Are Lithium Stocks Still Providing Any Hope Despite The Latest Sector Driven Challenges - MIN, GXY And PLS?

  • Apr 27, 2019 AEST
  • Team Kalkine
Are Lithium Stocks Still Providing Any Hope Despite The Latest Sector Driven Challenges - MIN, GXY And PLS?

We are discussing a few lithium stocks, which are facing challenges in the highly capital intensive environment with the long lead time involved in the projects. Mineral Resources Limited (ASX: MIN) Mineral Resources Limited (ASX: MIN) a Perth-based leading mining services provider, today announced that it has completed an offering of US$700 million senior unsecured notes due in 2027, with a coupon rate of 8.125%. The proceeds received in cash will partially be used to refinance the company’s few existing credit facilities. The remaining net cash proceeds will be used for general purposes of the company, including capital expenditures. After completing the existing credit facilities, the company intends to enter into a new $250 million Syndicated Revolving Credit Facility. The development related to the outcome of notes offering will provide the company access to an additional source of capital to support further growth opportunities once they arise. At the current market price of $15.840, the stock is trading at a price to earnings multiple of 24.89x. The dividend yield for the stock stands at 3.27% with a market cap of $3.05 billion as on 26th April 2019. Galaxy Resources Limited (ASX: GXY) Galaxy Resources Limited (ASX: GXY) released its activity report for the quarter ended March 2019. The total mining volumes posted a growth of 18% as compared to the December quarter. The higher growth was on the back of an increase in the stripping ratio. Ore grade mined in the March quarter was lower than the average reserve grade but in line with Q4 2018. The production volume witnessed a growth of 24% to 41,874 dmt as compared to the previous quarter. Galaxy and JP Morgan conducted an evaluation of strategic JV opportunities for Sal de Vida. However, till-date, the company has not been able to agree on the transaction structure. Galaxy enjoys a strong financial position with US$285 million available in the form of cash and liquid assets with zero debt and robust cash flow from Mt Cattlin. With the available financial comfort, the company is in the position to progress the development of Sal de Vida with its true value unlocked. Management intends to remain patient and prudent related to any third-party transaction for the Sal de Vida Project, given the current weakness in short term contract prices for lithium chemicals. However, management is confident about the prospects of the lithium sector and market growth potential. At the current price of $1.550, the stock is available at a price to earnings multiple of 2.970x, with a market cap of $631.66 million as of 26th April 2019. The stock is trading near its 52-week low price of $1.520. Pilbara Minerals Limited (ASX: PLS) Pilbara Minerals Limited (ASX: PLS) updated the market that March 2019 Quarterly Activities Report is scheduled for release on Monday, 29th April 2019. PLS in its earlier update informed that the company undertook the issue of 14,000,000 and 1,000,000 ordinary shares (fully paid). In another update, PLS informed that GFL International Co. Limited has become a substantial holder with the voting power of 8.37% in Pilbara Minerals Limited. The company earlier communicated about the initiation of the partnering process for Stage 3 Pilgangoora offtake with future JV chemical conversion facilities. The company expressed its intention for sale of a minority interest between 20% to 49% in its Pilgangoora Project in WA. The stock of PLS is trading towards its 52-week low. At CMP of $0.655, the market capitalisation of the stock stands at $1.2 billion as on 26 April 2019.


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