Galaxy Resources Limited

One of the Low-Cost Spodumene Producers: Galaxy Resources Limited (ASX: GXY) is associated with the production of lithium concentrate and exploration of minerals in Australia, Canada, and Argentina.

Recently, the company notified that its substantial holding in Lepidico Ltd has been reduced from previous voting power of 10.99% to 9.35%, arising from the issue of shares by the company.

H1FY19 Performance Highlights for Year Ended June 2019: GXY reported its first-half results for the financial year 2019 wherein, the company posted revenue at US$27.96 million as compared to US$88.44 million in H1FY18. The company incurred losses during the period at US$171.86 million as compared to a profit of US$11.5 million on pcp. Revenue was impacted by a lower realization of 38% than average realized selling price, and a 50% dip in sales volumes compared to H1FY18. The company reported EBITDA margin at 33% during the half as compared to 48% in H1FY18. The company reported total material mined at 2,347,045 bcm during the half as compared to 1,690,138MT during H1FY18. Ore mined and Ore processed was reported at 817,119WMT and 836,695WMT, respectively. Realized selling price during the half stood at US$584/dmt as compared to US$940/dmt in H1FY18.


1H19 Highlights (Source: Company Reports)

Outlook:The Management is targeting production of spodumene at 45-55kt during the next quarter while the CY2019 estimates stand at 180-210kt, followed by shipment volume of 60-70kt in the third quarter of 2019. The company will further focus on improving productivity and rationalizing cash-based expenses. GXY will continue exploring downstream opportunities with existing clients. The Management is of the view that sales volumes will be skewed to H2FY19. Thus, revenue is expected to improve in H2FY19.

Stock Recommendation: The stock of GXY is trading at $1.095 with a market capitalization of $442.24 million. The stock is trading close to the lower band of its 52-weeks trading range of $1.050 to $2.850. The stock has generated a negative return of 14.29% and 41.3% during the last three-months and six-months, respectively. The stock has declined by 7.69% and 4.85% in the last one month and five-days (excluding today’s gain). Enterprise value to sales stood at 1.1x on the next twelve months (NTM) basis as compared to the industry median of 1.4x. GXY is one of the lowest-cost producers of spodumene (source of lithium), globally, which ensures the company’s market position despite weak macro conditions. Considering the aforesaid facts, current trading levels, valuation and business perspectives, etc., we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $1.095, up 1.389% as on 30 September 2019.
 

Pilbara Minerals Limited

Esteemed Clientele to Support Upcoming Production: Pilbara Minerals Limited (ASX: PLS) is a mining company, specialized in the production of lithium and tantalum in Australia. The company is working on the Pilgangoora project, which is regarded as one of the premier hard-rock lithium-tantalum resources globally, with respect to the size and grade. The company has material Tantalite as its by-product credits.

Recently, PLS announced a Share Purchase Plan (SPP) of $20 million wherein the existing shareholders will have a participation limit of up to $30,000 per eligible shareholder in new shares.

FY19 Operating Highlights for the year ending 30 June 2019: PLS announced its FY19 full-year results wherein, the company reported $42.78 million as compared to $10.18 million during FY18 while the company reported a comprehensive loss of $28.93 million as compared to a loss of $19.41 million in FY18. Cash and cash equivalents stood at $63.576 million, total assets at $582.271 million and net assets at $376.65 million as on 30 June 2019. The company reported direct shipping ore (DSO) sales of 205,766 tonnes during FY19. During the year, Spodumene concentrate and tantalite concentrate were produced at 174,852dmt and 180,077lb, respectively. While, Spodumene concentrate and tantalite concentrate were shipped at 128,373dmt and 104,062lb, respectively.


FY19 Highlights (Source: Company Reports)
 
Outlook: PLS focuses on extending the mine life of the Pilgangoora Project through Resource conversion and through new discoveries identified as exploration targets. The Management expects an income of 20 – 35kt of spodumene concentrate and 65kt to 80kt spodumene concentrate during the September quarter and December quarter, respectively.

Stock Recommendation: The stock of PLS is trading at $0.320 along with a market capitalization of $641.45 million. The stock is inching towards the lower band of its 52-week trading range of $0.315 to $0.930. The stock has generated negative returns of 39.81% and 53.57% during the last three months and six-months, respectively. The stock has corrected 4.41% in the last five trading sessions (excluding today’s price movement). With the development of its 100%-owned Pilgangoora project, PLS aims to become one of the largest suppliers of lithium raw materials globally. The company has secured long-term offtake arrangements with world-class customers to support its upcoming production and has successfully delivered high-grade products to meet customer requirements. Looking at the aforesaid facts, current price movement and business prospects, we recommend a ‘Speculative Buy’ rating on the stock at the current market price $0.320, down 1.538% as on 30 September 2019.

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