PERTH (miningweekly.com) – The directors of lithium miner Galaxy Resources have appealed to shareholders to take part in the proposed A$47-million capital raising to fund the ramp-up of its Jiangsu plant, in China.

In January this year, Galaxy lost a A$66.2-million investment from the East China Mineral Exploration & Development Bureau (ECE), after a November incident at the Jiangsu plant, which claimed the lives of two workers.

ECE had initially been scheduled to subscribe for some 132.4-million shares in Galaxy.

The miner subsequently launched a one-for-one pro rata entitlement offer, at an issue price of 8c a share to raise the necessary capital.

It told shareholders on Monday that the November events at Jiangsu had placed a significant burden on the company and its working capital position, forcing a cash injection during the ramp-up phase.

“Given the difficult equity-raising environment and, therefore, the discount being offered, we consider that the appropriate course of action is to offer the equity raising to our 10 000-strong shareholder base, in order to provide the company with the necessary working capital to achieve our vision of reaching positive cash-flow status and become a major player in the lithium industry.”

Galaxy pointed out to shareholders that the company had undertaken a number of initiatives to reduce costs, reschedule its debt, and to sell off its noncore assets to reduce leverage.

Corporate costs for 2013 were expected to be some A$12.2-million, compared with the A$17.6-million spent the year before. A further A$4.3-million in cost savings to bring the corporate costs down to A$7.9-million over the next 12 months, were targeted.

Part of this cost reduction would be a salary cut of 20% for the MD and board of directors, and a cut of between 10% and 15% for the executive management of the company.

Galaxy said that the successful completion of the entitlement offer would allow the company to reduce its gearing levels, and along with debt refinancing, would allow Galaxy to restructure its balance sheet.

The company said that it shares would remain suspended until July 1.