The Galaxy Resources (ASX:GXY) share price has rocketed 20% in 2021

The Galaxy Resource Limited (ASX: GXY) share price has soared 20% in just four days. Here's why ASX lithium shares are starting to heat up

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The Galaxy Resources Limited (ASX: GXY) share price has soared more than 20% in the four trading sessions so far this year. Shares in the lithium producer are up 6.46% today alone, with the Galaxy share price sitting at $2.80 per share at the time of writing. 

Stronger spot prices lifting ASX lithium shares 

It has been a challenging few years for lithium producers where prices continued to grind lower following an influx of producers and lack of demand since late 2018. 

Orocobre Limited (ASX: ORE) is a good example of a producer that was struggling to produce on a profitable basis. In its September quarter 2020 update, the company produced 2,353 tonnes at an average cost of US$3,974 per tonne but an average price received of US$3,102 per tonne. 

However, prices appear to have bottomed in recent months. Pilbara Minerals Ltd (ASX: PLS) provided a December quarter shipments update on 6 January 2021. The update cited a material uplift in lithium chemicals pricing within China, with Platts Battery Grade lithium carbonate pricing up 35% from its lows in August 2020. 

Galaxy cashed up and ready to ramp up production 

In November 2020, Galaxy raised $161 million to accelerate its Sal de Vida Stage 1 project and progress its James Bay project to construction ready status. 

Galaxy currently holds three assets.

Sal de Vida is a high-grade, large scale brine resource in the Catamarca province, Argentina with an expected project life of more than 40 years. The project is currently in the design and piloting stage, which will end in the first quarter of this year with updated cost estimates and project financials. The company is aiming to begin construction and commissioning in 2022, and progressively ramp up production throughout 2023. 

James Bay is a large, high-grade, hard-rock spodumene deposit located in Quebec, Canada. This project holds a similar timeline as Sal de Vida, where the company is aiming commence the construction of the plant and operational readiness in 2022. 

Mt Cattlin is Galaxy's flagship resource, and a mature and stable operation. Galaxy opted to adapt Mt Cattlin to market conditions by moderating its production settings to 50–55% of nameplate capacity. In its capital raising presentation, Galaxy advised it is examining the potential ramp up of Mt Cattlin to full capacity, subject to inventory levels and prices. 

Foolish takeaway

Lithium prices are starting to recover after a prolonged downturn. Galaxy's Mt Cattlin resource is able to ramp up production, its Sal de Vida resource has the potential to become one of the lowest cost lithium producers globally, and James Bay is well positioned to supply into the emerging European and Northern American regions.

Today, the Galaxy share price is more than 6% higher at the time of writing. 

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