Galaxy Resources Ltd [ASX:GXY] is in a trading pause as the market waits for their next announcement. At time of writing, Galaxy’s share price is hovering around $1.54 apiece.
This latest pause in trading comes after last week’s placement between Galaxy and Alliance Mineral Assets Ltd [ASX:A40] to raise funds for continued upgrades to processing facilities at WA’s Bald Hill Lithium and Tantalum mine.
Nothing turns investor sentiment like a good rumour
There has been some speculation from investors over the last couple of days on whether Galaxy is transforming itself from a lithium exporter to a battery chemicals producer. This is on the back of several rumours the company has invested in an unnamed Chinese processing plant.
This even led to Galaxy releasing a statement this morning:
‘Galaxy confirms it has held, in the ordinary course of its business, a number of conversations with various parties about possible co-operation in a chemical processing plant in China.
‘At present all conversations have been informal and are incomplete, and no binding or non-binding documentation has been signed.’
If true, then a greater amount of Galaxy’s spodumene concentrate resources would go towards processing to make lithium carbonate and lithium hydroxide — key EV battery components.
Galaxy did earlier confirm the alliance with A40 was part of a strategic deal to move away Mt Cattlin, which has a ‘limited life’.
Is this the right long-term plan for Galaxy shares?
The market’s desire for lithium batteries and subsequent components seems like a good reason for Galaxy to look beyond just exploration. And it stands to reason that China, a country with a raging hunger for everything EV, would want a better standard of lithium to get them through the demand.
A downside for Galaxy is the worse than previously projected growth in the battery component market, which has slowed considerably. This spectre of slower growth in the industry is not something investors are warming to.
It would be wiser for investors to wait until the result of the trading halt is clear — particularly if it turns out true.
For Money Morning
PS: Free report reveals three tiny mining stocks set to ride the lithium frenzy. Click here to find out who they are.