Should you buy Galaxy Resources shares or avoid the lithium miners?

The Galaxy Resources Limited (ASX:GXY) share price has pushed higher on Wednesday following the release of a mineral resource update. Should you invest?

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The Galaxy Resources Limited (ASX: GXY) share price has pushed higher on Wednesday following the release of a mineral resource and ore reserve update for its Mt Cattlin operation.

At the time of writing the lithium miner's shares are up 1% to $2.25.

What was in the update?

This morning's update revealed that following drilling activities undertaken during the second half of 2018 at the company's key Mt Cattlin Project in Western Australia, there has been a 42% increase in classified Resources compared with the equivalent position as at June 2018.

Ore reserves have increased 40% overall to 10.7Mt (Proven and Probable) at 1.15% lithium and 137 parts per million (ppm) of tantalum oxide. A 17% dilution at zero grade and 93% mining recovery have been applied to the ore reserve.

Management advised that further resource definition drilling to target the inferred resource has now commenced following the success of the latest drilling campaign.

Should you invest?

I think that Galaxy is one of the best lithium miners in the world with a collection of high quality assets.

This could make it a great option for investors along with the likes of Orocobre Limited (ASX: ORE) and Pilbara Minerals Ltd (ASX: PLS) if lithium prices improve in 2019 and beyond.

However, at present it appears as though prices are going through a spot of weakness due to softening demand and increasing supply.

This led to Orocobre recently reporting a significant quarter on quarter decline in the price it commanded for its lithium.

Because of this, I would suggest investors hold off making an investment at this stage and wait for improvements.

Especially with the company due to release its December quarter update tomorrow morning. That update should reveal the price that Galaxy has been selling its lithium for during the quarter.

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.

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