Galaxy Resources Limited produced 21,901 dry metric tonnes (dmt) of lithium concentrate at its Mt Cattlin project in Ravensthorpe, Western Australia.
The record monthly output, as well as better final output quality were achieved after the facility completed its Yield Optimisation Project (YOP) in Q1 of 2019. Construction of this project commenced in the June quarter 2018.
About Galaxy Resources (ASX GXY)
Galaxy Resources owns lithium production facilities, hard rock mines and brine assets in Australia, Canada and Argentina. The Mt Cattlin mine produces spodumene and tantalum concentrate and is wholly owned by the company.
The record April lithium output represents an equivalent annual run rate of 260,000 dmt. Compared with the final product grade of 5.75% Li2O in first quarter of 2019, the facility achieved 5.92% in April.
Plant recovery also improved dramatically by almost 20% to 61% compared to 51% in the previous quarter.
Galaxy Resources reports a significant reduction in cash costs
Notable also is the solid reduction in cash costs per tonne of lithium concentrate. The cost fell from to US$329/dmt from US$453/dmt reported in the first quarter, a drop of nearly 27%.
The company said this crystallized its competitive advantage while boosting its operational cash margin.
This is a significant achievement considering recent downturns in the market pricing of lithium feedstock and chemical. Prices of spodumene fell sharply in January following the entry of four new operations last year.
“Galaxy’s operational plan will continue to focus on maintaining Mt Cattlin as one of the lowest cost, high-quality lithium concentrate producers in Western Australia,” said Anthony Tse, CEO and Managing Director.
Lithium compounds are used in the manufacture of ceramics, glass, and consumer electronics. It is an essential cathode material for long life lithium-ion batteries used in hybrid and electric vehicles, as well as mass energy storage systems.
According to this report, in the UK, nearly 75% of car buyers are considering an electric car as their next vehicle. This is a huge jump from the 25% positive response found in the same survey conducted in 2017.
JPMorgan analysis forecasts electric cars would take 35 per cent of the global market by 2025 and 48 per cent by 2030.
Last month, German carmaker Volkswagen inked a 10-year deal with Chinese company Ganfeng for the supply of lithium.
Volkswagen said the move towards auto electrification will “have a major impact on global raw material markets,” and that global lithium demand could more than double by 2023.
Galaxy Resources (ASX GXY) touched upon this in their announcement today, noting that its Chinese customer base has access to some of the major lithium supply chain end users.
The GXY share price rally today of 3% also takes into account the company’s production guidance of 45,000 – 50,000 dmt of lithium concentrate and shipment volume and sales guidance of 45,000 – 50,000 dmt during Q2 of 2019.
The GXY share price is down to $1.66 after touching a high of $4.561 in December 2018. It is trading around the long-term support line of $1.50.
This represents an attractive entry point for the stock. Note that its PE ratio of the past twelve months is 3.07 versus the industry average of 7.27. Its Price/Book is only 0.83 versus the industry 3.62.
It may also be noted that though demand projections look rosy, there is always the possibility of fresh capacity coming on stream to neutralise the gap.
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