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Galaxy Resources Limited shares rocket on Panasonic deal speculation

The strong run of the Galaxy Resources Limited (ASX: GXY) share price has continued today.

In afternoon trade the lithium miner’s shares are up 9.5% to $3.00.

Why are its shares higher?

Although there has been no word out of the company today, the AFR is reporting that the lithium miner has penned a deal with Tesla’s battery supplier Panasonic.

According to the report, sources have told the newspaper that Galaxy’s executive team were in Japan two weeks ago to secure the deal. Furthermore, shipping data appears to confirm this and shows product being shipped from its Mt Cattlin operation to Japan.

Such a deal would not come as a surprise. With electric vehicle adoption tipped to grow strongly as governments crack down on pollution, securing lithium carbonate supply is becoming very important for automakers.

Only last week Pilbara Minerals Ltd (ASX: PLS) signed a deal with Chinese automaker Great Wall Motor Company for Stage 2 off-take from its flagship Pilgangoora Lithium-Tantalum Project in Western Australia.

And this morning mineral exploration company Avz Minerals Ltd (ASX: AVZ) announced that it is in discussions with Shanghai Greatpower and a number of other parties for a potential investment and off-take opportunities from its Manono Lithium Project.

Should you invest?

While Galaxy is certainly a high risk investment, I believe that its three world-class assets make it one of the best options in the resources sector.

With lithium supply and demand expected to remain tight for the foreseeable future, I believe prices will remain high and put Galaxy in a strong position to produce high levels of free cash flow.

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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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