PROJECTS

Sal de Vida - Argentina

The Sal de Vida (Salt of Life) Project is located in NW Argentina in the Lithium Triangle, home to more than 60% of the world's annual production of lithium from brines in the Salar de Atacama and the Salar del Hombre Muerto.  The Salar lies approximately 1,400 kilometres NW of Bueonos Aires at an altitude of 4,025 metres. The property is accessible from the city of Salta via an all-seasons road, and there is a major powerline 115 kilometres away.

The Sal de Vida deposit has emerged as one of the largest and highest grade undeveloped lithium brine deposits in the world with significant expansion potential.  The Project hosts a NI 43-101 Resource Estimate of 4,053,000 tonnes of lithium carbonate
("Li₂CO₃") equivalent of 16,071,000 tonnes of potash ("KCl") equivalent in the measured and indicated categories, plus an additional 3,180,000 tonnes of Li₂CO₃ equivalent and 12,762,000 tonnes of KCl equivalent in the inferred category.

Table 1: Sal de Vida Resource Statement

Cutoff grade:500mg/L Lithium

The reader is cautioned that mineral resources are not mineral reserves and do not have demonstrated economic viability. (Refer to news release of January 25, 2012 for additional details).

The total contained lithium and potassium values are based on measurements of effective (drainable) porosity, with an average of 7.7%.

Definitive Feasibility Study

The Sal de Vida DFS continues to progress well and is expected to be completed in Q1 2013. Argentinean engineering firm TAGING S.A. ("TAGING"), which specialises in Argentinian mining projects with extensive experience in lithium brine projects, has been appointed to complete the DFS.  International engineering company Hatch Ltd ("Hatch") is providing specialist process input for Galaxy during the DFS process.  Hatch was the designer and EPCM contractor for the Jiangsu Plant and also has extensive lithium brine and operational experience in South America.

Preliminary Economic Assessment ("PEA")

In October 2011 the first PEA for Sal de Vida modelled the economics of a conventional evaporation recovery circuit for lithium and potash, using data collected from the drilling programs, pumping tests, evaporation circuit and pilot plant work and other engineering and process studies.

The PEA used commodity pricing from a study commissioned from Roskill Information Services, which yielded average pricing per tonne of US$5,490 for lithium carbonate and US$620 for potash for the 2011-2025 period, expressed in 2011 dollars.

Table 2: Preliminary Economic Assessment Highlights ($US, Pre-tax)

Additional details can be found in the original news release as well as the full Technical Report filed on SEDAR on November 2011

The PEA outlined an operation producing 25,000 tonnes pa Li₂CO₃ and 107,000 tonnes pa KCl, with a 28% IRR and a US$1.066 billion NPV8 pre tax. The PEA foresees high net cash flow and low unit cost for lithium carbonate, with KCl revenue projected to more than cover total operating expenses.

In March 2012 Galaxy announced a new resource estimate for Sal de Vida.  This resource estimate is more than 30% greater in the estimated total contained lithium and potash and approximately 10% higher grade than the inferred resource used in the PEA.  The increases are expected to significantly benefit the Project economics for the final feasibility study.  Work is now continuing on various aspects of the Project including resource expansion and upgrading, pumping tests and process refinement in order to complete the feasibility study Q1 2013.

Location and Geology

Galaxy controls 100% of the brine mineral rights over more than 385km² on the eastern half of the Salar del Hombre Muerto. The western half of the Salar is the site of Argentina's only commercial scale lithium mining operation owned by Minera del Altiplano, a subsidiary of FMC Corporation.  The Fenix operation has been producing lithium since 1997 and according to FMC's website has a mine life of over 75 years.

A salar is a predominantly dry lake bed within a restricted drainage basin. Normally, the dry climate and lack of drainage results in the deposit of salt and borate minerals with sand and clay intervals. Just below the surface, the pore spaces of the unconsolidated sands, silts and salt bodies are filled with water.  Near surface, the water is brackish and below approximately 2 metres in depth, the water is consistently very salty (brine). In addition to ordinary salt (sodium chloride), the brines also contain high concentrates of dissolved potassium chloride, lithium chloride and boron.

The Salar del Hombre Muerto lies in the high altitude Puna, a plateau comprised of basins and ranges discrete from the much larger Cordillera-bounded Altiplano basin to the north. Outcropping basement at Farallon Catal divides the basin into Western and Eastern sub-basins. The origin of lithium in the brines of the Puna is not well known. The area is underlain by an extensive magma chamber at depths of only 4km and this could be the ultimate source, lithium being transported to the surface via volcanic activity, especially hydrothermal vents.  It is not known whether the transfer was as a result of the leaching of lithium-bearing volcano clastic sediments or by the recycling of trapped lithium-bearing solutions.

The Sal de Vida brines average about 780mg/L Li. They also have potassium concentrations averaging around 0.87mg/L K, low magnesium and sulphate.  High magnesium content can increase the production costs of lithium carbonate. The Sal de Vida Mg:Li ratio of approximately 2.2 and SO₄ Li ratio of 11.5 are low by industry standards. The Salar de Atacama in Chile, the largest lithium producing brine operation in the world, reports Mg:Li ratios of more than 4 and Salar de Uyuni in Bolivia has an Mg:Li ratio of more than 14.

In addition to the brines, the Salar hosts near surface deposits of ulexite, a sodium-calcium borate mineral mainly used for the production of boric acid.