Galaxy Resources Limited

GXY Details

Update on Corporate Strategy for FY20 and Beyond:Galaxy Resources Limited (ASX: GXY) is involved in the production of lithium concentrate; and exploration of minerals in Canada, Australia and Argentina. On November 18, 2019, the company informed the market about its corporate strategy for 2020 and beyond. It is committed to leverage its two world-class development assets to create a sustainable, large scale, global lithium chemicals business via organic growth. One of the primary actions in this strategy is to advance Sal de Vida to execution in 2020. Under its Sal de Vida project, the company has concluded its process test work and the evaluation of alternative technologies. The result of this work is the selection of an in-house developed, simplified flowsheet which will underpin the development phase of the project.

In 2020, GXY is expected to implement a lower activity mine plan for Mt Cattlin, focused on reducing volumes and costs to maintain positive cash margins and preserving resource life. Moreover, key works for 2020 include a comprehensive value engineering exercise, a detailed geotechnical program at James Bay and a continuation of permitting activities and Impact and Benefit Agreement negotiations with the Cree Nation of Eastmain.


Production Data (Source: Company Reports)

Key Highlights of September’19 Quarter:Total shipment volume of lithium concentrate (grade 6.0% Li₂O) for the period was reported at 58,278 dry metric tonnes (dmt), the midpoint of the stated production guidance of 45,000 – 55,000 dmt. Production volume of lithium concentrate (grade 6.0% Li₂O) at Mt Cattlin for the period was reported at 50,014 dmt, the midpoint of production guidance of 45,000 – 55,000 dmt.

The company executed an agreement with a consortium of lenders to acquire the senior secured loan facility provided to Alita Resources Limited (ASX: A40), and it continues to assess restructuring options related to Alita and Bald Hill. Cash balance at the end of the period was reported at US$169 Mn, with a debt of US$32 Mn.

Stock Recommendation:GXY’s share generated a negative YTD return of 50.68%. The stock is trading towards its 52-week low of $0.815, proffering an opportunity for accumulation. Its EBITDA margin for H1FY19 stood at 30.9% better than the second half of FY18 at 21.2%. Its current ratio for H1FY19 stood at 4.97x, better than the industry median of 1.87x, which implies that the company is in a position to address its short-term obligations. Its debt to equity ratio for H1FY19 stood at 0.07x, lower than the industry median of 0.08x. Moreover, its Price to Book Value multiple on TTM basis stands at 0.8x, lower than the industry median of 1.5x. Hence, considering the company’s decent cash position, FY20 strategy for Sal de Vida and Mt Cattlin with guidance and current trading levels, we recommend a “Speculative Buy” rating on the stock at the current market price of $1.055, down 2.315% on November 18, 2019.
 
 
GXY Daily Technical Chart (Source: Thomson Reuters)
 
 

Pilbara Minerals Limited

PLS Details

PLS Targets Operating Costs of USD$320 - $350/dmt CFR China (SC6.0 basis) from June 2020:Pilbara Minerals Limited (ASX: PLS) is involved in exploration, development and operation of the Pilgangoora Lithium-Tantalum project. Recently, the company announced the issuance of 10,540,736 Options at price of $0.4149 and expiry date of 31 December 2022, granted pursuant to the Company’s Employee Award Plan, and 1,735,366 performance rights, effective from November 14, 2019.In another announcement, the company provided its plant performance update, wherein it highlighted that the plant modifications are almost complete and have been commissioned with optimisation underway as part of the current plant production run. The company is targeting cash operating costs of USD$320 - $350/dmt CFR China (SC6.0 basis) from June 2020 once steady-state nameplate recovery (and full production volumes) are sustained.

Key Highlights of September’19 Quarter: During the quarter, the company produced 21,322 dry metric tonnes of spodumene concentrate at 6.06% Li₂O as compared to 63,782 dmt in the June quarter. Subsequent to the quarter-end, the company also signed its first sales contract for secondary tantalite concentrate for 36,500 lbs with expected delivery in October 2019.


Quarterly Production data (Source: Company Reports)

What to Expect: Two small mining campaigns to support the required plant production are expected during the December quarter. Subject to market conditions and demand assessment, mining activity on a continuous shift roster is likely to restart in Q3FY20. Based on indicative customer demand, inventory levels and current capacity to take further product, spodumene concentrate sales guidance for the December quarter has been provided in the range of 35,000 – 70,000 dmt.

Stock Recommendation: The stock of the company generated a negative YTD return of 57.93% and is currently trading close to its 52-week low of $0.270. In FY19, the company had a current ratio of 2.13x, which is higher than the industry median of 1.81x, implying that the company has enough cash position to address its short-term obligations. The company is targeting the development of Pilgangoora Stage 2 for expansion of up to 5 Mtpa to produce 6.0% spodumene concentrate of around 800,000 to 850,000 dmt. In order to cater to additional customer requirements, the commissioning of Stage 2 Pilgangoora Project is being targeted during December 2020 half-year. Hence, considering the aforesaid facts, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.295 per share, down 3.279% on November 18, 2019.
 
 
PLS Daily Technical Chart (Source: Thomson Reuters)

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.