Galaxy Resources: Lithium stocks surge from 18 cents to historic highs

Galaxy Resources: Riding the lithium wave from 18 cents to $4

How high can a lithium miner rise before someone writes the word 'bubble'? Galaxy Resources (ASX:GXY) began trading at 18 cents after a year of 600% revaluation, eventually ending up within a larger group under a new name, with lithium already established as a strategic raw material. Between those two moments lay two mines, a salar, a trading suspension, a first shipment bound for China, and a corporate merger. There were also 20% and 30% corrections that, insiders said, attracted new capital.

Lithium shifted from interest only in the chemical industry to becoming the bottleneck for electromobility. Those holding rock with spodumene or brine with carbonate held a valuable asset.

From 18 cents to $4 in twenty months

The journey unfolded in chapters: 41 cents in November 2016, 43 cents shortly after, 60 cents in January 2017—the highest in three years—62.5, 66, and the phrase summarizing any mining euphoria: "I see it at the dollar". It wasn't the dollar. By October 2017, the share surpassed $4, an eight-year high, with daily gains of 4%, 5.8%, and 7% chained together.

There was an uncomfortable argument for bears: years prior, the share had been near 2 euros with lithium much cheaper then. The optimistic conclusion wrote itself. The pessimistic one did too: a company multiplying its market cap twentyfold in twenty months rarely does so in a straight line, and those entering at the top usually pay the bill.

The lithium Tesla needed and no one had signed

On the edge of the Nevada desert, Tesla was building the world's largest battery factory. The facility needed to cover lithium demand for its electric vehicles alongside Panasonic, and the company had not yet announced supply agreements with major producers. This gap, highlighted before the facility started up in 2017, explains much of the investor interest that dragged the entire sector along.

Prices trinc. Lithium carbonate averaged above $8,000 per ton, doubling since October 2015 after months of sideways movement. With major auto brands' projects adding up one after another and battery manufacturers announcing megaprojects, the underlying thesis was simple and somewhat tricky: supply was not arriving, so prices would keep rising.

Mt Cattlin, Sal de Vida, and James Bay: where the mineral is located

The business rested on three pillars. Mt Cattlin, a lithium and tantalum deposit one kilometer from Ravensthorpe, in Australia's Great Southern region, which had been in care and maintenance for over two years until reactivated with General Mining Corporation in September 2015. Sal de Vida, in Argentina, presented as one of the world's largest lithium salars, with a start-up project planned for early the trinc year. And James Bay, a spodumene project in Quebec, Canada, with high-grade drill results.

The company came from a two-year restructuring with a new board and management, claiming readiness to become the newest lithium producer in the world. The corporate presentation spoke of tailwinds; the market, of buying.

Why was trading suspended in March 2016?

Because the company requested it. The suspension was requested pending an update on purchase agreements for Mt Cattlin, the project Galaxy was set to launch alongside General Mining. The detail circulating among investors was that the operation required the favorable vote of at least 80% of shareholders and, by mid-month, only 35% was counted, with a deadline of the 28th.

The scare was short-lived. Upon resuming trading, the share rose 4.65%. A sample of the type of episode that defines this kind of stock: real corporate risk, disproportionate volatility, and a calendar that commands more than any analysis.

The merger with Orocobre and the birth of Allkem

In 2021 came the major move. Announced in April, the merger with Orocobre was approved by the majority of shareholders in August, with a size of about $4 billion Australian dollars, awaiting final court hearings. The goal: to create one of the world's five largest lithium companies, with hard-rock production and brine assets spread across Australia, Canada, and Argentina.

Operational figures trinc. Mt Cattlin signed a record quarter with 67,931 metric tons of dry spodumene concentrate at a unit cash cost of $351 per ton, and 89,640 tons shipped at an average realized price of $779, generating $69.8 million in revenue. The company spoke of new shipments of 38.5 kt in the December quarter and 25 kt in early 2022. Then came the name change to Allkem, and later a new all-time high with 7% gains.

What risks were flagged?

There were, and they were significant. It was warned that electric vehicle deployment could slow due to lithium scarcity risk, with demand potentially tripling to one million tons annually by 2025 and doubling thereafter to two million by 2030. The underlying doubt, unresolved by anyone, was whether mining supply could keep that pace.

In parallel, the uncomfortable question about the buyer circulated: if Tesla lost money on every car sold, what would happen to lithium if the manufacturer failed? The answer given then—and which time has not fully endorsed—was that demand came from many places at once. Nevertheless, the price comparison with the 2011 cycle repeated as an argument: lithium was expensive, but not so much as to justify the peak.

Three names, two mergers, and one mineral. The asset rising was always the same; what changed was the logo on the brochure.