Galaxy Resources Shares Rise as It Plows Ahead with Lithium Plan

A few years ago, lithium was the talk of the town.

Everyone was talking about the potential of this hot, new commodity. A vital ingredient in ever promised battery revolution.

But, like so many promising innovations, the hype was far bigger than reality.

It’s not that lithium hasn’t made an impact, it’s just that it hasn’t made as big an impact as people had hoped. At least, not yet…

That hasn’t stopped lithium miners like Galaxy Resources Ltd [ASX:GXY] from giving up though, one of the few big names in lithium that is still committed to the sector.

And today, they unveiled their latest plan to further their lithium ambitions. Leading to a modest 1.18% rise in their share price at time of writing.

Bigger, better, bolder

Working out of Argentina, Galaxy has advanced to the design phase of its Sal de Vida project. A prospective lithium brine site that is set to come fully online by 2022.

In the meantime, Galaxy is preparing for a slew of pilot plant tests. The first of which are slated to commence sometime this quarter. That is, as long as COVID-19 doesn’t lead to any restrictions.

Suffice to say, this will be a lengthy process of trial and error. Finding out what works, and what doesn’t so that tweaks can be made.

Broadly speaking though, it is an important step forward for the company. One that will no doubt play a major part in their long-term success or failure.

As mentioned, they are committed to lithium and this site could be a premier producer of the metal.

Trouble is, lithium as a whole is in a tricky spot at the moment. Even Galaxy concede that the market is in a tough spot right now, commenting:

Market conditions in the lithium sector remain challenging due to inventory overhang in the upstream section of the value chain and an uncertain near-term outlook for most end markets due to COVID-19.

But that doesn’t mean all hope is lost either, as Galaxy continues:

However recently announced stimulus packages are expected to accelerate the pace at which electric vehicles (“EV”) are adopted globally.

They are in desperate need of an EV demand boom. An outcome that is certainly possible, but in need of some subsidised help. Which is exactly what the industry is hoping for.

It is simply a matter of whether it will arrive in time.

Waiting for the boom

According to Galaxy, current prices are going to lead to an eventual lithium shortage.

They believe that low margins are slowing or even stopping new mines or expansions from going ahead. Creating a scenario where current supply will eventually give way to higher prices as demand grows.

At least, that’s what they’re hoping for.

An unexpected ‘lithium bounce-back’, if you will.

Sounds like old news? Well, you might be surprised.

We’ve done some investigation and believe that the lithium story is far from over. In fact, Galaxy might be right on the money with their forecast. Because a lithium demand boom looks as though it could be right around the corner.

You can read all about it — and three of our favourite lithium plays — in our new report, right here.


Ryan Clarkson-Ledward,
For Money Morning

Ryan Clarkson-Ledward is an Editor at Money Morning.

Ryan holds degrees in both communication and international business. He helps bring Money Morning readers the latest market updates, both locally and abroad. Ryan tackles all the issues investors need to know about that the mainstream media neglects.

Ryan is also the Editor of Australian Small-Cap Investigator, a stock tipping newsletter that hunts down promising small-cap stocks by dissecting the latest events affecting the world.

To find out more about the publications Ryan works on and how you can subscribe, please click on the corresponding link here:

Money Morning Australia