Lithium producer Galaxy Resources has received Chinese backing for an $81 million capital raising, which it will use to reduce its debts and progress development at the Sal de Vida lithium mine in Argentina.
Galaxy said it had received commitments for a placement of 162.4 million shares at 50 cents each to existing cornerstone investor M&G Investments and a new investor, the East China Mineral Exploration & Development Bureau (ECE).
It is ECE's fourth investment in an Australian mining company - it already has shares in rare earths company Arafura Resources, niobium company Globe Metals and vanadium company TNG.
The placement will be made in two tranches; a $15 million first tranche to M&G, and a $66.2 million second tranche to ECE.
Galaxy said it would use the funds to reduce debts, complete a definitive feasibility study and pilot plant work at the Sal de Vida project and provide additional working capital.
The company will apply $31 million towards debt reduction, $15 million for the feasibility study, $5 million to repay convertible notes owed to Lithium One and retain $15 million for working capital.
A further $15 million will be retained as a buffer to working capital for Galaxy’s Jiangsu processing plant.
“We have an opportunity not only to raise a substantial amount of money and strengthen our balance sheet considerably, but to bring in a new strategic, long-term cornerstone investor,” managing director Iggy Tan said.
“The fact that two strategic investors were prepared to invest at a slight premium to market is a solid indication of the future of our business, and validates our forecasts of a significant increase in demand for lithium products in the near term.
“In light of the current market outlook, we’ve taken the opportunity to raise money now to give us sufficient and certain funding to carry out our development plans.”
