Galaxy Resources Limited

GXY Details

Progress of the sale transaction with POSCO - Galaxy Resources Limited is an Australia-based company engaged in mineral exploration and processing. The Company's principal activities include the production of Lithium Carbonate and exploration for minerals. Its segments include Australian operation, Argentina operation and Canada operation. Recently, Red 5 Limited confirmed that it has entered into an agreement for the sale of the Company’s royalty entitlement from the Mt Cattlin mine in Western Australia to Canadian royalty company, Lithium Royalty Corporation.

Recently, GXY entered into an agreement with POSCO to sell a package of tenements located on the northern area of the Salar del Hombre Muerto in Argentina, for a cash consideration of US$280 million and this non-binding agreement is conditional on completion and execution of definitive documentation and receipt of POSCO Board approval which is expected to be satisfied during the third quarter of 2018. Recently, the Company updated the market that the agreed timetable for completion of this transaction continues to be met and notice has been received from POSCO on 6 July that their investment review had been completed satisfactorily.


Overview of Cashflow of the Company to support Future Growth (Source: Company Reports)

Once this transaction is completed, Galaxy will retain 100 per cent of the tenements in the southern area of Salar del Hombre Muerto in Catamarca Province, which were included in the recently announced updated feasibility study for the development of the Sal de Vida Project. That update showed that the southern tenements contain 1.14 million tonnes LCE of JORC compliant reserves. The proceeds from this sale will be used for the development of Sal de Vida in Catamarca Province. Among other lithium miners, Galaxy is ahead of many peers like Orocobre Limited  and Kidman Resources due to its diverse and world-class asset base. All of its projects are progressing well and are ahead of its production through development and further progress in feasibility.

It is expected that the market for lithium chemicals will remain tight and will continue to support a decent pricing environment. The stock price was down by 4.15 per cent in last one month but started recovering in the last five days and was up by 6.60 per cent as on 9 July 2018. The stock was up by 1.24 per cent as on 10 July 2018. So, we maintain our “Hold” recommendation at the current market price of $3.27 by looking at the progress of the sale transaction with POSCO, commodity pricing scenario and lithium dynamics that are again turning a bit positive.
 

GXY Daily Chart (Source: Thomson Reuters)

 
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