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Main Forum•Galaxy has been approached by 5 Chinese banks to provide funds
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It looks like Australia's only ASX listed Lithium producer (and exporter) is on the money with their plans to value add by taking spodumene through to EV batteries.
According to overnight reports and GXY's ASX announcement (below) Galaxy has been approached by 5 Chinese banks to provide funds.
ASX ANNOUNCEMENT / MEDIA RELEASE
Galaxy Resources Limited (ASX: GXY, ?Galaxy?) is pleased to advise that the Company has received approaches by five major Chinese banks regarding funding of the Company?s proposed Lithium-Ion Battery Project (Battery Project) in China?s Jiangsu Province.
Galaxy said certain Chinese Banks have registered interest in providing the Company with indicative funding of up to US$100 million as a fixed asset loan facility and up to US$45 million in working capital. The required level of funding would be determined by the final project investment level, which was still being established.
The Chinese Government?s recently-endorsed 12th Five Year Plan (2011-2015) targeted renewable energy usage and a significant boost to electric vehicle ownership. The consequence of this plan will be a significant rise in lithium-ion battery demand. Galaxy?s Battery Project falls into a strategic mandate area for China and therefore is considered an ?encouraged? industry for the country.
Galaxy Resources Managing Director Iggy Tan said: ?The level of interest from local Chinese funding institutions was very encouraging. The Company will continue to progress the debt funding discussions with these particular Chinese funding institutions.?
?The completion and commissioning of our Jiangsu Lithium Carbonate Plant remains our priority, nonetheless, investigating funding options for the Battery Project is important preparation and continues the focus on our project pipeline. The Company will not consider making this decision until the Jiangsu Lithium Carbonate plant is completed.? Mr Tan said.Galaxy announced on 27 July 2011, it had secured a technology license with US-based lithium-ion battery producer K2 Energy Solutions Inc. Under the agreement, K2 Energy will provide Galaxy with battery technology expertise, licensing and commercial support during the construction and operation of the proposed Battery Project.
Battery Project Feasibility Study
Galaxy completed a feasibility study for the Battery Project in Q4 2010. The study found that production of 350,000 e-bike batteries per annum would generate expected annual revenue of A$68 million and average pre-tax net cash of A$30 million per annum. The non geared, net present value (NPV) of the project at a discount rate of 10% was estimated at A$187 million, with a project capital cost of around A$134 million. The internal rate of return (IRR) would be around 29%.
The battery project EPCM contractor, M+W Group (Germany) is currently finalising the detailed design and an Environmental Impact Assessment (EIA) Report for submission the Environmental Protection Board, Jiangsu Province.
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A great project well conceived and I'm sure will be well finished.
But I believe that there is no value in GXY as a share based on their model. It may be that Lithium based batteries extend their reach beyond what GXY are preposing but, as I read the numbers, there is little value in GXY.
GXY gave up their value when they gave away their shares.
Just my thoughts Alite
