Galaxy Resources has revealed it will incur a cost impairment of up to $274 million following a review of inventory at the Mt Cattlin lithium mine in Western Australia.
Mine development costs at the site were attributed to the acquisition of General Mining and deferred tax assets arising from capitalised tax losses.
This has resulted in the company anticipating a non-cash impairment for the first half of this year in the range of $US150 million ($220.3 million) to $US185 million.
Once finalised and reviewed by auditors, the adjustment is set to be included in Galaxy’s financial statements for the half-year ending June 30, which are scheduled to be released in late August.
Galaxy said that the adjustment arising from this impairment is a non-cash item and therefore does not have any impact on cash-flow, operations or banking covenants.
As of June 30, this year, Galaxy held cash of $US176.3 million, marketable securities of $US27.2 million and no debt.
The Mt Cattlin project is two kilometres north of Ravensthorpe and mines pegmatite ore that is processed on site to produce spodumene concentrate.
At full capacity, ore can be processed at a rate of 1.6 million tonnes per annum with lithium oxide concentrate production at 180,000 tonnes per annuum.
The output is being used to fuel the growing international electric vehicle market, which has recently seen an oversupply, leading to a volatile price for the commodity.