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Why lithium miners Galaxy, Orocobre, and Mineral Resources surged higher today

One of the best performing groups of shares on the local market on Wednesday has been the lithium miners.

At the time of writing the Galaxy Resources Limited (ASX: GXY) share price is up 4%, the Orocobre Limited (ASX: ORE) share price is 3% higher, and the Mineral Resources Limited (ASX: MIN) share price has climbed 2.5%.

Why are the lithium miners surging higher today?

The catalyst for today’s gain appears to have been an update from Mineral Resources on pricing at its Mt Marion Lithium Project.

This morning the diversified miner and mining services company advised that the sale price for 6% spodumene concentrate shipments from Mt Marion for the March 2019 quarter will be US$791.84 per dry metric tonne. This is a decline of approximately 15% from the US$930.80 per dry metric tonne it averaged during the quarter ended December 31.

While a 15% decline is bad, I suspect that the market had been fearing even sharper declines after demand for the battery making ingredient softened in China.

Is now the time to invest in lithium miners?

While this pricing may be better than many had expected, it is still a sizeable decline and there’s no guarantee that prices won’t fall further in the coming quarters.

In light of this, I would suggest investors resist the temptation to buy lithium shares at this point and wait for a couple of quarters of improvements in pricing before considering an investment.

In the meantime, I think investors would be better off looking at other options in the resources sector.

My favourite two shares are BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO), even after strong recent gains.

I believe their world class and diversified operations have positioned them well to deliver bumper profits and provide a generous dividend this year.

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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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