Galaxy Resources – Lithium concentrate below contractual levels

Galaxy Resources Limited (ASX: GXY) announced the first shipment (13,815 wet metric tons) of lithium concentrate from its Mt Cattlin mine under 2017 contract terms. The Mt Cattlin operations plant utilization continues to improve with the last 30 days’ concentrate production averaging 440dmt per day, which equates to an annualized production of more than 160,000tpa. However, the mica content of lithium concentrate is observed at 1.38%, and which is much below the contractual terms with clients. The MV Belle Ocean shipment is the first under 2017 contract pricing terms of US$830 per ton at 5.5% grade lithium concentrate with option of increasing to US$905 per ton for 6.0% grade equivalent. Total tonnage contracted at these pricing levels for delivery in 2017 is 120,000dmt and final pricing will be confirmed once the final grade and moisture content have been determined. Further, the company is aiming to dispatch one shipment per calendar month with 2017 contracted terms. Meanwhile, the stock has tumbled 19.6% to $ 1.55 in the last two trading sessions driven by the news of low quality lithium concentrate at Mt Cattlin. However, we believe that the street is exaggerating to the news as the final pricing of its supplies are based on the grade and moisture content.


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