The Galaxy Resources Limited (ASX:GXY) share price is on the move today following the release of an update on its James Bay operation…
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The Galaxy Resources Limited (ASX: GXY) share price is pushing higher on Tuesday morning.
At the time of writing, the lithium producer’s shares are up 2% to $2.28.
Why is the Galaxy share price pushing higher?
Investors have been buying Galaxy shares this morning following the release of an update on its James Bay Lithium Mine Project in Québec, Canada.
According to the release, the Preliminary Economic Assessment (PEA) for the project is complete. That assessment found that the project is a viable, near-term supplier of spodumene to feed the emerging electric vehicle value chains in North America and Europe.
Management estimates that the project will deliver average annual production of 330,000 tonnes of spodumene concentrate over an ~18-year mine life.
It expects to achieve this with a cash operating cost (FOB Montreal) of US$290 per tonne of concentrate. Management notes that this will position James Bay competitively.
In light of the above, the company estimates that the project has a pre-tax net present value (NPV) of US$560 million at an 8% discount rate. It also anticipates a pre-tax Internal Rate of Return (IRR) of 39.6%, with a payback period of 2.2 years.
As a result of this, Galaxy will now advance the project directly into the basic engineering phase. The full capital cost of the project is estimated to be US$244 million.
Galaxy also revealed that it plans to integrate James Bay with a downstream lithium chemicals facility. Discussions with a number of prospective partners will be advanced following the release of the PEA.
Galaxy’s Chief Executive Officer, Simon Hay, was pleased with the PEA. He commented:
“Galaxy is pleased to release the PEA outcomes for James Bay which clearly demonstrate that the Project is a viable, near-term supplier of spodumene to feed the emerging electric vehicle value chains in North America and Europe. Our skills and experience in developing and operating Mt Cattlin have been utilised to optimise the James Bay design. As a result, the Project is a low-cost operation and will sit in the lowest quartile regionally for capital intensity and operating costs.”
“Galaxy intends to develop James Bay as a fully integrated project and the release of the upstream PEA is a major milestone in our engagement with potential downstream owners and suppliers. Forecast financial outcomes are compelling and with downstream facilities needing to secure long-term spodumene supply from reliable and proven miners Galaxy is confident that the James Bay project will be highly attractive, particularly to North American and European value chain participants.”
“We have immediately commenced the basic engineering phase. First production is targeted for early 2024 as electric vehicle penetration rates increase and the forecast demand for lithium in the region accelerates.”
Following today’s gain, the Galaxy share price is now up 200% over the last 12 months.
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Motley Fool contributor James Mickleboro owns shares of Galaxy Resources Limited. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.