Galaxy merger to create lithium giant

The pending Galaxy Resources' merger with Canadian explorer Lithium One will create the largest pure play lithium producer by market value in the world, according to the Australian company's managing director Iggy Tan.

Under Galaxy's March 15 offer each Lithium One share would be traded for 1.8 fully paid ordinary Galaxy shares.

Lithium One has a cash balance of about $C10million and controls the lithium potash brine Sal de Vida development, which sits adjacent to one of the largest producers in the world, in Argentina.

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Galaxy, which controls the Mt Cattlin mine in Western Australia, a plant in eastern China's Jiangsu province and an adjacent Lithium-Ion Battery Project, has a market capitalisation of about $320 million and is in the process of raising $50 million.

The miner started book-building on Friday, with an announcement expected this week on the outcome.

"What we are doing with the merger with Lithium One and potential capital raising of a minimum of $50 million we are looking at building a pure play lithium company with close to half a billion dollar market cap," Mr Tan said.

"We will be the largest market cap pure lithium company."

The merged company would also become the largest producer of battery-grade lithium, and the fourth or fifth largest producer in the broader lithium industry.

Lithium's role

Lithium mines typically take about five years to come online, but demand is surging for the commodity, Mr Tan said.

"Our view is that you need to find those resources, you need to bring them into production, in anticipation of this demand that's coming," he said.

"The lithium battery is now in your laptops, your mobile phones, your iPads. It's now moving into power tools.

"You can see that growth already has given about a 25 per cent year-on-year growth and think of how many iPads are sold today,? he said, referring to the popular Apple tablet computer.

The world uses about 140,000 tonnes of lithium carbonate a year, which Mr Tan believes will triple in the next decade.

Galaxy shareholders are expected to vote on the deal May 17.

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