The Galaxy Resources Limited (ASX: GXY) share price will be one to watch today after the lithium miner released its third-quarter results after the market closed on Monday.
Here are a few highlights:
- Production increased 43% quarter-on-quarter to 47,075 dry metric tonnes (dmt) of lithium concentrate. Annualised rate of 190,000 dmt per annum.
- Sales of 41,834 dmt of lithium concentrate, up 39% on the second-quarter of FY 2017.
- Average production cash costs (excluding royalties and marketing fees) fell 18% to US$320 (A$405) per dmt produced.
- Average realised selling price before royalties and marketing fees increased 17% to US$843 (A$1,062) per dmt sold.
- Generated EBITDA of A$21.6 million.
- Cash on hand at 30 September 2017 of A$57.4 million.
Overall I felt this was a strong quarter from Galaxy and goes some way to justifying its meteoric share price rise over the last three months.
During this time the Galaxy share price has risen a staggering 83% compared to a 1.4% gain by the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).
I was impressed with the strong increase in production and the way that management has been able to bring its costs down even further. Ultimately, this has led to expanding margins and bumper profit growth during the quarter.
Pleasingly, I expect these margins to expand considerably over the next 12 months when 2018 pricing comes into play.
Management is currently finalising lithium concentrate offtake contracts for 2018 and considering the strong rise in prices this year, I believe pricing will be meaningfully higher next year.
Should you invest?
Whilst I believe that it is a great buy and hold investment option in the resources sector, I do feel lithium miners such as Galaxy, Orocobre Limited (ASX: ORE), and Pilbara Minerals Ltd (ASX: PLS) are probably fully valued now.
In light of this, I would suggest investors hold out for a slight pull-back before making an investment.
