Galaxy Resources Limited (ASX: GXY)

Trying to leverage on its strategy – With positive sentiments emerging up again, GXY was seen to move up on ASX on May 31, 2018. Galaxy, a Company engaged in mineral exploration and processing whose principal activities include the production of Lithium Carbonate and exploration for minerals, entered into a non-binding agreement with POSCO (one of South Korea’s largest conglomerates) to sell a package of tenements located on the northern area of the Salar del Hombre Muerto in Argentina, for cash consideration of US$280 million and this tenement package is situated to the north of Galaxy’s world-class Sal de Vida Project. Galaxy retains 100% of the tenements in the southern area of Salar del Hombre Muerto in the Catamarca Province included in the recently announced updated feasibility study for the development of Sal de Vida. Moreover, the proceeds from the transaction with POSCO will be available to progress the development of Sal de Vida in the Catamarca Province and will place the Group in a strong financial position so that it can continue the planned development of the Project.


Indicative tenements subject to the transaction (blue area) and tenements to be retained (red area) (Source: Company Reports)

This non-binding project is conditional and will be completed on receiving the definitive documentation and receipt of POSCO Board approval which are expected to be satisfied during the third quarter of 2018. Both the Companies, Galaxy and POSCO will also enter into cooperation agreements and will maximize potential development, operational, infrastructure and logistical synergies for their respective project. This transaction is also strategically significant as it means there will now be two new lithium projects that will be developed concurrently on the Salar del Hombre Muerto and will deliver benefits for all stakeholders in the region. The stock was up by 7.40 per cent in last three months and climbed up by 9.15 per cent in last one month. The stock rose up by 10.60 per cent in last five days and was up by 4.34 per cent as on 31 May 2018 as market sentiments were improving. This comes after a dip noted on 30 May 2018 while some investors might be booking profit. So, we give a “Hold” recommendation at the current market price of $3.49 on the basis of the deal and positive market sentiments.

Western Areas Limited (ASX: WSA)
Demand for Nickel-Western Areas, Australia’s highest grade, lowest cash cost nickel producer and second largest sulphide nickel miner, producing approximately 22,000 to 25,000 nickel tonnes per annum, reported another quarterof free cashflow generation and cash at bank increased to A$135.7 million, after capital expenditure, feasibility study and exploration costs of A$13.6 million.  The Company reviewed all FY18 guidance metrics and advised that nickel in concentrate production is expected to be marginally lower by ~0.5k nickel tonnes (~2 per cent of production guidance) to around 21,000 nickel tonnes for the year. Moreover, it is expected that Exploration expenditure will be in the range of A$3 million - A$5 million which is lower due to delay in the approval at Western Gawler and Cosmos (all approvals now received).

FY 18 Guidance (Source: Company Reports)

Overall total cash operating costs were A$1.2 million, lower than the December quarter. Recently, the nickel market remains volatile and traded within a consistent range during the quarter. It was noted that LME and SHFE nickel stockpiles have recently fallen dramatically to their lowest levels in many years which was another indicator of the decent outlook for the nickel market. The Company also holds significant exploration interests in Canada through shareholdings in Mustang Minerals and it remains focused on the core business of low cost, long life nickel production, new nickel discoveries and in generating returns to shareholders. Additional high-grade nickel sulphide intersections were reported by St George Mining Limited at its Cathedral prospect within the Mt Alexander JV (WSA 25% free-carried). There has been an increasing demand for the nickel due to China’s Electronic vehicle boom. In the last six months, the share price was rising that is by 5.54 per cent but started falling since last one month that is by 6.63 per cent. The stock witnessed a recovery of 4.32 per cent as on 31 May 2018 due to commodity price movement and general uptrend seen for mining and resource sector. We give a “Hold” recommendation at the current market price of $3.38.

 
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