Why the Galaxy Resources share price has dropped lower today

The Galaxy Resources Limited (ASX:GXY) share price has dropped lower on Monday. Here's why…

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Galaxy Resources Limited (ASX: GXY) share price has dropped lower in morning trade after providing an update on its Sal de Vida operation.

At the time of writing the lithium miner's shares are down almost 3% to $2.17.

What was in the update?

According to the release, project development activities at the Argentina-based operation have been largely focused on the Front-End Engineering Design (FEED) and optimisation phase, as well as improving its operational readiness in order to minimise executional risks and maximise financial returns.

The company expects to appoint Worleyparsons Limited (ASX: WOR) as project management consultant to lead the FEED and the optimisation work program in the near future.

In addition to this, management advised that it has received several offers from potential strategic partners which it is currently evaluating.

As negotiations continue to progress, the board has extended the process timeline to ensure proper consideration is given to the strategic merits and proposed terms and structure of each of the offers. I suspect this delay may be the reason for the share price weakness today.

Management advised that it made this decision to extend the process timeline as it "will only proceed with a strategic partner if the final terms of the relationship properly recognize the fundamental underlying value of Sal de Vida and the partner can add additional value to the Project either through technical and/or financial input."

For now, though, project development activities will continue and can be funded internally due to Galaxy's strong financial position thanks to the recent sale of a selection of tenements at Sal de Vida to South Korean conglomerate POSCO for US$280 million.

In addition to this, Galaxy has zero debt and is generating solid cash flow from its Western Australia-based Mt Cattlin operation.

Should you invest?

While I think that Galaxy, Kidman Resources Ltd (ASX: KDR), Orocobre Limited (ASX: ORE), and Pilbara Minerals Ltd (ASX: PLS) could all be good investments if lithium prices remain favourable over the medium term, I have been left concerned by recent weakness in the prices being commanded by Orocobre.

This month Orocobre advised that during the December quarter it averaged a price of US$10,800 per tonne for its lithium carbonate, down 15% from the US$14,699 per tonne it commanded in the September quarter.

Management advised that soft market conditions in China have had a direct impact on shorter term contracts, leading to the fall in prices.

In light of this, I would suggest investors wait to see how prices fare during the first quarter of 2019 before considering an investment.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the 'five best ASX stocks' for investors to buy right now. We believe these stocks are trading at attractive prices and Scott thinks they could be great buys right now...

See The 5 Stocks *Returns as of 30 April 2025

Motley Fool contributor James Mickleboro owns shares of Galaxy Resources Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Fallers

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why Dexus, Mayne Pharma, Nufarm, and Treasury Wine shares are falling today

These shares are having a tough session on Thursday. But why?

Read more »

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Share Fallers

Why James Hardie, Mayne Pharma, Nufarm, and Resimac shares are falling today

These shares are having a tough time on hump day. But why?

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why Kogan, Monash IVF, OFX, and ResMed shares are falling today

Why are these shares taking a tumble today? Let's find out.

Read more »

A young male investor wearing a white business shirt screams in frustration with his hands grasping his hair after ASX 200 shares fell rapidly today and appear to be heading into a stock market crash
Share Fallers

Why Appen, DroneShield, Gentrack, and New Hope shares are dropping today

These shares are starting the week in the red. But why?

Read more »

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Share Fallers

Why Dexus, Dusk, Fletcher Building, and Paladin Energy shares are falling today

These shares are ending the week in the red. But why?

Read more »

Couple look at a bottle of wine while trying to decide what to buy.
Consumer Staples & Discretionary Shares

Treasury Wine shares: Buy, hold, or sell? Here's Macquarie's take

What is Macquarie forecasting for Treasury Wine shares amid the CEO’s unexpected exit?

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why Newmont, NRW, Peet, and Treasury Wine shares are dropping today

Let's find out why investors are selling down these shares on Thursday.

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why Aristocrat, EBR, GQG, and Insignia shares are tumbling today

These shares are having a tough time on hump day. Let's find out why.

Read more »