Why the Galaxy Resources (ASX:GXY) share price hit a 52 week high

The Galaxy Resources Ltd (ASX: GXY) share price continues its impressive run into the green from today’s market open.

Whereas the S&P/ASX 200 Index (ASX: XJO) has posted a return of around 26% over the last 12 months, Galaxy Resources shares have gained 340% over the same time.

Here we examine some of the tailwinds behind the Galaxy Resources share price.

Planned Merger with Orocobre

Back in April, Galaxy revealed it had entered into a binding merger deed with Orocobre Limited (ASX: ORE).

Under the scheme, Orocobre would acquire 100% of Galaxy shares. In response, Galaxy shareholders will receive “0.569 Orocobre shares” for each Galaxy share held.

In addition, there is a meeting on 6 August where shareholders can vote on the proposal — that’s just around the corner.

The Galaxy Resources board unanimously recommends shareholders vote in favour of the scheme. Should the vote be successful, the new Orocobre/Galaxy shares will commence trading on 26 August.

As a result of the merger announcement, Galaxy Resources shares initially took a nosedive into the red soon after 19 April.

However, the share price rose again on the back of a court ruling in early July which allowed shareholders to vote on the merger. The Galaxy Resources share price has shot up 49% since then.

Lithium spot prices running hot

Underlying lithium prices in the spot markets continue to deliver upside on the charts for Australian lithium miners.

Using Orocobre as a case study, it recently realised a 45% sequential increase in lithium prices from March this year.

This resulted in a 117% year-on-year increase in realised lithium prices from the same time a year prior.

The entire basket of ASX-listed lithium exploration, development and mining shares have been major benefactors of these strengths in lithium spot prices.

Galaxy has expertise as a resource company with expertise in lithium. Therefore, it stands to reason that it has also been a major benefactor of this run-up in lithium markets.

To illustrate, since its quarterly activities report was released on 22 July, Galaxy Resources shares have jumped a further 21% from the market open on that day.

Galaxy Resources share price snapshot

The Galaxy Resources share price has posted a return of 27% over the past month, extending the year to date return of 117%.

Given the recent fundamental momentum, Galaxy Resources shares hit their 52-week high today.

Galaxy shares are now exchanging hands at $4.83 apiece, a 3% jump into the green from the market open.

The post Why the Galaxy Resources (ASX:GXY) share price hit a 52 week high appeared first on The Motley Fool Australia.

More reading

• Why ASX lithium shares are beating the iron ore majors – again
• The Pilbara Minerals share price (ASX:PLS) is booming 8%. Here’s why
• These ASX 200 lithium shares have all surged more than 20% in a month
• ASX 200 shares in this sector pushing into record highs on Friday
• ASX lithium shares are surging this Friday. Here’s why.

The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. 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. 

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