Galaxy Resources' much-vaunted plan for a vertically integrated lithium business is in tatters after it sacked 37 workers at its Ravensthorpe mine before taking up a three-year supply contract with rival WA producer Talison Lithium.
In what was described as an "economically sensible" decision by managing director Iggy Tan yesterday, Galaxy will buy spodumene for its Jiangsu lithium processing plant in China off Talison from July, instead of re-opening its mothballed Cattlin mine.
Mr Tan flew to Mt Cattlin the yesterday afternoon to deliver the news to the 37 staff still employed at the mine, which was placed in care and maintenance in July because of operational delays at Jiangsu.
Mr Tan said the staff had accepted the decision and would be assisted in finding alternative employment.
The details of the supply deal with Talison are confidential. However, Mr Tan said it provided Galaxy with "significant savings" because of the high exchange rate tied to feed ore from Mt Cattlin, as well as associated start-up costs.
He said Galaxy was approached by Talison, and his company would purchase the new spodumene feedstock in US dollars.
Mr Tan has repeatedly told _WestBusiness _ that Galaxy was committed to re-opening Mt Cattlin mine by the middle of this year in an attempt to keep alive its long-held plan to create an integrated lithium business.
Yesterday he conceded the plan was no longer economic.
"It's very simple," Mr Tan said.
"In the current economic conditions, it's just cheaper to buy the material. There was no alternative until recently. Talison has increased capacity since their expansion last year. They approached us and it became a viable option."
Galaxy's Mt Cattlin mine produces spodumene at about one third of the grade of Talison's Greenbushes mine near Bridgetown.
Although the company farewelled the mine's remaining staff yesterday, Mr Tan said Mt Cattlin would remain on its books and the company could re-commission the asset "anytime we want".
"We'll have two or three people remaining at the site and we think it's a valuable asset - we certainly won't be selling it," Mr Tan said.
Galaxy's shares closed up 0.5Â¢ to 38.5Â¢ before the company made the Talison announcement.
The news continues a tumultuous period for the Perth company.
Galaxy's share price has been sitting on or about four-year lows over the past three months.While the company was forced to stop operations at Jiangsu for 2 1/2 months after two workers died following an explosion at the plant in November. The shutdown dried up Galaxy's cash-flow and coincided with a proposed investor axing a $66 million cash injection.
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