Galaxy Resources Limited shares rise on quarterly update

In morning trade the Galaxy Resources Limited (ASX: GXY) share price has climbed over 2% to $4.40 following the release of its quarterly update.

Here are key takeaways from the fourth-quarter:

  • Record production of 52,139 dry metric tonnes (dmt) of lithium concentrate, up 11% on Q3 of FY 2017. Annualised rate of 209,000 dmt tonnes per annum.
  • Record sales of 58,094 dmt of lithium concentrate, an increase of 39% over Q3 of FY 2017.
  • Average production cash costs of US$325 (A$423) per dmt produced.
  • Average realised selling price before royalties and marketing fees of US$868 (A$1,125) per dmt sold.
  • Offtake agreements signed with multiple customers for 5 years for 100% of total planned lithium concentrate production.
  • Quarterly EBITDA of A$34.2 million.

Overall I felt this was a solid quarterly performance from the lithium miner which goes some way to justifying the meteoric rise in its share price over the last few months.

I was especially pleased to see its recovery rates remained above target despite the strong increase in production. Recovery rates increased to 58%, well ahead of its target of 50% to 55%.

Pleasingly, this is likely to improve in the future. According to the release, Galaxy has completed the technical and financial evaluation for the construction of an ultra-fines dense media separation circuit, a secondary float re-crush circuit, and a final product optical sorter.

These plant improvement projects will allow it to target increased recoveries of 70% to 75%. The construction and commissioning of these improvements are expected to be completed during early Q3 of FY 2018.

Lastly, as well as providing a company update, Galaxy has followed in the footsteps of Orocobre Limited (ASX: ORE) by providing an update on the industry.

Management remains bullish on lithium demand in the future mainly due to its use in electric vehicles and renewable energy batteries. China is expected to be the key driver of this growth as it cracks down on pollution and incentivises both electric vehicle buyers and manufacturers.

Should you invest?

Galaxy remains my first pick in the industry due to its three world-class assets, efficient production, and strong management team.

However, its share price has rallied strongly in recent months and investors may want to hold out for pull back before investing. Furthermore, it is worth remembering that lithium miners like Galaxy, Orocobre, and Pilbara Minerals Ltd (ASX: PLS) are amongst the most volatile on the share market.

In the meantime, these three growth shares could be trading at fairer prices.

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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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