Galan Lithium has rung the till for AU$25 million from a placement and a rights issue to support the completion of the first phase of lithium production from its Hombre Muerto West (HMW) project in Argentina in 2025.
The capital raise includes a firm commitment for AU$12 million through a placement at 10.5c per share and a non-renounceable entitlement offer aimed at raising an additional AU$13.3 million.
Galan says it has secured backing from both institutional and sophisticated investors, in addition to a US$3 million (AU$4.5 million) cash injection from Chengdu Chemphys Chemical Industry, which is currently in negotiations with the company in a bid to become a key offtake partner.
Although Chemphys has committed to the placement, its participation is still conditional on a successful conclusion to the discussions with Galan and shareholder approval. In any event, it is also subject to a year-end sunset clause.
The capital raised will be directed toward the continued development of the HMW project, as well as covering corporate overheads and providing essential working capital as Galan aims to reach production by mid-next year.
The company has also fired the starting gun on a 1-for-4 non-renounceable rights issue for shareholders at the same price of 10.5c that will raise a further $13.3 million and bring the total to $25.3 million.
Galan Lithium managing director Juan Pablo Vargas de la Vega said: The Board has adopted a lower capital intensity Phase 1 development to an initial 4000 tpa LCE rate in light of market conditions. Funds raised from the Offer and the planned Chemphys prepayment provide the means to complete this development and keep our planned start to production in the second half of 2025.”
Vargas de la Vega says that despite “challenging market conditions”, the company was moving forward with the development of HMW. Management remained confident about the project economics underpinning the development and the future of the lithium market.
The placement is expected to settle on Monday next week, with 69.5 million shares to be issued a day later at an 8.7 per cent discount to the previous closing price of 11.5c a week ago.
With lithium carbonate prices continuing to drop, currently trading at US$10,200 (AU15,388) per tonne, hopeful future producers such as Galan are increasingly looking for creative ways to keep moving forward.
With the finishing post tantalisingly close and a pragmatic approach of reducing initial capital expenditure while raising further funds, the company seems to be giving itself and its shareholders every chance of weathering the storm as it sails towards establishing a sustainable cash flow.
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By James Pearson
