Galaxy Resources to Sell Argentina Tenements for US$280 Million

Australian lithium miner Galaxy Resources (ASX:GXY) has entered into a non-binding agreement with South Korea’s POSCO (NYSE:PKX) under which Galaxy will sell POSCO tenements in Argentina for cash consideration of US$280 million.

According to a Tuesday (May 29) press release, the land is in the northern area of Argentina’s giant Salar del Hombre Muerto salt flat. Galaxy plans to retain ownership of all the tenements it owns in the southern part of the region, where its Sal de Vida project is situated.

The company will use the proceeds from the deal to fund the development of Sal de Vida, with Chairman Martin Rowley stating, “this transaction with POSCO provides a substantial cash injection which underpins the development of Galaxy’s Sal de Vida brine project in the Catamarca Province of Argentina.”

“The development of Sal de Vida by Galaxy, as a 40-year mine life project producing the equivalent of 25ktpa of battery grade lithium carbonate, will be based on the 100 percent retained reserves and will not include any of the estimated resource contained in the tenements being sold to POSCO,” he added.

“This transaction allows Galaxy maximum flexibility with the parallel formal process being conducted with JP Morgan (NYSE:JPM).”

According to Galaxy, the lithium triangle, where Sal de Vida is located, is the source of 60 percent of global lithium production. Sal de Vida could generate total annual revenues of around US$354 million, scaling up to 25,000 tonnes per year of lithium carbonate and 95,000 tonnes of potassium chloride.

“We look forward to working closely with POSCO on our projects for long term mutual benefit,” said Rowley. He noted that the deal is “also strategically significant as it means there will now be two new lithium projects developed concurrently on the Salar del Hombre Muerto, with obvious benefits for all stakeholders in the region.”

The tenements POSCO will receive have a total JORC compliant resource of 2.54 million tonnes of lithium carbonate equivalent (LCE), including 1.58 million tonnes of LCE in the measured and indicated category.

Meanwhile, Galaxy’s Sal de Vida project has a JORC compliant measured and indicated resource of 4.09 million tonnes of LCE, plus reserves of 1.14 million tonnes of LCE.

The transaction is subject to approval from POSCO’s board, which is expected in Q3 2018. As of 11:49 a.m. EST on Tuesday (May 29), Galaxy was up 14.38 percent, trading at AU$3.42.

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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.