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Old 05-06-2014, 08:51 AM
Sparty Sparty is offline
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Default GXY to have more cash than market cap

Things are looking a little brighter for ASX-listed Galaxy Resources (ASX:GXY), which last week signed a binding share purchase agreement (SPA) with Sichuan Tianqi Lithium Industries (SZSE:002466) for the purchase of Galaxy's Jiangsu lithium carbonate plant in China.

The transaction is valued at US$230 million, including cash considerations of $122 million and the assumption of $108 million in Chinese debt, and will leave embattled Galaxy Resources looking at a very different balance sheet when it closes. Specifically, with the closing of the SPA, Galaxy will see its balance sheet transition from material negative working capital to a "pro forma positive cash balance of approximately A$62 million." That positive cash will enable the company to focus its efforts on the Sal de Vida lithium brine and potash project in Argentina, an asset it views as core from a position of financial strength. Read more

GXY's market cap is $40m AUD today 6/05/2014. Having more cash than its market cap is likely a good thing plus its off shore project looks OK. I'll also have to think about the commentary re hard rock lithium especially in the light of Greenbush's situation.

Bottom line: I'm not sure that this will temper my discomfort with what has happened. As a long term investor I am saddened! Vertical integration seems like a great idea BUT

Will LYNAS be next?


Check out www.australian-lithium.com for more ASX listed Lithium plays.

 

Disclaimer: The author of this post, may or may not be a shareholder of any of the companies mentioned in this column. No company mentioned has sponsored or paid for this content. Comments on this forum should never be taken as investment advice.

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