Galaxy Resources (GXY) $2.04
September 09, 2009
FORGET about iron ore, rare earths or even gold: the real flyer at the moment is any stock with an exposure to lithium.
Lithium is in hot demand as China turns to electric cars and scooters in a serious way.
Lithium has applications in ceramics, glass manufacturing, lubricants and treating depression, but it's demand for lithium-ion batteries which has got investors excited in the last couple of weeks.
According to Galaxy chief Iggy Tan, lithium demand is expected to soar from 100,000 tonnes currently to 300,000t by 2020. And there isn't a lot of new supply coming on.
Galaxy is in pole position with its Mt Cattlin resource at Ravensthorpe in Western Australia, which the company claims to be the world's second-biggest hard rock lithium deposit.
The company this morning announced a small deal to acquire an 80 per cent interest in Traka Resources nearby ground, thus extending Galaxy's resource base and enhancing the viability of Mt Cattlin.
Galaxy is backed by Chinese tycoon Zheng Yuewen, who has taken a $26 million, 19.9 per cent Galaxy stake. He's also committed $130 million of debt funding to the project, which would also involve a processing plant at the China end to produce 17,000 tonnes of battery grade lithium carbonate annually.
Galaxy hopes to be producing in a year's time, which -- dare we say -- sounds an ambitious timetable.
“We are the next project to get up and running,'' Tan says. “The others are well behind us and the industry is going to get short (of lithium) again.
The bad news for investors is that Galaxy's share price has already had a decent run (up 150 per cent over the last two months).
Still, Galaxy's $150 million market cap is defensible and it's one to hold on to for the demise of the carbon economy.