Galaxy Resources Enters Trading Halt-What’s Next?

By ,

At time of writing, shares of Galaxy Resources Limited [ASX:GXY] have entered a trading halt pending an announcement.

Galaxy has been in a slide over the last 12 months:

Galaxy Resources

Source: marketindex.com.au

Curiously though, it has risen in the last three days:

Galaxy Resources

Source: marketindex.com.au

This has occurred without any announcement.

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What could the contents of Galaxy Resources’ announcement be?

While it is pure speculation at this stage, there are a couple of options on the table.

One outcome could involve the sale of a package of tenements in the northern area of the Salar Del Hombre Muerto in Argentina for US$280 million.

As per its December Quarterly Activities Report, the company provided the following update:

Registration of the Catamarca tenement transfers with the Catamarca Mining Court was completed on 28 December 2018. The Salta tenements transfer registration process has started and the relevant public deeds lodged with the Mining Court for registration. Registration has not yet been finalized and the Salta court is closed for all of January 2019, so February 2019 is targeted for final registration of the Salta tenement transfers. This is the final condition to release the consideration of US$280 million (less withholding tax of approximately US$8 million) from the escrow account held with HSBC.

So it is conceivable that the forthcoming announcement could be to do with the finalisation of this deal.

Another option on the table is that in addition to the finalisation of the Catamarca deal, something further may be announced.

It’s also worth noting that in the December Quarterly Activities Report, the company also stated that:

Galaxy has received several offers from potential strategic partners which are currently being evaluated in detail. Negotiations continue to progress, so the Board has resolved to formally extend the process timeline to ensure proper consideration is given to the strategic merits and proposed terms and structures of each of the offers.’

As such, there is the possibility that the Sal de Vida operation may have secured a joint venture partner as well.

Again, this is all speculation, but from reading the tea leaves from their recent announcements it appears that Sal de Vida could be what the announcement centres on.

Moreover, if the sale is finalised, it would give it cash on hand of around US$320 million (sale of tenements plus $41.1 million in cash and liquid assets as of its December announcement).

This would give the company a sizeable war chest to plough into its other two projects at Mt Cattlin and James Bay.

We will keep you updated when a further announcement is made.

Regards,

Lachlann Tierney,
For Money Morning

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About Lachlann Tierney

Lachlann Tierney is an Analyst for Money Morning and has been investing for nearly a decade. With a Masters of Science from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest…

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