LONDON, May 18, 2015 /PRNewswire/ --
- Edison Investment Research, a leading international investment research firm, announces the initiation of full coverage of Galaxy Resources
GXY is a lithium-focused company with substantial intellectual property (IP) related to lithium processing and a strong battery materials customer base, built up over the past few years, producing and selling lithium carbonate. GXY developed and commissioned the Jiangsu battery-grade lithium carbonate plant in China to process concentrate feed from its Mt Cattlin mine (WA). Its next objective is to advance its Sal de Vida lithium and potash brine project in Argentina in the lithium-rich Salar del Hombre sub-basin, strategically located adjacent to the FMC Lithium (a top three global producer) Fenix operations. Around 60% of global lithium supply originates from this area.
Following a series of financial restructuring initiatives that has significantly strengthened the balance sheet to a low net-debt position and emphasising higher-margin upstream activities, GXY recently divested its 100% interest in the Jiangsu lithium plant. It also announced a partnership with a third party that will generate cash flow from its Mt Cattlin project through lease fees and production royalties and an option to purchase.
We have conducted a sum-of-the-parts valuation for GXY, valuing its three assets. Stage 1 of the Sal de Vida project is reasonably well defined but the schedule and costs for Stage 2 are uncertain. Therefore our valuation for Stage 2 is only indicative. Our valuation for Mt Cattlin could vary if the third party operator decides not to exercise the option to purchase. For James Bay, we use its book value but development and exploration could ultimately yield a higher value. Our base-case valuation is A$0.08/share plus an additional indicative A$0.09/share for Sal de Vida Stage 2, to give a total of A$0.17/share. An upper-case scenario gives A$0.21/share.
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Analysis by Peter Chilton and Charles Gibson
SOURCE Edison Investment Research