Galaxy Resources Share Price Up on Quarterly: Lithium vs. Nickel

At time of writing, Galaxy Resources Limited [ASX:GXY] is up 6.11% trading at $1.39.

It has been a particularly tough time for the Galaxy Resources share price, locked in a steady slide over the last 12 months:

Galaxy Resources Share Price

Source: tradingview.com

It remains one of the most shorted stocks on the ASX, indicating that there are some large bets on a further decline. Today, we look at the highlights from Galaxy Resources’ quarterly update and have a look at why interest in lithium has waned. We conclude by looking at nickel’s prospects.

Galaxy resources share price reacts to positive quarterly

Let’s go straight to the highlights:

  • Exceeded Mt Cattlin production guidance of 45–50,000, with 56,460 dmt
  • Established Mt Cattlin as one of the lowest cost lithium concentrate operations globally
  • Total shipments of 29,439 dmt
  • Target of 60–70,000 dmt to be shipped in Q3 of this year
  • Cash of $176.3 million (just over 30% of its market cap)
  • No debt
  • Further progress on Sal de Vida project
  • James Bay feasibility study still on track

This array of positive news might have some investors thinking the Galaxy Resources share price could be about to snap out of its current rut.

But today’s trading was still relatively muted.

Part of this must come down to lithium prices — in its market update Galaxy said:

Domestic lithium chemical prices in China fell marginally in Q2 2019, with current spot prices of c. RMB73,000 — RMB75,000 (c. US$10,500 — US$11,000) per tonne for battery grade lithium carbonate and c. RMB83,500 — RMB90,000 (c. US$12,500 — US$13,000) per tonne for battery grade lithium hydroxide.

The update cited a number of factors for the sluggish lithium prices. Among them were the trade war, a new subsidy framework in China and diminished converter margins.

Lithium price forecast vs. nickel price forecast

But it gets worse.

A report from June by the Department of Industry, Innovation and Science, provides the following lithium price forecast through to 2020–21:

lithium price

Source: Department of Industry Innovation and Science

We note from this data that Australia will potentially be shipping significantly more lithium, but at a lower price.

So margins at companies like Galaxy Resources could be diminished.

But what about nickel?

The export value of nickel is forecast to expand from $3.5 billion this year to $4.9 billion by 2020–21.

The price could potentially rise by as much 15%, as well.

This indicates to us that as much as many investors want to believe that lithium remains their best speculative resource, other resources such as nickel deserve attention.

Especially if you are a battery geek.

If you want to learn more about nickel’s role in EV batteries, and pick up the names of key nickel stocks, be sure to download our free nickel stocks report. Our editor Harje Ronngard explains why the Galaxy Resources share price has not been able to replicate its previous trajectory, and examines the potential of the nickel market.

Regards,

Lachlann Tierney,

For Money Morning


Lachlann Tierney is a writer for Money Morning and has been investing for nearly a decade. With a Masters of Science from the 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. Recently he has been working with Ryan Dinse. He is involved in three publications:


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