Galaxy Resources Limited (ASX: GXY) has reported its result for the six months ended 30 June 2019.
Galaxy is a lithium business that has hard rock mines and brine assets in Australia, Canada and Argentina. It also owns lithium production facilities. It wholly owns the Mt Cattlin mine in Ravensthorpe, Western Australia. One of Galaxy’s key assets is the Sal de Vida lithium project which the company says has the potential to be an excellent low-cost brine-based lithium carbonate production facility.
Galaxy’s 2019 Half Year Result
Galaxy revealed that for the first half of its 2019 financial year it produced 98,334 dry metric tonnes (dmt), which was an increase of 7% on the first half of 2018 and a 51% increase on the second half.
However, Galaxy’s revenue dropped 68.3% to US$28 million. There were a number of reasons for this including a lower realised sale price and lower sales volumes because of customer shipping schedules. The average selling price was 38% lower compared to HY18 and 36% lower than the second half of 2018.
Galaxy reported that its underlying EBITDA dropped 78% to US$9.4 million, down from US$42.4 million due to the reduced sales price, although it was partially offset by a reduced cost of goods.
But, after a review of Galaxy’s balance sheet items and projected lower shorter term resource prices, the company has recognised write-downs and impairments totalling US$176.8 million.
There was a write down of inventory at Mt Cattlin of US$13.6 million, impairment of PPE (property, plant and equipment) at Mt Cattlin of US$123.5 million and derecognition of deferred tax assets of US$39.7 million.
That’s why the company reported a statutory net loss of US$171.9 million, compared to a US$11.5 million profit last year. Without the write-downs and write-offs, Galaxy said it produced an underlying net profit of US$4.9 million.
Galaxy finished the period with a cash balance of US$176.3 million and no debt.
Galaxy Resources Management Comments
Galaxy Resources CEO Simon Hay said: “Operational outcomes achieved in H1 2019 were pleasing in the face of difficult market conditions. Strong production volumes, improved product quality and reduced operating costs compared to H2 2018 demonstrate the early outcomes of an operational turnaround and the Company’s focus on production and costs efficiencies at Mt Cattlin.”
Are Galaxy Resources Shares A Buy?
For the full 2019 year Galaxy Resources, guidance is being maintained at 180,000 dmt to 210,000 dmt.
The best time to buy a cyclical company is when the price is lower and sentiment is down. So perhaps now is the best time to buy shares? Who knows.
However, resource prices and demand for the resource are quite unknown. That’s why I prefer to stick to shares that have more control of their profit and prices, such as the reliable shares in the free report below.
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