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The Galaxy Resources Limited (ASX:GXY) share price and the rest of the lithium miners are on fire

Rising ASX share price represented by investors jumping high in the air
Image source: Getty Images

It certainly has been a much-needed positive day of trade for many of Australia’s leading lithium miners.

Here is the state of play in the industry on Friday afternoon:

  • The Altura Mining Ltd (ASX: AJM) share price rose 4.5% to 23.5 cents.
  • The Argosy Minerals Limited (ASX: AGY) share price climbed 4.5% to 22.5 cents.
  • The Galaxy Resources Limited (ASX: GXY) share price jumped 10% higher to $2.65.
  • The Kidman Resources Ltd (ASX: KDR) share price stormed 11.5% higher to $1.05.
  • The Lithium Australia NL (ASX: LIT) share price rose 3% to 10 cents.
  • The Orocobre Limited (ASX: ORE) share price climbed 5% to $3.59.
  • The Pilbara Minerals Ltd (ASX: PLS) share price has risen over 9% to 77 cents.

Why are the lithium miners on fire today?

With no major news out of the lithium industry today, I suspect that this could be a case of bargain hunters swooping in after a series of sharp declines over the last few days.

For example, prior to today, since this time last week the Orocobre share price was down 19%, Galaxy’s shares were down 11.5%, and Pilbara Minerals’ shares had lost 14.5% of their value.

Rising short interest and concerns over the future prices of lithium and the impact that this would have on profits and ultimately valuations was largely to blame for the declines.

In addition to bargain hunting, there is a possibility that investor sentiment has improved this week following news that Argentina is placing a temporary tax on exports in an effort to reduce its deficit. The temporary export tax is expected to commence as soon as next week and run until December 2020.

Orocobre has estimated that the government’s plans equate to a duty of approximately 8% on export sales revenue from its Argentina-based operations.

While this isn’t good for Orocobre, I wouldn’t be surprised if this tax put off other mining companies from investing in new lithium projects in Argentina. This could potentially reduce the amount of supply coming to market in the near future, supporting higher prices.

Should you invest?

While I think many of the lithium miners are attractive at these levels, I would suggest investors stay clear of them until there are signs that prices of the white metal are holding firm or even rising.

Where to invest $1,000 right now

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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.

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