Galaxy Resources' Mount Cattlin lithium operation in Western Australia Source: Galaxy Resources

An analyst says Galaxy Resources Ltd.'s earlier-stage James Bay lithium project in Canada could end up as its flagship project given the strategic importance of such critical minerals in North America, as the company mapped out its plans for the West Australian Mount Cattlin mine and Sal de Vida development asset in Argentina.

Galaxy said in a Nov. 18 corporate strategy and projects update that it will reduce volumes and costs at Mount Cattlin in 2020 to maintain positive cash margins and preserve resource life amid the current lithium downturn, as reducing mining by 60% cuts operating costs by about US$20 million.

The update comes after Galaxy flagged in August a noncash impairment of US$150 million to US$185 million in the first half following a review of Mount Cattlin, where the company said in October it expected to cut mining rates by 40% in 2020.

Galaxy also said on Nov. 18 it has developed a simplified flow sheet in house for Sal de Vida, with stage one to be funded mostly from its balance sheet after a planned partial sell-down of the project, which it is still working on.

The company will stage Sal de Vida's execution in two to three modules to reduce development risk and stage the capital spend, with final investment decision due in the second or third quarter of 2020.

Meanwhile, Galaxy is planning a "comprehensive value engineering exercise" and detailed geotechnical program at James Bay in Quebec, while continuing permitting activities and negotiations with the Cree Nation of Eastmain.

Galaxy is also assessing restructuring options with receivers and administrators of troubled lithium miner Alita Resources Ltd., of which Galaxy recently became the largest equity holder.

Strategic future flagship asset

Broker Hartleys' Head of Research Trent Barnett said James Bay could well end up as Galaxy's flagship asset, given its rarity as a high-grade North American hard rock deposit, of the kind which proliferate in Western Australia as opposed to the brine projects usually seen in the Americas.

He said in a Nov. 18 interview that Hartleys believes James Bay to be a quality development asset given the size of the market in the U.S., for whom "the dependence on China for supply chains is risky."

Barnett believes James Bay would be of greater strategic importance than Sal de Vida, given the latter is a brine project that is typically more difficult to mine and process to create battery grade material, and its location being in the more risky Argentina.

He was also concerned that Galaxy said it will only produce a "battery quality" primary carbonate rather than "battery grade," though the company added that upgrading the product to battery grade could be done at "moderate additional cost."

Galaxy also said as James Bay, which currently has an entirely indicated resource of 40.3 million tonnes at 1.4% lithium oxide, has "high strategic value to the emerging growth markets of North America and Europe."

Its ongoing feasibility study encompasses an integrated upstream mining and concentration and downstream chemical operation.

Solidified relationship

Barnett's comments came the same day the U.S. and Australia formalized their partnership on developing both nations' critical mineral assets, between Geoscience Australia CEO James Johnson and U.S. Geological Survey Director Jim Reilly.

The strategy strengthens an existing memorandum of understanding by collaborating on research and increasing critical mineral capacity for both countries, after the U.S. Department of the Interior released a list of 35 minerals — including lithium and rare earths — in May 2018 that were deemed critical to its economy and security.

Association of Mining and Exploration Companies CEO Warren Pearce hailed the announcement in a Nov. 19 statement, given his group had previously identified a A$2 trillion lithium/critical minerals value chain opportunity in Australia's critical minerals.

He told S&P Global Market Intelligence that the agreement was prescient given reports that China was threatening to cut off rare earths supply and the likelihood that other critical minerals may be next in the strategic materials struggle between the U.S. and China.

In terms of ensuring secure supply, countries need to be certain about what that would look like, which is why it is so important that the Australian and U.S. governments have put in place government-to-government frameworks that will then lead to business-to-business relationships.

This agreement therefore facilitates opportunities for companies with projects not only in Australia and North America, but the European Union, whose governments similarly will need to facilitate supply chains outside China.

Pearce said China's "threat" was not necessarily an act of ill will, but a commercial reality given the Asian giant has worked hard to be in a dominant positions regarding strategic minerals.

West Australian dysprosium producer Northern Minerals Ltd. announced Nov. 19 it was part of the Australian delegation to meet U.S. government officials, where CEO George Bauk highlighted how much of his competition in China, which produces 98% of the world's heavy rare earths, is "unethical," and is neither "green" nor "clean."