Galan lithium inventory grows, key partnership deal nears

With its phase one ponds at 60 per cent capacity, Galan Lithium says its stocks at the Hombre Muerto West (HMW) project in Argentina have grown to 2800 tonnes of lithium carbonate equivalent (LCE).

With the project’s construction stage reaching 40 per cent completion, the company has also today confirmed that is has moved closer to selecting potential offtake and funding partners for the operation.

The 750,000-square-metre evaporation area at the site that has already been built is holding 2800 tonnes of contained LCE inventory. The evaporation area is capable of producing lithium chloride at nearly 3000 tonnes per annum LCE. The phase one pond system has a total capacity of up to 10,000tpa of LCE.

Management says its key processing parameters, including brine well average flow rates, lithium grades and evaporation rates, are all meeting or exceeding the targets set out in its phase one feasibility study.

In a strategic move in the past month, Galan has reworked its construction activities to preserve cash as it focuses on securing funding and a definitive sales agreement. To expedite the process, the company says it has shortlisted potential offtake partners, in what should be welcome news for shareholders.

Interestingly, with the push in China to manufacture next-generation lithium ferrous phosphate (LFP) batteries, demand for Galan’s product is starting to appear much stronger. LFP batteries are the first-of-breed to directly use “polished” lithium chloride as an input material, side-stepping the need from manufacturers to process the concentrate into carbonate.

Apart from the obviously significant manufacturing cost savings that come with LFPs, the Chinese government is actively promoting their use in new electric vehicles (EVs) as having a longer life span, no maintenance, extreme safety, a light weight, improved discharge and superior charge efficiencies.

Consequently, the demand in China for LFP batteries has grown 35 per cent in the past year and demand is now starting to outstrip supply.

Galan Lithium managing director Juan Pablo Vargas de la Vega said: “Our current in situ inventory of 2800t LCE has been the first step of our production pathway. Our inventory will continue to increase as we have a low-energy cost operation that only requires brine pumps to operate. As a result, once Galan finalises sales and funding arrangements, which are progressing well, the Company will be in a strong position to produce a competitive low-cost lithium product.”

Vargas de la Vega believes the strong international market interest in HMW’s lithium concentrate is evidence that the current lithium pricing environment and market oversupply is not expected to be a long-term trend.

As a near-producer and with first sales in sight, Galan has been working closely with local government during the past two years to secure the all-important commercialisation license that allows it to sell its product to offshore partners. In April, the company confirmed it had won the support of the regional Catamarca Government in exchange for an increased royalty rate of 7 per cent and a commitment to pursue further processing routes such as carbonate and hydroxide production in collaboration with the State.

Now at the legal stage, the licence will be issued at the same time as funding for completion of phase one has been secured.

Under the definitive feasibility study (DFS) for stage one released last year, Galan outlined a forecast production cost of US$3500 (A$5250) per tonne of LCE, positioning it among the lowest-cost producers. As a guideline in its DFS, the company suggested that a sale price should be about 70 per cent of the prevailing carbonate price.

With 8.6 million tonnes of LCE at 859 milligrams per litre of lithium in resource, Galan has planned a four-phase strategy for the HMW project. Phase one, supported by the necessary production permits, aims to produce 5400tpa of 6 per cent lithium chloride concentrate by the second half of next year and will then eventually ramp up in a staged production plan to 60,000tpa.

According to Platts weekly commodity insights, lithium carbonate prices have continued to underperform as the market struggles with the cost of oversupply into downstream consumer demand that remains weak.

Lithium carbonate is now trading at US$12,500 (AU$18,466) a tonne and 6 per cent spodumene concentrate has traded at less than US$1000 (AU$1477) a tonne in the past fortnight. However, it appears from the anecdotal evidence provided by the company today that chloride prices could recover quickly.

Despite the challenging year for aspiring lithium producers, Galan has maintained steady progress towards first production and today’s announcement appears to have provided some much-needed comfort for investors, with the share price up as much as 24 per cent on the company’s highest turnover in the past two months. And positive developments in selecting an offtake partner and securing short-term funding could further boost its prospects.

Is your ASX-listed company doing something interesting? Contact: matt.birney@businessnews.com.au