IT’S been a tumultuous period for lithium, with the once-highly sought-after commodity losing its lustre amid uncertainty within the Chinese economy.
But despite the challenges faced by the global lithium market, Galaxy Resources Ltd has continued its strategy to become a leading global supplier of high-quality lithium products.
The company’s latest report states that Galaxy is in fact in the strongest financial position in its history.
The balance sheet remains robust, with cash and financial assets of US$143.2m and zero debt as at the start of the year.
Chairman Martin Rowley said this financial position, together with diversity of global assets, continues to uniquely position the miner in the industry to react promptly to evolving global market conditions. “A key focus remains upholding the highest standards of operational excellence and sustainability across our three global locations in Australia, Argentina and Canada,” he said.
“We also continue to consider suitable opportunities as they arise in order to complement and unlock shareholder returns from our existing world class brine and hard rock assets.”
The lithium market
2019 was a very challenging year for the lithium market.
Changes in the subsidy regime in China, together with oversupply in the market, resulted in a significant decline in Chinese domestic pricing for lithium carbonate and hydroxide, and in turn spodumene. The demand for lithium raw materials from chemical conversion plants has not increased since 2018, while supply has increased due to new entrants to the industry.
In response a number of lithium miners curtailed production plans and deferred or cancelled various expansion plans during the year. But Mr Rowley said that as an established responsible producer, Galaxy sees this time as a positive re-adjustment in the market.
“We remain focused on maintaining low production costs to ensure sustainable cashflow from operations are generated despite the current lower pricing environment,” he said.
“To adapt to current market conditions, Galaxy will implement lower operational settings in 2020 to prioritise value over volume. “Notwithstanding the market challenges of the year, our view of the underlying fundamentals and outlook for the lithium market has not changed.
“We remain confident about, and committed to, the future of the industry.”
Mr Rowley said it was inevitable that the use of electric vehicles, and therefore the use of lithium batteries, would continue to grow.
“Indeed, with the acceptance of climate change as a reality, we particularly consider the rapid electrification of the motor industry as now essential,” he said.
“With the requirement for significant demand growth to be met, increased supply from well-established, reliable and financially secure companies such as Galaxy will be necessary.”
Global assets
Throughout the year, advancement of Galaxy’s two world-class development assets, the Sal de Vida brine project in Argentina and the James Bay spodumene project in Canada, continued.
Sal de Vida is globally recognised as one of the world’s largest and highest quality, undeveloped brine deposits.
With significant technical advancements and a staged development approach, Galaxy is well positioned to substantially fund stage one of development at Sal de Vida and bring the project online during a period of double-digit lithium demand growth.
James Bay remains a strategically located project with current development activity aimed at defining and optimising an upstream mine and concentrator operation with an integrated downstream conversion facility.
Mt Cattlin
At a more local level, Galaxy fully owns the Mt Cattlin spodumene project, located two kilometres north of the town of Ravensthorpe in WA.
Galaxy is currently mining pegmatite ore at Mt Cattlin and processes on site to produce a spodumene concentrate and a tantalum by-product.
At full capacity, ore can be processed at a rate of 1.6mtpa, with lithium oxide concentrate production of 180,000 tpa.
Galaxy Resources holds a series of tenements surrounding and including the mining lease M74/244, which contains the majority of the spodumene (LiAlSi2O6) resource identified to date and which hosts the Mt Cattlin mine.
The mine operations include open-pit mining of a flat-lying pegmatite ore body, with the flat-lying nature of the ore body allowing mining to proceed at a constant strip ratio once the ore is uncovered.
Mining is carried out using excavator and truck operations, delivering to a conventional crushing and HMS gravity recovery circuit.
Contract mining is used for grade control drilling and earthmoving operations (drilling, blasting, load, haul and ancillary work) for the open-cut mining operation.
The nearby processing plant consists of a three-stage crushing circuit producing a -14mm product from ROM ore, at a treatment rate of 1.6mtpa.
The mine and its operations recently underwent a rigorous review spearheaded by incoming Chief Executive Officer Simon Hay.
The process identified opportunities to adapt to the challenging lithium market by deploying capital more efficiently, optimising Mt Cattlin and de-risking project development.
This led to a modified, focused and simplified corporate strategy to accelerate growth plans.
Mr Hay said the strategy comprised of three pillars representing Mt Cattlin and the short and longer term growth objectives of the company.
“Firstly, at Mt Cattlin we continued optimising the plant and reduced costs, with the assistance of our major contractors,” he said.
“The 2020 operating plan prioritises value over volume, the processing of stockpiled ore and targets the generation of positive free cash flow.
“Lower operational settings will enable the drawdown of spodumene concentrate inventory and we will retain the capability to swiftly ramp up operations should market demand increase.”
Positively, Mt Cattlin achieved a record breaking year in production volumes, quality and costs, although sales were negatively impacted by the slowdown in the lithium chemicals market.
“During this challenging time, Galaxy’s customers endeavoured to honour their offtake commitments despite their own significant financial pressures.” Mr Hay said.
“When working with our customers, we were cognisant of the fact that forcing sales onto customers in such circumstances would harm long term relationships, and therefore we agreed modified shipping schedules.”
The second growth pillar was to advance and execute the Sal de Vida project, with Galaxy committed to developing it from both a capital intensity and unit operation cost perspective.
Mr Hay said the third pillar of the corporate strategy was the pursuit of further growth and expansion opportunities in the medium to long term.
Safety and sustainability
Mr Rowley said that safety and sustainability were embedded in the business and Galaxy was committed to social and environmental engagement.
This sentiment is reflected with the publication of Galaxy’s first stand-alone Sustainability Report.
“The product we supply meaningfully contributes to the use and storage of energy and provides an opportunity to power innovation while considering our wider impact,” Mr Rowley said.
“For this reason Galaxy is strongly committed to sustainable growth to ensure that, through our operations, the lives and wellbeing of our workforce is paramount and we contribute to both the communities in which we operate and improvement of the environment.”
Mr Hay added that while medium term volume contracts are in place for all of 2020’s forecast production and year-end inventory, the COVID-19 pandemic is a factor to contend with.
“Our priority is the wellbeing of our people and stakeholders and we have implemented preventative measures at all sites,” he said.
“Mt Cattlin operations continued uninterrupted, and we remain cautiously optimistic about 2020 sales as we field enquiries from new customers who are concerned with other supplier production curtailments but who recognise Galaxy as a reliable supplier of high-quality spodumene concentrate.”
Team effort
Mr Rowley said the company would benefit much from the appointment of Mr Hay, whose experience includes senior positions at major Australian mining companies such as BHP Billiton, WMC Resources and Iluka Resources.
Most recently Mr Hay was Head of Resource Development at Iluka, with accountability for exploration and geology, mine planning and development, major projects and engineering, and technology and innovation.
Mr Hay has significant operational experience in assets located across Australia and internationally, and has also spent five years in Asia leading Iluka’s Asia-Pacific and then global, zircon marketing activities.
“Simon has the ideal blend of skills and experience in operational, development and marketing roles to be able to lead Galaxy through its next phase of growth,” Mr Rowley said.
“After a comprehensive search process, Simon’s experience in guiding projects at an early stage and established mines in jurisdictions such as Sri Lanka and Sierra Leone convinced me he was the ideal candidate to lead Galaxy’s plans for the development of its assets in Argentina and Canada.
“His operational expertise has already been applied to optimising and extending the life of our existing operations at Mt Cattlin in WA.”
Mr Rowley praised his senior executive management team, who worked tirelessly in order to develop and implement Galaxy’s ongoing expansion strategy through the enhancement of internal expertise.
“Our achievements of today and tomorrow would not be possible without the ongoing support of our shareholders, customers, partners, communities and everyone in the Galaxy team,” he said.
“We pleased to lead Galaxy on the journey towards becoming a leading global lithium company.
“The recent difficult years are typical as new industries mature.
“Eventually an equilibrium will be reached with acceptable profits achieved throughout the entire supply chain.
“With the opportunity to have a positive impact on technological advancement and impact business innovation, we can make a difference in the lives of people all around the world as we power the future.”
