Thursday, May 26, 2016

Galaxy Resources CEO recent presentation

When my speculation in Orocobre, another emerging lithium producer I own, recently doubled I took my original investment out and put it into Galaxy Resources. I liked what Mr. Lithium Joe Lowry said about the company and his view that in five years or so it could be one of the major producers of lithium.

Lithium has really been a windfall for me this year and is the best performing commodity. I suspect that if the price for lithium stays elevated than sufficient supply will brought on line to meet demand. However this will be several years from now. The really good news is that demand for lithium will grow about 20k tonnes per year each year for at least the next 3-5 years. Here are Lowry's comments on lithium and Galaxy:

Developments in Australia will also play a key role in the future of at least one Argentina property. Since Neometal’s production is initially committed to Ganfeng, Galaxy is the only uncommitted new supply of spodumene going to China until another resource (such as Pilbara) comes online later in the decade. I do not expect the Talison JV’s output to increase significantly in the next couple of years which means that Galaxy is in an enviable position to supply converters in China who currently cannot operate at capacity due to a shortage of raw material that has driven carbonate and hydroxide pricing in China up 3X since the end of Q3 2015. Unlike other junior companies, Galaxy is again a “real lithium company” (i.e. one with production) who will be able to sell their entire output for the foreseeable future and likely at a premium to the spodumene market price in China. I took the digression through the Australia situation to make it clear that Galaxy is no longer the debt ridden mess they were just a short time ago but are now in a position to access capital markets on their own to develop Sal de Vida. Expect Galaxy, driven by cash flow from spodumene sales beginning in Q3, to be profitable sooner than their fellow ASX listed company, Orocobre. Once Galaxy develops Sal de Vida they will become the next lithium major. Yes, that is a prediction. Galaxy has the best new brine project on the planet in Sal de Vida located on Salar del Hombre Muerto. This is the same salar that FMC has been producing great quality product on for almost 20 years. While it is unfortunate that FMC’s corporate leadership has recently shown no vision for the lithium business and has no plans to expand (or attempt another expansion) in Argentina, the “other side” of Hombre Muerto is likely be producing for Galaxy by the end of the decade. 

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