Galaxy and Tianqu renegotiate terms for China plant
PERTH (miningweekly.com) – ASX-listed Galaxy Resources on Monday announced that it had revised its sales agreement with China’s Sichuan Tianqu Lithium Industries for the Jiangsu lithium carbonate plant, in China.
The consideration of the sale has changed from an enterprise value of $230-million to $173.2-million, with cash payable to Galaxy changing from $122-million to $71.1-million, along with Tianqi assuming Galaxy’s current outstanding Chinese debt of $101.5-million.
Galaxy told shareholders on Monday that owing to the completion process being more protracted than anticipated in the original April 2014 sales agreement, Tianqi has indicated that its board and shareholders would not approve the transaction, necessitating the renegotiation of the terms.
The sales agreement was postponed as Galaxy preferred to wait for the China Securities Regulatory Commission (CSRC) to change its policy, rather than facing red tape.
The CSRC rule changes were affected in December last year, meaning that the Jiangsu divestment was no longer subject to CSRC approval. However, Galaxy was still required to file certain statutory reports regarding the transaction with the CSRC.
Galaxy said that in light of Tianqi’s board and shareholder decisions, the company believed it was in the best interest of shareholders to renegotiate the terms of the sales agreement, in order to complete the divestment.
The final enterprise value, and therefore the cash consideration, would be subject to an adjustment to account for Tianqi’s contribution to 50% of the Jiangsu plant costs from February this year, until the completion of the sales.
Galaxy has previously received a deposit, included in a cash consideration, of $12.2-million. Post the completion of the sales agreement, Galaxy would be required to repay a $30-million loan facility made available by Tianqi.
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