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Galaxy Resources Limited share price jumps 6%: Time to buy?

In early trade the Galaxy Resources Limited (ASX: GXY) share price is up 6% to $1.97, making it three days in a row of strong gains.

In fact, this means that since Tuesday the lithium miner’s shares have risen over 22%.

Why have its shares jumped today?

This morning Galaxy provided the market with an update on its Mt Cattlin operation in Western Australia.

According to the release, Galaxy has successfully optimized its Mt Cattlin plant further, resulting in increased recoveries and production.

In June production at Mt Cattlin was 14,038 dry metric tonnes, based on final recoveries of 61.3%. Impressively, this was well ahead of its recovery rate targets of between 50% and 55%.

Furthermore, lithium concentrate production exceeded 500dmt on 16 days, five of which saw production of over 600dmt. If the company can maintain this level of production then I wouldn’t be surprised to see its overall production increase further in July.

Pleasingly, Galaxy received payment for its third shipment of lithium concentrate at the end of June. Based on its revised 2017 contract pricing, it achieved US$860 per tonne FOB for this shipment.

Should you invest?

I think that Galaxy is one of the best options in the resources sector and would class it as a buy. Especially with demand for lithium to be used in the batteries of electric vehicles, renewable energy, and smart devices expected to grow substantially over the next decade.

However, Galaxy and its lithium miner peers Orocobre Limited (ASX: ORE), Neometals Ltd (ASX: NMT), and Pilbara Minerals Ltd (ASX: PLS) are among the most volatile shares on the share market. I feel this would only make them suitable for investors with a high tolerance for risk.

If the lithium miners are too high risk for you, then these growth shares may be more suitable investment options in my opinion. I'm tipping them for strong gains over the next 12 months.

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Motley Fool contributor James Mickleboro owns shares of Galaxy Resources Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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