the project, as the company remained confident in the underlying fundamentals of the lithium sector and the growth potential for the market, as well as the value of the asset.
An updated feasibility study previously estimated that the project would require a capital investment of $474-million to produce some 25 000 t/y of battery grade lithium carbonate and 95 000 t of potash over a mine life of 40 years.
The Sal de Vida project’s operating costs are forecast at $3 144/t during full production, with the mine expected to generate annual revenues of $360-million and earnings before interest, taxes, depreciation and amortisation of $270-million.
Galaxy said on Thursday that it was currently in its strongest financial position ever, with $285-million in cash and liquid assets, zero debt and a robust cash flow from its Mt Cattlin operation, in Western Australia.
With this strategic and financial flexibility, the company will continue to progress the development of Sal de Vida, to ensure that its value is unlocked and enhanced, the miner said.
Galaxy will undertake a testwork programme during 2019 focused on process optimisation and product qualification, and to test a number of alternative, unconventional processing technologies.
Work has also started on energy generation options assessing the preferred mix of energy sources, as well as exploring capital efficiencies in required infrastructure design and construction.
Galaxy shares were trading at a low of A$1.52 a share on Thursday, down from a high of A$1.78 a share.