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$5.28 galaxy resources limited

Galaxy is poised for the next 5-years to become profitable,...

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bobsacramento

1,202 Posts.

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24/03/18

04:09

Post #: 31994053
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Originally posted by Cadel ↑

After reading the reports I was interested to see how the downrampers would try and rubbish it, there was a few figures I thought they would use and guess what they were all over it.

So 2017 was our first year back in production, which is going to be our most expensive year, add to that the fact that we were only receiving 50% payments due to our prepayments we were never going to get the full picture in this report, so we had 100% costs and only 50% revenue for part of the year. So in this year we basically paid off all of our debt associated with getting the mine up after paying off the debt we are even for the year. Also we are paying for 3 assets and receiving income from 1. We can say that the $60 million positive cash position is from the sale of shares.

So it is all about 2018 now, the income is safe as houses with our 5 year offtakes and with the improved recoveries we will see higher profits then the basic maths below. So if we go off 2017 prices we are selling for $US868 (which is expected to increase) a tonne and the production costs are $US325 (which is expected to fall). So that is $US543 profit a tonne. We are going at 210ktpa so if we work on $US500 profit a tonne all in we are generating $US 105 million profit or about $AU140 million profit. That is how I justify our $1.4 billion MC. PE ratio of 10, so plenty of upside. Now much or all of that profit will go back into build our two other resources, that gives us about $AU200 million to spend this year on getting them up, which is more than we could spend. These will obviously generate income in the future totaling around $AU 500 million a year in a few years time. So times that by 15 or 20 we have plenty of room in our MC in the years to come.

Now all of our longs know that, while the weasel shorters cling to their figures. We know the real figures and I am sure they do too, but while they can fool the market they can have a go, but the reality will come out sooner or later and the patent ones will be rewarded handsomely. I imagine the retail % is getting lower by the week as the SP can be hard to watch. Management are playing the long game and since it was our first year of profits they can go low ball and still show improvement, maybe get a few more bonus shares for the improvement this year and years to come as the figures keep getting higher.

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Galaxy is poised for the next 5-years to become profitable, given the supply/demand metrics of lithium. I think the market is also waiting for the converters to increase their capacity, which seems to be easier said than done, rift with delays. Beyond 5 years, Galaxy is dependent on production from the higher grade of James Bay (which according to the local government document won't be operation till at least 2020) and SDV. Execution at SDV will be of paramount importance for the company, or they will face some increased competition from other producers. Mt Cat is unfortunately a low grade mine (one of Joe Lowry's earlier podcast had him also doubting the quality of the mine as well, often times struggling to give any real praise to the mine), that is producing at fortunate time, it isn't the long term response.

What is concerning: The BMW/SDV debacle, Galaxy needs to hire some solid PR people, because it's PR is shitty, given the multiple false rumors that are being reported, and they make no attempt whatsoever to correct or address the market. (3 times already, 1) selling equity in Jan 2) the panasonic rumors 3) BMW rumors) Proper PR is important, and for a guy who has TV experience (hollywood tony according to the Dean), it's extremely concerning. And it's sad because good PR builds investment confidence, and leads to higher valuations (due to positive market psychology). AT has done well, don't get me wrong, but this is my only criticism of management.

For now, I'm out, but I do plan to start a new position when the PR issues are addressed, and some direction towards SDV is given (including some of the infrastructure issues in Argentina, given that the location of SDV is in a relatively remote area) Remember, brine projects historically take a long time (just ask our neighbors at LAC (had to do a JV with SQM to execute, there is no shame in asking for help in a technically challenging project) or Orocobre ((5-20 years to get into actual production)). There are executional doubts, and if resources (time and money) are being put into SDV at the expense of JB, then there will be massive delays in production are valuations will be solely reliant on Mt. Cat (which is okay now, but will be disastrous in 5+ years)

GXY Price at posting: $3.28 Sentiment: Buy Disclosure: Not Held
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