The three-year feedstock contract with Talison Lithium is expected to commence in July after existing stockpiles at Jiangsu have been depleted.

Galaxy temporarily suspended production at Mt Cattlin in July 2012 due to high inventory levels of spodumene at Jiangsu but said the sustained high Australian dollar had impacted local operating costs.

Managing director Iggy Tan said the decision to use Talison was the best financial option.

“Given the current exchange rate and the adverse impact on local operating costs, it is financially a better option to purchase external spodumene today instead of resuming operations at Mt Cattlin,” he said.

“The Talison Greenbushes mine has the benefit of a threefold head grade and greater capacity compared to Mt Cattlin and can better weather the impact of the high Australian dollar.”

Despite the decision to keep Mt Cattlin shuttered, Galaxy will hold onto the mine as a backup.

“Galaxy believes Mt Cattlin is a valuable strategic asset for the company and purchasing external spodumene maintains Mt Cattlin’s resource base without further depletion,” Tan said.

“Mt Cattlin remains an important security of feedstock supply for the company.”

A small workforce will remain onsite to maintain the mine and processing plant and the company said Mt Cattlin could come back online quickly if it was needed.

Galaxy shares dropped 5.2% to A36.5c.