General Mining : 29 May 2016 - Notice of Initial Substantial Holder from Galaxy Resources

225750e7-0d2c-419d-8104-845b3c76e35a.pdf ASX Release

30 May 2016

GALAXY RESOURCES AND GENERAL MINING TO MERGE CREATING LEADING DIVERSIFIED GLOBAL LITHIUM PRODUCER Highlights of the Merger

• Creation of a leading diversified global lithium company with a large wholly-owned portfolio of hard rock and brine based lithium assets located in multiple jurisdictions.
• Leading growth profile underpinned by Mt Cattlin production, the development of the Sal de Vida brine project in Argentina and James Bay hard rock project in Quebec, Canada.
• Positioned to be a major supplier of high quality lithium, servicing the growing demand from energy storage applications.
• Strong financial position with a strong pro-forma balance sheet and growing cash flow generation to support continued project expansion and development, and further industry opportunities.
• Enhanced equity and capital markets profile with a combined pro-forma market capitalisation in excess of A$700 million.
• Significant growth potential with existing and expanding production, diversified and superior growth profile, proven management and operating teams, strong balance sheet and greater international market profile.
• Galaxy and General Mining Boards unanimously support the merger.
• 4.94% of General Mining shares have entered into pre-bid acceptance agreements. In addition, other General Mining shareholders associated with Michael Fotios, the Chairman of General Mining, representing a further 10.56% of General Mining shares outstanding have made statements of intention to accept the Offer, in absence of a superior proposal.

Galaxy Resources Limited (ASX:GXY) (Galaxy) and General Mining Corporation Limited (ASX:GMM) (General Mining) have entered into a definitive Takeover Bid Implementation Agreement (Implementation Agreement) to merge the two companies. It is proposed that Galaxy will acquire all of the issued shares of General Mining that it does not already own in a share based transaction by way of an off-market takeover offer (Offer).

Under the Offer, General Mining shareholders will receive 1.65 new Galaxy shares for every 1 General Mining share held, which represents a 9.4% premium to the 10-day volume weighted average price (VWAP) and 13.5% premium to the 20-day VWAP to Wednesday 25 May 2016. Based on Galaxy's closing share price of A$0.395 on the ASX on 25 May 2016 (being the last day General Mining and Galaxy shares traded before the announcement of the Offer), the Offer values General Mining at approximately A$216 million (on a fully diluted basis) or A$0.652 per share (on a fully diluted basis).

The Galaxy proposal is unanimously recommended by the directors of General Mining who have also agreed to accept Galaxy's Offer in respect of all shares they control, in each case in the absence of a superior offer.

Strategic Rationale for the Transaction

The merged entity creates a leading diversified, global lithium producer well positioned for continued project expansion and development and further opportunities.

• A leading and diversified global lithium company with existing production and a pipeline of market leading development projects.

• Attractive, wholly-owned and geographically diversified portfolio of hard rock and brine based lithium assets across multiple jurisdictions:

  • Maiden spodumene and tantalum production in 3rd quarter 2016 at Mt Cattlin, Western Australia, generating significant and growing cash flow.

  • Flagship world-scale Sal De Vida Project in Argentina with superior brine chemistry and significant expansion potential.

  • James Bay Project in Canada provides valuable potential to be a future supplier into the rapidly growing North American market.

• Positioned to be a major supplier of high quality lithium, servicing the high-growth demand from energy storage applications including long life lithium-ion batteries used for electric vehicles, domestic and commercial power storage, consumer electronics and power tools.

• Simplified single ownership structure and operational management of assets currently owned via the Galaxy-General Mining joint venture.

• Pro forma market capitalisation of merged entity in excess of A$700million; potential to become an ASX/S&P 200 company and opportunity for re-rating.

• Strong balance sheet well positioned for continued project expansion and development.

• Merged Board and management team highly credentialed and experienced with strong connections in the key Asian and North American lithium markets.

Management and Governance

Martin Rowley, Chairman of Galaxy, will remain as Chairman of the Board of the combined group. Anthony Tse, Managing Director of Galaxy will remain as Managing Director of the combined group and Michael Fotios, Executive Chairman of General Mining, will be offered a position as a Director on the Board of the combined group.

It is anticipated that the new Galaxy Board will be further strengthened with the appointment of new directors to add international technical and financial experience and expertise.

Galaxy Chairman, Martin Rowley, said:

"We are extremely pleased that the joint venture arrangement we entered into with General Mining in 2015 has resulted in a merger proposal that makes sound strategic sense and, importantly, gives the shareholders of both Galaxy and General Mining the opportunity to participate in the upside of a merged lithium company of global significance.

"The arrangement struck between Galaxy and General Mining has enabled the re-commissioning of the Mt Cattlin mine, drawing on General Mining's financial and technical resources, with Mt Cattlin now poised to deliver first production of spodumene to contracted buyers in the third quarter of calendar 2016.

"We are confident that merging the companies will result in significant benefits to both sets of shareholders with the opportunity for a re-rating for the expanded shareholder base from the enhanced equity and capital markets profile.

General Mining Chairman, Michael Fotios, said:

"General Mining and Galaxy are an excellent and natural fit, given existing joint venture owned assets, complementary project development and operational expertise, as well as aligned, success driven cultures.

"Both companies have successful track records of creating substantial value for shareholders and, together, we will retain this focus. Our ability to capture future growth opportunities in the rapidly evolving lithium market will be significantly enhanced by this merger."

Transaction Details

The Offer will be implemented by way of an off-market takeover offer under the Australian Corporations Act.

The Offer extends to any General Mining shares that are issued as a result of the exercise of General Mining options during the Offer. In addition, Galaxy intends to enter into private treaty arrangements with General Mining's option holders to acquire their options in exchange for new Galaxy options.

Following implementation of the Offer, General Mining is expected to become a wholly-owned subsidiary of Galaxy, with current Galaxy and General Mining shareholders holding 71% and 29% respectively of the enlarged Galaxy.

The Implementation Agreement and the Offer are subject to typical conditions precedent, including:

• a 90% minimum acceptance condition, which (at any time prior to Galaxy receiving acceptances representing 80% of General Mining shares) can only be waived with the consent of General Mining;

• no prescribed occurrence (as defined in the Implementation Agreement) occurring in relation to General Mining;

• no material adverse change (as defined in the Implementation Agreement) occurring in respect of General Mining ;

• no material acquisitions, disposals or new commitments being undertaken by General Mining; and

• other customary conditions as set out in the Implementation Agreement, including no regulatory intervention which (among other things) restrains or prohibits the Offer.

Refer to the Implementation Agreement, separately released to the ASX, for a full copy of the conditions which will apply to the Offer.

The Offer is expected to close during the third quarter of calendar 2016.

Galaxy will remain headquartered in Perth, Western Australia and will maintain its listing on the Australian Securities Exchange.

Pre-bid Acceptances and Shareholder Intention Statements

General Mining shareholders representing 4.94% of General Mining shares outstanding have entered into binding pre-bid acceptance agreements to accept the Offer in respect of their General Mining shares in the absence of a superior proposal. This combined with Galaxy's existing holding of 1.92% of General Mining shares means Galaxy currently has a relevant interest in 6.86% of General Mining shares on issue.

The full terms and conditions of the pre-bid acceptance agreements are attached to Galaxy's initial substantial shareholder interest notice, in relation to General Mining, which has been lodged on the ASX announcements platform.

In addition, other General Mining shareholders associated with Michael Fotios, the Chairman of General Mining, representing a further 10.56% of General Mining shares outstanding have made statements of intention to accept the Offer in respect of their General Mining shares in the absence of a superior proposal.

Timetable

It is expected that Galaxy's Bidder's Statement and General Mining's Target's Statement, containing further information about the Offer, will be posted to General Mining shareholders in June 2016.

Further details about the Offer, the conditions to the Offer, deal protections and proposed timetable are set out in the Implementation Agreement, which will be released on the ASX at the same time as this announcement.

Advisers

Canaccord Genuity is acting as financial adviser to General Mining and Squire Patton Boggs is acting as Australian legal adviser to General Mining.

Steinepreis Paganin is acting as Australian legal adviser to Galaxy.

Investor Conference Call

A conference call will be held for investors, analysts and media on Monday 30 May 2016, 12.00pm (AEST) Conference call details are:

Toll free: 1800 123 296

International: +61 2 8038 5221

Conference ID: 2291 7844

To ask a question, participants will need to dial "*1" (star,1) on their telephone keypad