Galaxy Resources Ltd (GXY) LITHIUM COMPOUNDS - POWER TO THE PEOPLE

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1 C o r p o r a t e Galaxy Resources Ltd (GXY) LITHIUM COMPOUNDS - POWER TO THE PEOPLE AFSL: Capital Structure C ode GXY Shares m. Special shares 14.1 Notes * $100K e@ ITM Options 37.0 m. Av $ m. C ash (est) -$ 14 m. Price $ per share Market C ap'tln $ 38 m. EV (est) $ 52 m. * Likely to be restructured Valuation Asset A$m $/shr Hardrock Li 29 $0.015 Sal De Vida 60 $0.030 Net cash * 16 $0.008 Risked Exploration 5 $0.003 Total 110 $0.055 * Including new equity Source: Strachan Corporate Board Martin Rowley Anthony Tse Charles Whitfield Jian-Nan Zhang Chairman Managing Director Exec Director Non-Exec Director Opinion* Galaxy Resources is restoring its balance sheet, holding about $50 million of cash while refinancing a convertible note facility. The company is establishing a lease fee and royalty stream from third party operations at its Mt Cattlin Ta/Li mine with potential significant revenue from spodumene sales to follow. Development of a low cost, lithium and potash brine project at its 96% held Sal de Vida project in Argentina will place Galaxy well down the cost curve as a competitive supplier of lithium compounds to an expanding market for Li-ion batteries. Expansion opportunities and a long life project position Galaxy as a major player in this rapidly growing industry. Peter Strachan. *No recommendation is offered for this commissioned research. Investment Drivers Galaxy has a clean balance sheet supported by A$62.4 million of convertible note debt and ~A$50 million of cash with which to progress development of its Sal de Vida project. Galaxy is positioned to be a low cost supplier of lithium compounds into an expanding lithium-ion battery market from its 96% owned Sal de Vida lithium brine project in Argentina. Demand for lithium compounds for use in batteries directed at consumer goods, communications and computing is forecast at a rate of over 4% pa over the medium term and should rise to 7% pa once sales of storage batteries along with hybrid and electric vehicles accelerate in the early 2020 s. The company has negotiated a 3-year, $2.5 million pa lease and royalty agreement over its Mt Catlin Li-Ta mine in Western Australia, which is currently gearing up for production. Sale of spodumene by-product is likely to lift revenue in Galaxy is examining a lower cost, possibly 8,000 tonne pa LCE start-up at Sal de Vida costing ~US$122 million, with a later expansion to 25,000 tpa plus addition of a potash recovery circuit, as the market expands and product gains market acceptance. Galaxy is a lithium focused growth story, trading at a discount it s to more advanced peers. Strachan Corporate expects that the stock will be re-rated as cash flow from Mt Cattlin is established, along with reduction in the technical and funding risks at Sal de Vida, through a clear path to start-up using a development funding partnership. Galaxy continues to have the support of major shareholders, as well as Acorn Capital, Deutsche Bank and Geologic. Page 1

2 Lithium focus Demand growth for lithium-ion batteries expected to support price of lithium compounds... Lithium carbonate price rises by ~20% over past year Development of Galaxy s Sal de Vida project will provide integrated processing to Li-carbonate +40 year project life Possible 8Kt pa LCE start-up rate Introduction In mid 2012 Galaxy Resources merged with Canadian lithium developer Lithium One to create a significant force in the lithium supply chain. Following the sale of its Jiangsu lithium carbonate plant in northern China, the company s main focus is developing a 96% owned, lithium/potash brine project at Sal de Vida in Argentina. The company also owns the Mt Cattlin spodumene/tantalum mine in the Southwest of Western Australia and the James Bay hard rock spodumene development project in Canada. Galaxy s major focus remains to develop a significant presence in the global market for lithium compounds. Strachan Corporate sees strong growth in demand for lithium compounds used in the manufacture of lithium ion/polymer batteries, while other industrial uses show expansion in line with global economic growth. Sales of lithium compounds into the rechargeable battery market for mobile electronic consumer, communications and computing equipment are expanding rapidly while the price for high grade product has risen ~20% over the past year to levels of US$6,500 per tonne. Newly emerging trends towards battery use in transport equipment and power storage look set to provide a further upward step in market usage that will support expanded production of Li-ion batteries as the decade unfolds. Sources of Lithium Carbonate Most lithium carbonate is sourced from brines such as Galaxy s Argentinean Sal de Vida Salar from which industry experience demonstrates that production cost is typically lower than US$2,500 per tonne of carbonate. The process of concentration, precipitation and purification of lithium product from brines is simpler than for spodumene feed since lithium found in brines is already in solution. Hard rock sources such as Galaxy s Mt Catlin and James Bay deposits typically grade 1% to 1.4% lithium oxide. The Greenbushes mine in Western Australia is not typical since it grades 3% lithium oxide and is considered an outlier of its type. Operating costs relating to the processing of a complex lithium silicate called spodumene (chemical formula LiAlSi 2 O 6 ) are higher, typically ranging from US$4,000 to US$5,000 per tonne since spodumene concentrate it must first be calcined and leached to deliver lithium into solution. Sal De Vida 96% Galaxy s Sal de Vida salar project is part of a larger series of salar lithium accumulations located in Argentina, near the borders with Chile and Bolivia at an altitude of 4,025 metres. The western Salar del Hombre Muerto is owned by leading lithium company FMC, which has operated its El Fenix production facility for 20 years and currently produces about 16% of global lithium supply. Sal de Vida is estimated to hold a Measured and Indicated Resource containing just over 4 million tonnes of lithium carbonate equivalent (LCE) and 16 mt of potash. Reserves of 1.1 Sal de Vida LCE Potash mt. Resources Reserves mt of LCE plus 4.2 mt of KCl should support a project life of over 40 years at final run-rate of 25,000 tpa of LCE. Armed with an April 2013 Definitive Feasibility Study that assesses capital and operating costs and consequent economics for a 25,000 tpa Li-carbonate project, Galaxy is now considering a staged development. Initial capital costs and market risk for the project are likely be moderated by commencing production at an initial rate of 8,000 tonnes per annum of lithium product. Page 2

3 Galaxy estimates ~US$120m CAPEX at stages start-up Large Resource pumping flow rate tests & assays support DFS Once the project s process is refined and markets for product are established, output can be lifted to a target rate of 25,000 tonnes pa of lithium product, while adding a potassium recovery circuit, all funded out of operating cash flow as the market opportunity develops. Strachan Corporate has modified the company s capital cost estimate of US$369 million for a 25,000 tpa project to estimate a more manageable capital cost of US$122 million for start-up rate of 8,000 tpa of lithium product without an initial potash circuit. The company is confident that it has the skills required to produce high quality, >99.5% pure Li 2 CO 3 product to capture premium prices of around US$6,500 per tonne for battery grade material. The company s engineering consultants estimated that a project to produce 25,000 tpa of lithium product plus 95,000 tpa of potash would have an initial capital cost of US$369 million. Operating costs were estimated at US$2,200 per tonne of lithium carbonate and an estimated annual revenue of US$215 million was said to result in a pre-tax operating cash flow of US$118 million pa and a post tax NPV 10 of US$380 million. Sal de Vida Ktpa US$m. * General Brine extraction Evaporation ponds Li carbonate plant Potash plant Reagents Power & Infrastructure Other Direct costs EPCM Owners costs Freight Total indirect Total costs C ontingency Total Capital investment * Strachan Corporate estimate A scaled-down and conservative start-up at 8,000 tpa would deliver a project that is within Galaxy s capacity to fund while adding a more manageable and less disruptive 4.7% to global lithium carbonate capacity. At this initial scale, the project is likely to deliver an EBITDA of around US$23 million pa which could be used to support the establishment of an add-on potash circuit while expansion of overall capacity would be driven by global market demand. Source: Galaxy Page 3

4 Test work supports development methodology Located high in the Argentinean Andes Sal de Vida brine has favourable chemical properties, containing relatively high grades of both lithium and potassium and a low grades of deleterious elements including magnesium, ensuring a low cost and high quality carbonate product can be produced by solar methods. Critically, brine pumping test work on the Sal de Vida salar supports capacity assumptions used for preparation of a Definitive Feasibility Study on the project. Consistent mineral composition and flow rates of 16 litres per second from a depth of 53 metres over a 30 day test supports an initial 8 well development with capacity to expand to a 24 well development producing 25,000 tonnes of lithium carbonate and 95,000 tonnes of potash per annum at full capacity. Sal de Vida Location Map Source: Galaxy Development likely to follow farm-in funding negotiations The company has delayed progress towards a final investment decision on Sal de Vida development until completing the sale of its Jiangsu plant and negotiating off-take and farm-in funding of capital requirements. Through 2015, once all approvals are in place and funding is arranged Strachan Corporate believes that Sal de Vida could begin developing its plant with the aim of commencing production by late 2017, after a 15 month ramp-up period from early Salar pond development. Comparative Grades DFS indicates A/Tax NPV 10 of US$380 million at full-scale Source: Galaxy With a stronger balance sheet and cash flow from Mt Cattlin, the company will be able to fully explore opportunities for joint venture and other funding mechanisms with downstream lithium partners. While the lithium carbonate Page 4

5 Current business environment is favourable for project cost reduction Significant development value upside for Galaxy price remains firm, current competitive conditions for engineering and project development should enable Galaxy to revisit capital and operating cost estimates with a view to achieving significant cost reductions prior to a final investment decision. At an average Li 2 CO 3 price of US$5,500 per tonne, depending on grade the DFS expects a full-scale project to deliver an operating cash flow before interest and tax of US$118 million pa, which corresponds to a pre-tax NPV 10 of $645 million. The current market price for product is ~US$6,500/tonne. The company will work towards achieving generous project financing facilities through its Chinese banking and joint venture partner connections. Progress could then commence with possible new equity, along with ~US$220 million of project debt. Re-emerging as tantalum concentrate producer with lucrative spodumene by-product Mt Cattlin 100% Annual Lease Fee + Royalty Top Up The Mt Cattlin mine was placed on care and maintenance in July 12. The plant had achieved close to its design run-rate of 1 mt pa of ore during the June 12 quarter with an annualised rate of 876,000 tpa recorded over that entire quarter. Lease & royalty agreement with GMM to contribute ~$6m pa. Deal to sell spodumene could add revenue of >$15m pa. to Galaxy General Mining (GMM: ASX), controlled by Galaxy s founding MD Michael Fotios, has completed due diligence on the opportunity of restarting the mine to produce a tantalum concentrate as well as spodumene by-product from higher grade ore remaining. Galaxy has negotiated a 3 year, $2.5 million pa lease agreement plus a 10% production royalty payment. An initial sale option any time during the lease period for a price of $30 million less any production payments could be renegotiated to reflect positive developments on the spodumene sales front that could see the project revert to a joint venture. GMM is preparing to recommence production by September 2015, with sales of spodumene from Mt Catlin initially accruing on a 50/50 basis to Galaxy and General Mining under an agreement to be finalised prior to GMM s completion of due diligence. Under the initial agreement, if the purchase option is exercised, Galaxy would be entitled to a 3% net smelter return (NSR) royalty on sales from existing Resources and a 1% NSR on any additional resources outlined. Mt Cattlin s total global mineralisation target, calculated to a maximum depth of ~60 metres has been estimated at nearly 25 million tonnes, containing 2 mt of spodumene and 6.6 m lb of Ta 2 O 5. When applying a cut-off grade of 0.4% Li 2 O or 5.9% spodumene, a Reserve of 11.4 mt, containing 1.7 mt of spodumene and 3.7 m lbs of tantalite is estimated. Mt Cattlin Resource and Reserve Estimates Mt Cattlin mt Spodumene Li 2 O Ta 2 O 5 Resource % 1.08% 0.016% C ontaining 2.33 mt 378 m lb 5.6 m lb High Grade Reserve % 1.05% 0.015% C ontaining 1.68 mt 264 m lb 3.7 m lb Source: Galaxy, Strachan Corporate Pty Ltd Strachan Corporate believes that the Mt Cattlin mine will not be resource constrained. Drilling to the west and northwest of known mineralisation expanded known zones of relatively shallow lithium mineralisation. Bore-hole GX849 recorded an intercept of 14 metres from 50 metres depth, grading 25% spodumene and bore-hole GX850 hit 10 metres from 53 metres depth grading 26% spodumene, showing much higher grades than the Reserve average at slightly deeper extensions. The project should be able to Page 5

6 look forward to at least a 20 year project life with further extensions reliant on applying capital to drilling and the presumption of commercial grades and supportive commodity prices over the projected project life. Lateral & depth extensions offer expanded mine life The Mt Cattlin ore zone occurs within a layered volcanic sequence of rocks containing hard and brittle, mineralised pegmatite sandwiched between equally hard basalt layers. Mining to depths of about 50 metres will present little difficulty, despite a need for drill and blast mining operations virtually from the surface. Drilling to about 120 metres has shown repetitions of flat lying, mineralised pegmatite below the presently defined open pit mineralisation. This mineralisation could enable mining operations to be extended at depth, either by deepening open pits or by application of underground mining extraction techniques. On balance, underground methods may prove to be more profitable than deepening open pits, provided that deeper mineralisation with sufficient lithium and tantalum grades can be established. Mining plans envisage the eventual low cost disposal of waste and tailings into mined voids, following a period of surface disposal. Mt Cattlin Location Map GMM to sell tantalum concentrate to Talison Hard waste ideal for value adding road metal sales Low cost magnetic & gravity separation of spodumene & tantalum concentrates Source: Galaxy Resources Tailings material or crushed waste rock may ultimately find a market as aggregates for road building or other industrial materials, representing an additional revenue stream for the project. When in operation, the mine produced a lithium oxide concentrate via heavy medium separation from ore crushed to 100% less than 12 mm, using a specific gravity cut of 2.9 gram per cubic centimetre. The light fraction was subject to further grinding followed by wet magnetic and gravity separation, with a target production of about 117,000 tpa of spodumene concentrate grading 5.5-6% Li 2 O along with 351 tpa of 25% tantalum concentrate, containing 193,000 lb of Ta 2 O 5. A recovery target of over 80% for spodumene and 65% for tantalum had been set and the plant was close to achieving this level when it was put on care & maintenance in July 12. Page 6

7 Since GMM is focusing on a tantalum product, production of a low grade, 5% spodumene concentrate by-product for sale at a 30% discount to market price of $430 per tonne, could generate revenue of $21 to $30 million pa. If Galaxy is instrumental in achieving sales of this product there may be some adjustment to initial profit sharing understandings. Despite poor ratings, Argentina remains a solid mining destination Reform in the air, post Oct 15 election Spodumene project Argentina Argentina consistently ranks poorly on tables of country risk. It s political and economic landscape has moved through several cycles since the country went bankrupt in In 2012 the country took control of Repsol s 51% interest in Argentina s largest oil company YPF, effectively nationalising it and causing a further deterioration in its global financial standing. Beyond that, the country remains relatively stable for miners and there has been little interference in this part of its economy. Argentina s GDP fell by ~2.1% in 2014 and inflation remains high at 38%. Elections are due in October 2015, at which time an unpopular leader could be voted out, paving the way for economic reform. James Bay 100% Galaxy owns 100% of the James Bay Pegmatite project in Quebec. The deposit holds total Indicated and Inferred Resources of 22.1 mt grading 1.28% Li 2 O, which is similar in size and extent to the Mt Cattlin deposit. Metallurgical test work indicates that James Bay mineralisation can be adapted to the same processing route employed at Mt Cattlin to produce a spodumene concentrate. Galaxy will concentrate on its high quality brine project, keeping James Bay as a long term option or selling the project. Recent interest in the project from private equity indicates that the asset has longer term value. Financial Position Galaxy holds approximately $50 million of cash and expects that final reconciliation of working capital from the Jiangsu plant sale should add about $2 million on completion. The company holds 600 convertible bonds, on which it owes a total of $62.4 million. The company is engaging with bond holders with the objective of restructuring this debt, aiming to resolve the position by July 15. Galaxy may offer to repurchase debt at a discount or some other arrangement involving partial repurchase of debt, interest commitment payout in equity, along with the issue of new debt with no equity option attached. Once Mt Cattlin is re-commissioning in July 15, Galaxy will receive lease payments of $2.5 million pa from General Mining, plus a 10% royalty on tantalum sales, adding a further $2-$3 million per year. Income of $6 million pa would cover the company s debt service obligations plus its administration costs. Page 7

8 Product Market Review LITHIUM PRODUCTS Global lithium carbonate/chloride/hydroxide production, which arises largely from processing of continental brines, is currently estimated at 187,000 tonnes pa of lithium carbonate equivalent (LCE), while installed capacity is close to 200,000 tpa. Tesla's sale of over US$800 Bn of storage batteries in just 2 days following product release shows the future for lithium demand Current estimates see demand for lithium rising by over 7% per annum, which will result in a doubling over the coming 10 years to over 270,000 tpa of LCE. An annual increase in market consumption of 7,000-9,000 tonnes of LCE should easily absorb Galaxy s proposed start-up volume of 8,000 tpa in In recent years, as the market for lightweight, high performance Li-ion batteries to power mobile and hand held equipment has ballooned, consumption of lithium compounds has expanded. In response to this growth, Chinese processors began to access higher cost lithium by roasting and leaching spodumene, either with sulphuric acid or using an alkali leach solution of sodium carbonate to access lithium carbonate. The major producers include brine operations in Chile, Argentina and China while Australia s production arises largely from the high grade Greenbushes spodumene mine, while several additional projects are in the wings, including the re-commissioning of Galaxy s Mt Cattlin mine. About 35% of lithium compounds find application in the manufacture of ceramics and high temperature glass, such as that used for glass cook-tops, coffee plungers and the like where a low coefficient of expansion is required. Lubricating greases, metallurgical powders and polymers account for a further 19% and air treatment adds a further 5% to market share. Most of the legacy or non lithium-ion/polymer (Li-ion) battery uses of lithium compounds are expected to experience demand growth at around global GDP expansion, or around 3-4% pa. Page 8

9 Over the past two decades, the major growth market for lithium compounds has been for the manufacture of rechargeable and primary batteries for use in consumer appliances, power tools, computers, communication devices and increasingly in transport equipment and power storage applications. Lithium ion battery technology now dominates the rechargeable battery market and combined, this area currently makes up about 31% of lithium demand and remains the fastest growing segment. Within the battery market, transport applications are set to experience an upward step-change in application as Tesla Corporation pushes ahead to build its Gigafactory near Reno, Nevada. Once price and performance issues are resolved, demand for electric vehicle (EV) applications look set to take off later this decade and into the 2020 s. Vehicle Battery Required Li 2 CO 3 C hevy Volt 16.5 kwh 14.8 kg Nissan Leaf 24 kwh 21.2 kg C hevy Bolt* 60 kwh 53 kg 70 kwh / Tesla Model S 64 kg/75 kg 85 kwh *Estimate. Source: calculations based on: Fox-Davies Research, signumbox. Sales of 114,000 Tesla Model S vehicles pa would require ~8,000 tpa of LCE, equal to Galaxy s initial target output from Sal de Vida. Longer term, power storage for remote and off-grid applications are set to add significant tonnage to the lithium market in the 2020 s as smart-grids combine with storage and renewable power generation technology to reduce capital costs, leading to a likely outlook for very strong expansion in lithium demand at rates of around 10% pa during the 2020 s. Early technology focused on nickel-cadmium and NMH batteries is rapidly being overtaken by the lighter, more energy dense and better performing lithium based batteries now is use and development. There are several technologies competing in the lithium-ion battery arena. Each has its own intellectual property attached. As technical improvements enhance battery performance, more applications are found and the common theme is that all these batteries use lithium carbonate or hydroxide in the manufacture of their cathodes, which now accounts for over 80% of the rechargeable battery market. Page 9

10 In China, production of electronic bikes is booming and has passed 2 million units per month. Restrictions on the manufacture and use of lead-acid batteries, combined with the superior performance and weight characteristics of Li-ion batteries is opening up this market as more manufacturers switch to Li-ion batteries. One of the limiting factors that may hold back manufacturers from adopting the Li-ion batteries is fear of secure supply. Galaxy is in a strong position to guarantee supply to downstream customers in volumes and at the quality required to underpin investment that must be undertaken by battery makers. High performance batteries make up a large section of the growing market for lithium, with Li-ion and various modifications, accounting for this growth. Generally, ~1 kg of lithium carbonate is required for each kwh of battery capacity. Each Toyota Prius has a 1.5kWhr battery and there are over 17 million of these vehicles that currently use NMH batteries. Fully electric vehicles, such as the Volt, will need a 16.5 kwh battery containing ~15 kg of lithium carbonate. Even at the current Li-carbonate price, this amount represents just $98 per battery, so the price of lithium is not a significant factor in the final product cost. The energy density of Li-ion batteries is twice that of competing Ni/Cd batteries, but they are fragile, requiring protection circuits which limit peak voltage. The industry is experiencing rapid technological advancement, with new chemistries and circuitry introduced about every 6 months. Latest advances involve lithium/polymer/gel technologies. Several new battery making ventures have recently been announced, including Matsuchita, Volkswagon/Sanyo and Nissan-NEC, which have announced new, large scale manufacturing initiatives which are likely to raise demand for lithium after TANTALUM MARKET Tantalum metal has a number of physical properties which make it suitable for a range of applications including: Use in capacitors due to the metal s high capacitance to store and release energy An additive in superalloys in the manufacture of aircraft and land based turbine blades Tantalum carbide cutting tools Mill products for corrosive resistant piping, vessel lining and valves High purity tantalum oxides and chemicals for optical lenses and anti-reflection coatings Market data is difficult to find, but demand for Tantalum experienced annual growth of around 5% pa over the 15 years to 2007, with peak growth at the height of the tech market boom in Primary production currently stands at about 3.75 million. Australia and Brazil together supply about 50% of global production with large supply from Source: Talison Minerals Page 10

11 Strengths RISING DEMAND FOR LITHIUM: Auto makers are initiating programmes to develop fully electrical or hybrid electric vehicles, using Li-ion batteries. Chinese battery makers are gearing up to expand capacity. Warren Buffett and Tesla have invested in the industry ahead of roll-out for mass domestic power storage applications. SKILLED TECHNICAL MANAGEMENT: Galaxy has a quality technical and financial team with proven ability in corporate management. LARGE RESOURCE BASE: The company s Resources at Mt Cattlin, James Bay and Sal de Vida are well understood and the projects do not appear to be resource constrained. LOCATION: Projects are well located with respect to transport, services, labour and utilities. Opportunities EXPLORATION: Galaxy has extensive lithium Resources and has established relationships with customers. CORPORATE ACTIVITY: As a leader in its industry, Galaxy may attract corporate interest. Africa and co-product supplies for other sources making up the remainder. The tantalum price jumped from around US$30/lb in the mid 1990 s to a peak of US$250/lb in the late 1990 s on the back of demand for mobile phone capacitors and has recently settled under $200/lb. Industry observer Roskill sees the tantalum market tightening into 2016, expecting a return to 5% growth rates will have the market in balance or slight deficit by One serious issue for consumers is the large supply of tantalum sourced from conflict areas in the Congo, Nigeria, Ethiopia and Rwanda. Providing an alternative supply from Australia would be welcomed by many end users. S.W.O.T Analysis Weaknesses FUNDING: The company has a high level of debt that it must restructure ahead of making a transition to generating operating cash flow, firstly from Mt Catlin tantalum and lithium, and then from Sal de Vida. SMALL COMPANY: Risk adverse equity markets find smaller companies to be high risk. START-UP PROJECTS: Galaxy will need the ongoing support of customers and its financing partners. Threats FUNDING: Galaxy will need to attract funding to support growth objectives. Strong relationships with Chinese banks and potential joint venture partners should assist in this task. COMPETITION: Rising prices for lithium minerals are likely to draw in additional suppliers, potentially leading to lower commodity prices. Galaxy will need to work closely with customers to ensure that it is not in competition. Operating in an environment where Chinese producers and customers are major players presents special marketing risks. TECHNOLOGY CHANGE: Technology in the lightweight battery industry is rapidly evolving, but Li-ion is likely to be at the heart of this industry for decades. Page 11

12 Board & Management Martin Rowley Chairman Martin was a co-founder of TSX and LSE-listed First Quantum Minerals Ltd and remains its Executive Director, Business Development. First Quantum is one of the world's largest copper production companies and owns the Ravensthorpe nickel project in Western Australia. He was previously nonexecutive Chairman of Lithium One Inc., which was acquired by Galaxy in July Anthony Tse Managing Director Anthony has 20 years of corporate experience in high growth industries such as technology, media and entertainment, resources and commodities, primarily in senior management, capital markets and M&A roles. He was formerly the Director of Corporate Development at Hutchison Whampoa's TOM Group (HKSE), Deputy General Manager of TOM Online (NASDAQ), President of CETV (TOM/ Time Warner) and CEO of CSN Corp, as well as various positions at new Corporation's STAR TV. He joined the Board of Galaxy in late 2010 and was formerly appointed Managing Director in November 2013, following a management restructure of the company. Charles Whitfield Executive Director Charles has an MBA from Columbia University and is the Principal Investment Officer of Drumrock Capital, an investment firm providing capital and advisory services to start-up and early round companies. He was formerly a Managing Director with Citigroup where he held the position of head of the corporate equity solutions group (Asia Pacific). Jian-Nan Zhang Non Executive Director Mr Zhang is the Deputy General Manager of Fengli Group (Australia) Pty Ltd, a subsidiary of the Fengli Group in China, which is a leading private industrial group in China, holding interests in iron and steel, commodities trading, shipping and wharf operation related businesses. He is a Galaxy shareholder and was previously Managing Director of Winly Trade & Investment in China. Disclaimer The information herein is believed to be reliable but the author, Strachan Corporate Pty Ltd, ABN ; AFSL ( Strachan ), does not warrant its completeness or accuracy. Strachan has relied on information which is in the public domain and has spoken with management. Opinions and estimates constitute Strachan s judgment and do not necessarily reflect those of the Board and management of Galaxy Resources Limited and are subject to change without notice. Strachan believes that any information contained in this document is accurate when issued however, Strachan does not warrant its accuracy or reliability. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The investments and strategies discussed herein may not be suitable for all investors. Strachan has prepared this report without taking account of any particular person s investment objectives, financial situation or needs. Therefore, before acting on the advice, you should consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. Strachan, its officers, agents and employees exclude all liability whatsoever, in negligence or otherwise, for any loss or damage relating to this document to the full extent permitted by law. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The investments and strategies discussed herein may not be suitable for all investors. If you have any doubts you should contact your investment advisor. The investments discussed may fluctuate in price and changes in commodity prices and exchange rates may have adverse effects on the value of investments. This work was commissioned by Galaxy Resources Limited and Strachan will receive a fee for its preparation. Page 12