Alita Resources, also based in Australia, suspended securities trading on August 14 to discuss its debt situation with its consortium of lenders led by Tribeca Investment Partners, Fastmarkets reported earlier.

On August 16, Tribeca gave Alita a notice of default from the group of lenders for $27.02 million.

Galaxy has not specified by how much its ownership of Alita will increase by taking on this debt. Galaxy invested $22.5 million for 12.22% of Alita's shares on May 31 this year.

“Acquisition of the facility provides Galaxy with the flexibility of being the secured lender to Alita as well as being the largest equity holder,” Galaxy chief executive officer Simon Hay said. "As the senior secured creditor, Galaxy can work directly with all stakeholders to examine the best possible reorganization options.”

Falling lithium chemical prices in China have had a direct impact on lithium spodumene prices, the material produced by Alita and used for production of lithium chemicals in China.

Fastmarkets' monthly spodumene (min 5-6% Li2O) contract price has fallen by 30.42% to $585-650 per tonne cif China on July 31, from $850-925 per tonne on August 29 of 2018.

Conversations between Fastmarkets and the lithium market indicate the lithium spodumene price could fall further in the coming months.

Alita produces lithium spodumene concentrate from its nameplate Bald Hill Mine in Western Australia and has an offtake agreement with China’s Jiangxi Bao Lithium for 80,000-100,000 tonnes in 2019.

Alita will also be selling close to 20,000 tonnes of lithium spodumene on a spot basis throughout 2019. 

Galaxy Resources said during its second-quarter results that it will produce 180,000-210,000 tonnes of lithium spodumene concentrate in 2019 from its Mt Cattlin mine in Western Australia.

This is up from 156,689 tonnes of the same material produced across 2018.