A) Mount Catlin has been disappointing from an operational point of view but will improve with higher grade ore feed and better recovery.The company doesn't have $450m in the bank.
The last quarterly shows that they are nowhere near $100m free cash-flow per year. In fact, cash in the bank went backwards last quarter by quite a lot.
The reason why GXY is highly shorted is multi-faceted:
- Poor management - AT treating the market like you would treat a turd - listen to the latest results announcement
- Poor communication
- Not reliable - money for SDV sale was supposed to be in the bank for SDV by end of October; partnership with SDV by end of December, etc.
- Small revenue stream for the foreseeable future - Revenue for the next 5+ years is reliant on a tiny little resource that is struggling for relevance as is increasingly becoming evident with every quarterly report
- Execution risk with SDV - already delayed by 12 months and they have barely begun; new methods for processing lithium, etc.
- Lithium pricing "notably" down on 2018 pricing, despite EV uptake increasing and no oversupply or notable increase in battery grade lithium projects - heaven forbid there was an oversupply - GXY would be cactus!
B) Agree
C) Money is in Escrow and will be released to Galaxy sometime in Feb. 2) On receiving the money the stock de risks enormously and it enhances current sale process and likelihood of a strong result.
D) Revenue stream maybe small but exploration and production upside means it maybe around 10 years plus
E) Execution risk is certainly an issue but can be managed through a JV. Media reports from Argentina suggest Pos Co start construction in April with 1st production targeted for 2021. This is likely to include GXY southern tenements and would bring forward analyst estimates on time line.
F) Agree on Lith pricing. Not good but spod prices coming back do have benefit of delaying more production coming into market which help concerns on the over supply case.
All in all at this price I think it's much easier to be constructive about GXY and it's valuation at $A800mln as a lot of it's issues have been priced.
