Galaxy to sell lithium tenements to Posco

Australia-based lithium developer Galaxy Resources has entered into an agreement to sell a package of its lithium tenements in Argentina to South Korean conglomerate Posco, which is increasing its exposure to the growing lithium market.

The non-binding agreement involves Galaxy selling its tenements in the northern basin of the Salar del Hombre Muerto to Posco for a cash consideration of $280mn. The tenements contain a measured and indicated mineral resource of 1.58mn t of lithium carbonate equivalent (LCE) and a total resource of 2.55mn t of LCE. Galaxy will retain its tenements in the southern basin.

The transaction is expected to become binding and unconditional in the third quarter after documentation has been completed and the Posco board has given its approval. It is also expected that Galaxy and Posco will enter into co-operation agreements to maximise potential development, operations, infrastructure and logistical synergies.

Earlier this year Posco entered into a binding offtake agreement and an equity investment with another Australian lithium developer, Pilbara Minerals, regarding the second stage of its hard rock Pilgangoora lithium project in Western Australia. It invested A$79.6mn ($59.9mn) in Pilbara and signed an offtake agreement for 80,000 t/yr of lithium concentrate, possibly increasing to 240,000 t/yr if the two companies build a downstream lithium processing plant in South Korea.

Galaxy intends to use the proceeds from the sale to progress its nearby Sal de Vida project, one of the world's largest undeveloped lithium brine projects, with a mineral resource comprising 4.09mn t of LCE and 1.14mn t of LCE reserves.

Sal de Vida is expected to become a 40-year operation producing the equivalent of 25,000 t/yr of battery grade lithium carbonate.

"This transaction with Posco provides a substantial cash injection, which underpins the development of Galaxy's Sal de Vida brine project in the Catamarca province of Argentina," Galaxy chairman Martin Rowley said.

"With the geographical coverage of Galaxy and Posco's tenements spanning across both Catamarca and Salta provinces, this transaction is also strategically significant as it means there will now be two new lithium projects developed concurrently on the Salar del Hombre Muerto."

If Posco's board approves the transaction, the group will have direct access to two of the world's largest lithium brine and hard rock lithium resources. Posco is increasing its battery materials capacity to complement its steel, engineering, construction and trading activities.

Galaxy produces lithium at the Mt Marion project in Western Australia and is developing the James Bay hard rock lithium project in Canada.