Galaxy Resources Limited share price slides again: Time to invest?

In morning trade the Galaxy Resources Limited (ASX: GXY) share price has continued to sink lower, this time by around 3% to $1.79.

This means that the lithium miner’s shares have now fallen over 14% in the last five trading sessions.

What happened?

This recent dip is likely to be attributable to a spot of profit taking following a strong gain, together with a little disappointment with yesterday’s quarterly update.

According to yesterday’s release, cash costs for the quarter came in higher than the prior quarter at US$393 per dry metric tonne (dmt).

Whilst this was a surprise, I was pleased to see that costs in the final month of the quarter were reduced to US$334 per dmt.

Pleasingly, management anticipates unit production cash costs continuing to reduce as its Mt Cattlin operation achieves further efficiencies and full production rates are maintained.

So as disappointing as it was to see costs increase during the quarter, I feel confident that moving forward investors will see a big improvement.

Should you buy the dip?

Whilst Galaxy is certainly one of the more volatile shares on the Australian share market, I still believe that the long-term risk/reward on offer makes it a compelling buy for investors looking to gain exposure to the resources sector.

Demand for lithium to be used in the batteries of smart devices, electric vehicles, and renewable energy shows no sign of slowing.

And with supply not expected to ramp up enough to satisfy the growing demand, it seems inevitable that Galaxy will continue to enjoy high prices for the metal for the foreseeable future.

I believe this puts it and its lithium mining peers Orocobre Limited (ASX: ORE) and Kidman Resources Ltd (ASX: KDR) in a strong position to deliver bumper profit growth over the next decade.

I’m not the only one that sees significant upside for Galaxy either. Research notes out of Citi and Macquarie this morning reveal that their respective analysts have buy and outperform ratings on its shares.

Citi appears to be the more bullish of the two, with a price target of $2.70 on its shares. Whereas Macquarie’s price target is $2.10.

If the lithium miners are a touch high risk for you, then I would suggest you consider an investment in one of these top stocks instead.

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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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