INTERVIEW WITH MICHAEL FOTIOS, MANAGING DIRECTOR OF GALAXY RESOURCED LIMITED (GXY)

“Mt. Cattlin Progressing As Lithium Gains International Interest”

http://www.brr.com.au/event/52246

WEDNESDAY, OCTOBER 15, 2008, 2:10 PM.

            BRR    Hello and welcome to Boardroom Radio. Today, we are speaking with Mr. Michael Fotios, Managing Director of Galaxy Resources Limited. Thanks

10                    for joining us today, Michael.

            GXY     No problems, Eddie. Good morning to you and all of your listeners.

            BRR    Michael, there has been some recent positive publicity surrounding lithium and Galaxy has had a strong focus on this with its Mt. Cattlin Project. Can we

15                    start off with some information on its use and also the opportunities that may arise?

            GXY     Well, lithium is being more widely used in everyday articles all the time, Eddie. I mean, its traditional uses especially for spodumene, the mineral that lithium comes from, have been in glass and ceramics. It is a very heat-

20                    conductive mineral and is used in a lot of those sorts of applications. Cooktops, a lot of these modern cooktops use spodumene as a surface for the cooktops. Of course, its rapidly expanding usage is in lithium-ion batteries which we see in all of our everyday devices more and more as they expand in usage. I guess the biggest upcoming demand looks like coming from lithium-

25                    ion or lithium polymer batteries in motorcars. There is also usage in pharmaceuticals and it is used in certain aspects of concrete additives or those sorts of things, so it has a very broad consumption base, but by far, the most rapidly expanding market is the lithium-ion battery market which we would expect to accelerate its expansion once we see plug-in hybrids and

30                    plug-in electric cars start to hit the market and that is what some of this recent news has really touched on. We see that as a big opportunity for our Mt. Cattlin Project to plug into that rapidly expanding demand over the next 5 to 10 years.

35        BRR    Michael, what is the significance of the recent publicity surrounding lithium?

            GXY     The most significant thing that we are seeing especially in the last couple of weeks is some very significant international investors starting to look to investing in aspects of especially the lithium battery and lithium-ion car market. We saw Warren Buffett’s Berkshire Hathaway, through a subsidiary,

40                    recently invest a couple of hundred million US dollars for 10% of a Chinese car maker called BYD who also produced or their major business is manufacturing lithium-ion batteries, but they have an arm that produces motor vehicles and that arm is now focusing on producing lithium-ion battery-powered vehicles and they have recently come out since that announcement

45                    by Mr. Buffett’s company that they intend to be producing these cars next year. So, we are starting to see a number of car makers around the world. There was one in Europe recently that said they would be in commercial production next year. General Motors has talked about being in production in 2010 with a domestically available retail model which is sort of a four-cylinder equivalent plug-in electric. So we are really starting to see a ground swirl of movement towards electric vehicles that most of the major car companies have committed themselves to relationships with battery makers. Mitsubishi is joined with Yuasa Batteries. VW is joined with Sanyo to produce lithium-ion

5                      batteries. Sanyo is investing just under a billion dollars in a battery plant to produce batteries for motor vehicles. Nissan and NEC have formed a partnership to produce batteries for motor vehicles. We saw an announcement from Renault just the other day saying that they will have a plug-in electric car available at the end of 2009 and they were looking to

10                    source batteries from the Nissan-NEC joint ventures. So, there is a lot of activity around the world that is really starting to push towards this electric vehicle production regime. We think that has got the substantial amount of significance for the demand for lithium going forward, and given the timing of development of Mt. Cattlin, we see ourselves developing this project into a

15                    period of strong demand. Notwithstanding the current fluctuations in the market, we see the movement towards electric vehicles and the increased use of lithium-ion batteries in all sorts of applications as becoming a necessity rather than a luxury. For that reason, we think no matter what the underlying economic situation is that this is an international structural change that is

20                    going to occur no matter what.

            BRR    Michael, we have mentioned the Mt. Cattlin Projects go to the near completion of its drilling program. Can you update us on the progress?

            GXY     Yes. We have been very busy at Mt. Cattlin through our BFS process most of

25                    this year and we are moving on a number of fronts. We have finished the initial RC drilling program that was aimed at infilling the existing resource that we announced in December last year. We have announced some results from that already which have been very encouraging both from the point of view of the infill drilling which has confirmed both the geological continuity

30                    and is confirming the assay continuity, although we have some more assays to receive from the last part of the program yet, but it certainly looks very encouraging. We have also found some extensions exist to the west, the north-west, and we think to the south, so the deposit is open. We feel we have confirmed that. We have also drilled some deep holes which we have

35                    announced in recent weeks that have confirmed the presence of a series of stacked pegmatites at Mt. Cattlin which is opening up the potential for development of mineralization at depth and we eagerly await the assay results for this. So, from a drilling point of view, we have completed that initial program. We have been so encouraged by the results from that that we will

40                    probably now go back during November and do some additional extensional drilling and this will be in conjunction with some sterilization drilling that we plan to do for the proposed plant site at Mt. Cattlin, so we have been very pleased with that progress. Other aspects of the BFS including metallurgy and engineering and the formal approvals process, some of our detailed

45                    lithium carbonate metallurgy is going well, and we hope to have a BFS update on the progress of all of these things in the next few days to get out to the market.

            BRR    Mike, what does Galaxy have planned for this project moving forward?

            GXY     Whoever it came to see completion of the BFS around Christmastime, that will give us the answers we need on the way forward. We are very positive about the opportunities for lithium going forward. We will also produce a significant amount of tantalum concentrates from the proposed project and

5                      there are signs in the market that their prices are significantly improving as well coming in the next year and the year after. So, we are aiming towards/moving towards the development next year and we are very confident that we can achieve that. So far, all of the results that we are receiving are very positive so we are moving as quickly as we can towards

10                    that goal of getting this project developed and being in production during 2010 to hopefully produce lithium carbonate ourselves, although one option we do have is to initially convert lithium carbonate with other producers and then as we move forward build our own lithium carbonate plant, but that is all part of the BFS analysis and certainly the test work that we are doing so far

15                    on the lithium carbonate we feel is moving ahead well and we should have some results as I have said in the next few days on how that is going.

            BRR    Mike, just lastly, Galaxy has also recently appointed Dr. Ignatius, also known as Iggy Tan, to the Board as Non-Executive Director. It must certainly be

20                    pleasing to have someone with his experience as part of the team?

            GXY     Yes, look, it is great to have Iggy on the Board and then he has got experience in these chemical processing operations. It has been something that he has focused on during his career and we are trying to make a conscious effort now to build up the Board so that we bring on expertise in

25                    these areas that we look to be developing our capabilities or production capabilities in and Iggy is a very welcome addition to the Board and has been a very positive contributor so far. So, we look forward to him getting more involved in what we are doing especially as we move into this chemical processing aspect of the Mt. Cattlin development which we think is the key

30                    way for us to add value to the resource as to moving forwards into that sphere of producing lithium carbonate and being able to deliver battery grade lithium carbonate to the market which is a product that commands a premium.

            BRR    Michael, we thank you for taking the time today to give us the update about

35                    Galaxy and its lithium project and we look forward to speaking to you soon.

            GXY     It is a pleasure, Eddie, and we look forward to speaking to you again soon.

            BRR    That was Mr. Michael Fotios, Managing Director of Galaxy Resources. If you have any questions about this broadcast or any other broadcast, please feel

40                    free to contact us on brr@brr.com.au. I am Eddie Saade and thank you for listening to Boardroom Radio.

INTERVIEW CONCLUDED

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