a bird in the hand

This is one hell of a vertical ride.
All year Galaxy has been like a caged tiger. It’s nice to see it finally escaping and mauling it’s critics.

Back in the 30s it took a bit of faith to look up out of the hole we were in.
Every upwards movement was squashed by shorters and then the US election totally smashed us.
This epic re-rate began at that point. People with cash from selling out positions when Trump shocked the markets saw the turnaround and started piling into the near-term production that was just around the corner for Galaxy.
Then management started ticking through the to-do list faster than predicted.
Then the huge price premium was announced.
Then the shipment arrived and left on queue.
Then a higher recovery rate was announced, followed by appointment of another set of A-grade directors and COO.

It took the brokers who were paying close attention like Canaccord and the GXY faithful who read the announcements to load up before. Now in the 60s it's the banks and institutions who want a piece. And it looks like they’re fighting each other for it too.
And momentum begets momentum. Some of us may have been here for ages already - but its a brand new story for a new generation of buyers and - imho - they’ve picked the least risky way to ride the lithium boom here.
A production stock with the upside of new assets to develop and the likelihood of the seller's market persisting for a good while yet.

Congratulations to those who've got on board and can see what is happening
and willing to be patient as this repeats the success of last year's Summer.
The bankers have done their numbers. They can see that lithium under-supply is getting serious and that Galaxy have the head start and management has got their attention with a steady set of positive announcements, one after the other.
Either we now move up to a decent company valuation or we get bought out. Or both. That must be the central rationale behind the frenzy. We have been undervalued for far too long.

Joe Lowry said "focus on execution" for 2017.
That means - to those from other stocks who are swinging by - don’t worry about us.
Worry about your own management, finances, clients, mica impurities (because they’re there, I assure you) and forecast production. Worry about your own sp being "executed" if/when there are long delays, legal stoushes, regulatory hurdles, plant issues.
We’ve already worried about these things. Now it’s others turn to worry.
Galaxy wants you to succeed too. We want to build up the independent Chinese hard rock supply sector.
Meanwhile, spodumene price looks almost certain to keep going up and Galaxy is the first one in line for the increase in price/profits.

I’m beginning to realise that, while some have pointed the finger at Joe Lowry for being pro-Galaxy, there is an obvious lack of knowledge in the analysts to compete with him, and also likely with those with the technical skills like lithium plant and flow-chart designers for the next wave to depend on.
There isn’t enough real experience on the ground yet with lithium production. Particularly with hard rock.
And if you don’t trust JL for accurate modelling of lithium pricing - who do you ask?
Chris Berry? He’ll tell you the same thing about Galaxy.

Yeah - a lot of the lithium analysis is all over the shop or already hopelessly out of date.
Those who were lithium bears before are slowly getting the idea that supply shortage is very real and likely to last for years to come. Supply isn't coming on fast enough and demand is going vertical.
Now even Mac bank have a large position in Galaxy.
I guess we’ll see the second version of their report soon enough.

There is enough missing lithium expertise to cast doubt on the technical skill to smoothly execute the next wave's plants on the horizon, and quite possibly to adequately forecast their construction time, production, ramp up and recovery rate and costs.
Primero are the A-team of Australian hard rock (via Greenbushes) and they’re contracted to Galaxy. That's a nice advantage to have for Galaxy.

I’ve been studying Greenbushes a bit lately. Despite their status as king of spodumene, their recovery rate was down from 2015, achieving a little over 60% last year or 440kt. They seem to max out at under 70% even with a flotation circuit, and this supply is split with technical grade that has ceramics/glass clients rather than just battery plants.
It means that even if this was all going to battery plants that the 51/49 share that Tianqi/Albemarle each get from this plant is only a little more than what Mt Cattlin now seems on track to deliver in 2017, straight off the bat.
And Albemarle's share is further complicated by not being able to sell into China and have to work with complicated tolling arrangements that cost it payment in extra spodumene.
That in itself is quite interesting.
Greenbushes was sold in 2012 for around $815m when the price of lithium was 3-4 times lower. That may also assist in some way to give a little background to how valuable our supply may be at the moment on the market as a single asset. Another example is Rockwood, who were the only independent company in production that was pure play lithium with hard rock and brine before they were bought out by Albemarle for $6.2b.
Now the only pure play production company with both kinds of assets is Galaxy and our spodumene is very close to the Greenbushes standard - as high as 6.4% and as low as 1.2% mica content. Fine grained also - same as Greenbushes.
Our new production is a huge improvement over the old product profile of 5.2% grade and approx 5% mica. Even with that product Jiangsu was making some of the best carbonate in China.

For Mt Cattlin to be hitting 60% already, and without flotation is a massive achievement for Primero, management and all the staff who have been working on Mt Cattlin during the year. If it ramps up smoothly this year to 70%, as per guidance, and we are already starting at 60%, then we know we are on track for a very much higher production rate than our management has given guidance for. I've already typed up a bunch of stuff on that on the weekend if you want to go looking for it. The new recovery rate puts even the very latest broker reports from December out of date, let alone any of the wider sector analysis reports from mid year.

But that is management's way. Surprise with upside. We have to accept that this is how they provide figures, but, as it goes along, and each target is exceeded, as it has been lately - then we’re surely allowed to take a look at what the bottom line is more likely to be. I’ve always said that I believed 50% was conservative.

Clearly we are now also being permitted to start pricing in some of the value of our future asset production. It’s only fair. More work has been done on SDV than most of the spec miners have done on their tenements and it barely contributes to our sp, simply because Mt Cattlin keeps on getting better and more profitable.
GXY have the skills and expertise, and now the cashflow picture is emerging to show how quickly debt can be paid down.

The market is forward looking after all, and management look very capable of developing the next assets.
This company has turned around in such a fast and impressive way that they’ve attracted a lot of attention. First with the big news of shipment and some good media spots and now with the catapult in share price.
That feeds even more money into Galaxy.
The big banks are buying. Even JP Morgan, who already had about 200m or so picked up a few more. All the big names crop up in the last broker reports. Looks like they're now fighting each other with retail picking up what they can in the rush to get aboard.

September's delay had the silver lining of a production and quality upgrade that should repay share-holders each and every year of its operation. It looks to re-pay for the patience in the first year of operation alone, because one effect of the delay was to further exacerbate the supply problems in the independent sector. Hence the record contract price.

The year has started with a boom for lithium producers. China has just massively expanded renewable investment. Europe was already pro-EV and renewable policy and is starting to really need to accelerate as well to mitigate pollution for the same reasons China is pushing ahead - the pollution levels are getting dangerous in the big cities Paris, London etc. From the US is news of huge scale battery installations based partly from west coast policy but also from its efficiency and cost perspective. We knew this was all coming but it's happening pretty fast now.

Meanwhile in South America, Chile has set out a rather punishing royalty scheme for brine pricing which is turning more focus onto Argentinian brine supplies, even from Chilean-owned SQM. The new Argentinian govt has already won praise from Obama as an excellent example of anti-protectionist government.
SDV is recognised as the next big high quality brine project with a DFS and ready to roll.
And then James Bay - a copy and paste job of Mt Cattlin. But potentially a monster, surface-laying and easy to exploit.
DFS later this year - then hopefully followed by immediate build, financed by Mt Cattlin profits.

The value is certainly there.
And the share price action of the last period shows how many can see the the growth that Galaxy will be going through over the next couple of years, already ahead and riding the biggest resource boom in living memory.
Why is it going up? - because Galaxy can execute.

good luck to all holders.
Stay patient and don't get executed too early.