Lithium-ion (Li-ion) batteries represent the largest and highest-growth segment of the lithium market. They are currently considered the preeminent battery technology in high-growth industries, such as portable electronic devices, hybrid/electric vehicles, and storage batteries. We expect strong lithium demand growth in the coming years based on the positive outlook in these industries.
Demand growth is compounded by tight supply side conditions. Production issues from existing brine producers (poor capacity utilisation, expansion issues, new entrants still in ramp-up phase, and the changing dynamics of the lithium mineral (spodumene) market support the potential for significant lithium price increases in the near-medium term, in our view. Initiating coverage: Galaxy Resources Ltd (GXY:ASX) ·GXY is a globally diverse lithium development company. Primary assets include the Mt Cattlin spodumene project in WA (subject to 50% earn in by GMM), the Sal de Vida lithium brine project in Argentina (100%) and the James Bay spodumene exploration project (subject to 50% earn in by GMM) in Canada. ·GXY recently re-structured its business, having recently sold its underperforming lithium carbonate (Li2CO3) plant, reduced/re-structured its corporate debt, and established a JV with GMM to re-start production at Mt Cattlin in early 2016. In addition, GXY's Sal de Vida brine project offers optionality and potential strategic value in our view, with options to reduce capex and fund a potential staged development now being assessed. ·We value GXY on a NAV basis comprising 50% of our base case NPV10% for Mt Cattlin, our blended DCF/market based value for Sal de Vida, and exploration, net of corporate and other adjustments. We initiate coverage with a SPECULATIVE BUY rating and A$0.16/sh target price. Initiating coverage: General Mining Corporation (GMM:ASX) Canaccord Genuity (Australia) Limited was the Lead Manager to the Placement of ~40.3 million shares at $0.18 per share to raise ~A$7.3 million in December 2015. ·GMM's primary asset is a right to earn 50% of the +15 year, ~110ktpa Mt Cattlin spodumene project through sole funding a re-start of production (expected early 2016) and cash payments to GXY. GMM is also earning a 50% interest in the James Bay exploration project. ·Previous production issues at Mt Cattlin are being addressed through upgrades of the process plant, while project economics benefit from existing infrastructure, low initial start-up capex ( ·We value GMM on a NAV basis, consisting of 50% of our base case NPV10% for Mt Cattlin, exploration (James Bay), net of corporate and other adjustments. We initiate coverage with a SPECULATIVE BUY rating and A$0.40/sh target price.
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