I am making the following assumptions:
1) You are only considering the lithium production industry. I will not compare to any other industries.
2) You are aware of a current down trend in GXY and across the lithium production sector.
3) You are considering quite long term. Longer than 12 month investment and are therefore not too concerned with resolutions proposed in the upcoming May AGM so long as returns are good long term.
4) Lithium battery compounds are the focus of the growth.
5) You are considering speculative companies as well which have very low market caps.
Some current facts circulating about lithium:
50% current production of lithium compounds are from brine and 50% from hard rock.
Hard rock has less capex, quicker construction but also less profit than brine.
Hard rock can go bust if the price of lithium drops.
There are 3 lithium producing hard rock mines in Australia. GXY has one of them and has 100% ownership of the project. You can dyor on the economics of this project but it is running at a favourable time right now. Currently there is a high worldwide demand for lithium driven (pardon the pun) by the growth in electric vehicle production and large scale battery storage.
On the supply side there are competitors in various stages of exploration, research and construction. The speculation is that there will be at least two other large hard rock projects online around 2019-2020 and worldwide expansions in brine coming online between 2020 and 2025. This leaves a lag for another 2-3 years of lagging supply which is good for current producers.
For GXY this is good short term but results in no dividend as the cash flow will go to funding the flagship brine project at Sal De Vida which is preparing a pilot brine plant. Basically if SDV is a dud, GXY is sunk because the competitors hard rock mine proposals would be higher quantity and quality than the Mt Cattlin mine.
But if SDV is commissioned as a brine production with low Mg content and reasonable sulfate content it will be is a better position than the hard rock competition which is the most vulnerable in times of over production.
Other competitive hard rock projects would take time to build and commission and funding is all from debt and capital raising. Once in production would need to be paid back which is similar to SDV except that SDV also has a finance stream from Mt Cattlin exports which does have a good income while the global supply is in lag.
In terms of economics I think that:
The GXY brine project is feasible and competitive on a global scale.
The Mt Cattlin project is timely and makes for a good income stream at least until supply starts to catch up.
You might also be considering penny stocks which are focussing on research and not mining. These will either break through and make game changing technology or flop. I can't comment on how these compare to GXY except that you would need to do research to see if there are any who will actually succeed.
All my opinion only.
I hope this answers your question.
GXY Price at posting:
42.5¢ Sentiment: Buy Disclosure: Held
