Lithium miners sink deep into the red

With the market seemingly in the mood for taking profit off the table today, it was inevitable that the lithium miners would be targeted after their strong runs.

Here’s the state of play in the lithium industry in early afternoon trade:

  • The Argosy Minerals Limited (ASX: AGY) share price is down 2% to 39.2 cents.
  • The Avz Minerals Ltd (ASX: AVZ) share price has plunged 8.5% to 32 cents.
  • The Galaxy Resources Limited (ASX: GXY) share price has tumbled 6% to $4.19.
  • The Mineral Resources Limited (ASX: MIN) share price is down 2.5% to $20.66.
  • The Orocobre Limited (ASX: ORE) share price is almost 4% lower at $6.82.
  • The Pilbara Minerals Ltd (ASX: PLS) share price has fallen 3.5% to $1.17.

What now?

Even as a shareholder of Galaxy Resources, I do feel that a slight correction was in order after some incredible gains over the last few weeks.

For example, prior to today, the shares of Galaxy Resources and Pilbara Minerals had put on a gain of 30% and 31%, respectively, in just one month.

Should you buy the dip?

While I am a big fan of the lithium miners and think they have enormous long-term potential, I wouldn’t necessarily be in a rush to invest just yet and would suggest investors wait for things to settle before taking the plunge.

Ideally, I would look to buy Galaxy Resources shares in or around the $4.00 mark. At this level I think it represents great value and should provide investors with a decent margin of safety.

But I wouldn’t buy for a quick short-term trade, I would look at buying in for the long-term. With lithium demand expected to outstrip supply for some time to come, I believe Galaxy Resources has the potential to be a dividend star in the future thanks to its strong free cash flow generation.

In the meantime these stellar growth stocks could be a great option for investors looking for strong returns.

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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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