Hot on the heels of the Orocobre Limited (ASX: ORE) quarterly update on Wednesday, this morning fellow lithium miner Galaxy Resources Limited (ASX: GXY) released its update for the three months ending March 31.
How did Galaxy perform in the first quarter?
According to the release, Galaxy produced 41,874 dry metric tonnes (dmt) of spodumene concentrate during the quarter.
Approximately 41% or 17,021 dmt of this production occurred in the month of March, equating to an annualised run rate of over 200,000 dmt.
The average cash cost during the quarter was US$453 per dmt produced, which was an impressive 19% reduction on the previous quarter. Furthermore, the increased production in March led to its cash costs reducing to US$415 per dmt during the final month of the quarter.
One major disappointment during the first quarter was its concentrate shipped. Galaxy shipped just 15,192 dmt of concentrate, down 62% on the previous quarter.
Management explained: "The differential between production and sales volumes for the quarter was due to timing differences between Mt Cattlin production and the agreed delivery schedule between Galaxy and its customers during Q1 2019."
Before adding: "Shipments are now being finalized for the June quarter and a more normalized shipping schedule is expected for the remainder of 2019."
The company also provided its production guidance for the full year. It expects total spodumene production volumes in the range of 45,000 dmt to 50,000 dmt in the second quarter and between 180,000 dmt to 210,000 dmt for the full year.
Sal de Vida update.
As well as its quarterly update, management released an update on its Sal de Vida operation in Argentina.
According to the release, Galaxy has not been able to agree a transaction structure which provides a valuation basis that properly "reflects the world class nature of the Sal de Vida asset, particularly in the context of the successful POSCO transaction."
Whilst negotiations are ongoing with a shortlist of interested parties, the company has now resolved to formally close the Sal de Vida process.
Furthermore, due to prevailing market sentiment and current weakness in short term contract prices for lithium chemicals, management believes it is prudent to remain patient regarding any third-party transaction for the Sal de Vida Project. This is because it "remains highly confident in the underlying fundamentals of the lithium sector and market growth potential, as well as the world class quality of the underlying asset."
Whilst it is disappointing that the company has not been able to agree a transaction, I think management has made a good move by being patient. Selling the asset at the bottom of the market when it doesn't need the cash wouldn't make a lot of sense if they are confident that prices will improve materially.
Should you invest?
Galaxy didn't provide any sales or pricing data with its update, but its absence is likely to be an indication that lithium prices are still under pressure.
In light of this, I would suggest investors stay clear of Galaxy, Orocobre, and Pilbara Minerals Ltd (ASX: PLS) until lithium prices finally reach an inflection point.
