Galaxy Resources Reserves Up, Share Price Stagnates – an Explanation

At time of writing, the share price of Galaxy Resources Limited [ASX:GXY] is up a meagre 1.36%, trading at $2.24 per share.

The stock has been caught in a slide over the last year:

Galaxy Resources Share Price

Source: marketindex.com.au

The latest news was thoroughly positive, but markets greeted it with a shrug. This article looks at what could be behind this.

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Huge expansion of reserves does little for Galaxy Resources’ share price

Straight to the highlights then:

Galaxy Resources Share Price

Source: Galaxy Resources Limited

A 42% increase in resource tonnage is a significant jump for the company.

For a company looking at a 17-year life of mine, this would represent an approximately eight years increase in its life of mine.

As of Q3 2018 it was selling 29,555 dmt of lithium concentrate. This was:

primarily due to lower feed grade, and weathered ore being treated from the 2SW pit, coupled with a reduced recovery arising from delays in completion of the Yield Optimisation Project.

In further good news for Galaxy Resources from today:

The yield optimization program, which included the installation of an ultrafines DMS (dense media separation) circuit, ore optical sorting circuits, and a WHIMS (Wet High Intensity Magnetic Separation) circuit has now reached practical completion.’

It also provided further guidance as to the economics of its operation:

Galaxy Resources Share Price

Source: Galaxy Resources Limited

Perhaps the key takeaway from this is the impact a declining Aussie dollar could have on their sales.

But as for why the market shrugged off this announcement, it is worth considering two things.

As of 17 January, the ASX reports that around 17% of the total product issue are short positions on Galaxy Resources.

So a lot of investors are betting on the stock going down.

Another thing to remember is that lithium’s prospects in the short-term remain dampened.

For a more in depth look at lithium, Sam Volkering has written a piece which is available here.

As a long-term play, Galaxy Resources appeals as it has nil debt and lithium may well experience a resurgence in demand as the electric vehicle revolution takes hold.

Regards,

Lachlann Tierney,
For Money Morning

PS: Don’t buy a single lithium stock until you’ve read this free report. Download our free guide to learn more.


Lachlann Tierney is a writer for Money Morning and has been investing for nearly a decade. With an MSc from London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest their money wisely.


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