In morning trade the Galaxy Resources Limited (ASX: GXY) share price has continued it strong run and is up a further 2% to $3.30
This means the lithium miner’s shares are up over 10% since Thursday of last week.
Why has the Galaxy Resources share price climbed higher today?
After the market closed on Monday Galaxy released an update in relation to its non-binding agreement with South Korean conglomerate POSCO for the sale of tenements at its Sal de Vida project in Argentina for US$280 million.
According to the release, the agreed timetable for completion of the transaction has continued to be met. On Friday the company received a notice from POSCO advising that its investment review had been completed satisfactorily.
While the agreement remains conditional, Galaxy expects POSCO to finalise things and gain board approval in the third quarter of calendar year 2018 as previously planned.
Management added that following the completion of this transaction, Galaxy will retain 100% of the tenements in the southern area which were included in its recent updated feasibility study for the development of the Sal de Vida Project. That update showed that the southern tenements contain 1.14 million tonnes LCE of JORC compliant reserves.
Galaxy sold the tenements in order to progress the development of the remaining Sal de Vida assets. Which I think was a smart move and will most likely mean it doesn’t need to raise funds by potentially dilutive methods.
Should you invest?
And while I think that it would be a great option for investors looking to gain exposure to the resources sector, it certainly is high up on the risk scale due to the mixed outlook for lithium prices.
Some brokers are predicting the halving of prices over the next few years from oversupply, whereas others believe this to be nonsense. As a shareholder I’m siding with the latter opinion, but I also acknowledge the risks to my investment if prices do crumble.
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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 Scott Phillips.