Galan Lithium has secured a binding offtake agreement with mining giant Glencore for the supply of up to 100 per cent of lithium products from phase-one production at its Hombre Muerto West project in Argentina.
And as a sweetener to the deal, Glencore has offered to provide a secured financing prepayment facility for US$70 million (AU$107 million) up to US$100 million (AU$154 million), subject to conditions. The agreement is for a five-year period from the start of the first-phase commercial production, which is estimated at 5400 tonnes of lithium carbonate equivalent (LCE) in lithium chloride concentrate per annum.
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.
According to Galan’s phase-one definitive feasibility study (DFS) tabled in July this year, 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.
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.
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.
Galan Lithium managing director Juan Pablo Vargas de la Vega said: “Our agreement with Glencore significantly de-risks our project and we are very well poised to secure finance for Phase 1 of the HMW Project. Importantly, Glencore’s funding assistance via the prepayment facility endorses our lithium chloride concentration strategy to deliver the HMW project, and provide returns to shareholders, in a shorter time frame.”
With phase one fully permitted, Galan 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 company’s 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.
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.
Initial construction is expected to be completed by the final quarter of next year, with 6 per cent lithium chloride production expected to begin in the first half of 2025. Phase-two production is slated to begin in 2026, with anticipated cash flow from phase one going a long way towards funding the expansion.
However, with the financing facility in play, Galan may be able to draw on that cash to potentially enable production and funding to be completed within a shorter time frame.
Hombre Muerto can be loosely translated into English as “Dead Man”, but the latest offtake deal makes the project appear as though it is very much alive and kicking.
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By Michael Philipps
