Galan Lithium says it has received several partnership approaches for offtake and strategic financing for the second-phase development of its Hombre Muerto West lithium brine project in Argentina.
The interest follows a phase-one offtake and financing agreement with mining giant Glencore, with management saying the volume of direct enquiries highlights the strength of the long-term lithium market.
Galan says the purpose of the phase-two offtake process is to maximise shareholder value in pursuit of its low-cost, lower-risk lithium chloride development strategy to become the next lithium producer in Argentina.
According to a phase-one definitive feasibility study (DFS) tabled in July, Hombre Muerto West is projected to have an annual average EBITDA of US$83 million (AU$123 million). Based on the phase-two DFS, the projected annual average EBITDA pumps up to a whopping US$374 million (AU$588 million) for an astounding 40 years.
Galan beefed up its total mineral resource estimate earlier this year to 6.6 million tonnes of LCE averaging 880 milligrams per litre lithium. Comparatively, the phase-two DFS production schedule is modelled on a combined proven and probable reserve of 806,400 tonnes of LCE at an average grade of 864 milligrams per litre lithium.
The company will also look to ramp up production from 5400 tonnes per annum of LCE in phase one, to a hulking 20,000 tonnes during phase two.
Galan Lithium managing director Juan Pablo Vargas de la Vega said: “We are very pleased with the progress of the offtake process for Phase 2 of our HMW Project and it highlights the strength in the long-term lithium market. Subsequent to the delivery of a DFS for each of Phases 1 and 2, and securing Phase 1 offtake from Glencore, one of the world’s largest diversified natural resource companies, the interest in our project remains high.”
The company’s binding offtake agreement with mining giant Glencore earlier this month outlined the supply of up to 100 per cent of lithium products from phase-one production at Hombre Muerto West. As a sweetener to the deal, Glencore offered to provide a secured financing prepayment facility for US$70 million (AU$107 million) and up to US$100 million (AU$154 million), subject to conditions.
The two companies have already agreed that Glencore will have first right to negotiate the marketing or financing for phase two of the project, which has been shown to significantly enhance the operation.
Management says the offtake agreement does not require Galan to secure an export licence for its lithium chloride and Glencore will accept the product to be toll-treated into LCE for sale and export from Argentina.
With phase one fully permitted, the company is on the ground constructing its first 205,000-square-metre solar evaporation pond, which is expected to be completed and filled with brine by the first quarter of next year. The pond will feed the existing pilot plant with concentrated brine to produce a lithium chloride end product.
Recent testing from the Hombre Muerto West pilot plant achieved the production of a 6 per cent lithium chloride concentrate product, equivalent to 13 per cent lithium oxide or 31.9 per cent LCE, with low levels of impurities.
With phase-one backing by a significant mining player and an enviable resource and financial metrics at its Hombre Muerto West project, there is little doubt Galan will be able to negotiate a positive deal for its second-phase offtake and financing package … and potential suitors have already come running.
Is your ASX-listed company doing something interesting? Contact: matt.birney@businessnews.com.au
By Michael Philipps
