Galaxy Resources has agreed to sell its Jiangsu lithium carbonate plant in China to Sichuan Tianqi Lithium Industries in a deal worth about $249 million.
Galaxy said it would sell Jiangsu in return for US$122 million in cash and on the basis that Sichuan, a lithium-focused company listed on the Shenzhen stock exchange in China, assume the plant’s total debt, which stands at US$108 million.
Following completion of the deal, Galaxy said it would have a net cash balance of $62 million after deducting all its remaining corporate debt.
The company said going forward it would focus on the development of its Sal de Vida lithium brine and potash project in Argentina.
Galaxy managing director Anthony Tse said the sale of Jiangsu was a major step in the financial transformation of the company.
“This (transaction) will leave the company in a very strong position to extract the maximum value for shareholders from its remaining portfolio of lithium assets, in particular the Sal de Vida lithium brine project in Argentina.”
Jiangsu has proved problematic for Galaxy since the company completed construction of the plant in December 2011 at a cost of $99.8 million. The project was six months late and suffered a cost blowout of about $27 million.
The company was also forced to close the plant in November 2012 for two months after a worker was killed in a blast at the site.
Following the incident, East China Mineral Exploration & Development Bureau withdrew a proposed $66.2 million investment in Galaxy.
Former boss Iggy Tan also stepped down in June last year after leading the company for more than four years.
The company has since been on a cost cutting drive and axed jobs in its Perth office.
The sale of Jiangsu is expected to be finalised in three months and is subject to shareholder approval.
