Galaxy Resources Limited (ASX: GXY)
S&P / ASX 200 Index company with lithium production facilities, hard rock mines and brine assets in Australia, Canada and Argentina, Galaxy Resources Limited (ASX: GXY) has reported a decent FY17 result entailing profit after tax for the year to 31 December 2017 of $166,000 (31 December 2016: profit $122,706,000), while revenue was up to $125.6m, and the result took into account the amortization of A$18.4M relating to the substantial value that was recognised as part of the General Mining (formerly ASX:GMM) acquisition. The adjusted EBITDA has significantly improved to A$52m with contribution from Mt Cattlin of A$60.3M.
Upgraded Mt Cattlin operation helped in attaining a steady state while exhibiting a smooth ramp up to annualised run rate of >200ktpa, as achieved in Q4 2017. Mining operations achieved full production levels during the year, with total material movement of 2,052,813 bank cubic metres (bcm) of waste and ore, including 1,321,715 wet metric tonnes (wmt) of ore at an average grade of 1.14% Li2O. Spodumene production for the year was 155,679 dry metric tonnes (dmt), and the Mt Cattlin plant reached steady state operations in the June quarter with performance since then above the budgeted target of 50-55%. The group made eleven shipments of lithium concentrate during the year totaling 153,518 dmt. Thus, the operating performance has been healthy, and the production trend also points to attaining a better level for FY18.
FY17 Result (Source: Company Reports)
The group has also provided a Mineral Resource and Ore Reserve update following drilling activities undertaken at the Mt Cattlin Project in Western Australia. Galaxy’s geological interpretation of the Mt Cattlin resource has improved post a full year of mining and processing operations, along with a comprehensive Reverse Circulation (RC) and grade control drilling campaign (>10,000m). As at 31 December 2017, Mt Cattlin was estimated to contain 11.6 million tonnes at 1.2% Li2O or 140 thousand tonnes of contained Li2O metal. The updated Mt Cattlin Ore Reserve was estimated to be 7.6 million tonnes at 1.1% Li2O or 81 thousand tonnes of contained Li2O metal. An extensive 15,000m Reverse Circulation drilling campaign has now commenced and will focus on further resource development. GXY will be finalizing an expansive regional targeted greenfield exploration campaign (up to 60,000m) over the next two years.
To enhance shareholder returns, GXY aims to reinvest its healthy cash balance of A$59.7M into operational optimisation and development activities.
Despite a decent result, GXY stock was edging low on March 23, 2018 (down 2.96%) as the majority of the mining sector was bearing the brunt of geopolitical upheaval. Given the developments and future opportunities at Mt Cattlin, with Sal de Vida and James Bay lithium pegmatite Project yet to come online, we put a “Hold” on GXY at the current price of $3.28
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