Galan Lithium (GLN) - Pilot Plant Permits Imminent for Local Sales

Galan Lithium Ltd. is an ASX-listed lithium exploration and development company focused on the advancement of its lithium brine projects, the Hombre Muerto West and Candelas projects located in the Hombre Muerto Salt Flat of Argentina. The Hombre Muerto Salt Flat is known as the highest-grade and lowest-impurity lithium brine deposit in Argentina. The company also holds an exploration property in Western Australia, approximately 3 km south of the Tier 1 Greenbushes Lithium mine. 

Galan Lithium Ltd. on the 24^th of October 2022 announced that the mineral resource estimate of its Hombre Muerto West (HMW) project had increased by 2.5 times. The updated mineral resource estimate shows a total contained Lithium Carbonate Equivalent (LCE), which consists of measured, indicated and inferred resources, of 5.8 million tons. The average lithium concentration across the measured, indicated and inferred resources is 866 ppm Li, with the total brine volume being 1,258 million cubic meters (Mm³).

The company is underway advancing the pilot plant of its HMW project. Galan Lithium Ltd. announced on the 2^nd of November 2022 that it had applied to scale up the HMW project piloting stage to 4,000 tons per annum lithium carbonate equivalent (LCE). The application includes the construction of 120 hectares of evaporation ponds. The approval of the pilot plant is expected in Q2 2023, with the company planning to commence with the plant construction upon obtaining approval. The company will be able to fund the plant through its current financial position but may investigate funding the construction through alternative avenues in the future. Galan Lithium Ltd. is also underway with the creation of a definitive feasibility study for the HMW project, which it plans to publish in Q1 2023.

Projects

The company's flagship project, the Hombre Muerto West project, is a 100%-owned 11,600-hectare land package in the province of Puna in Argentina. A preliminary economic assessment (PEA) has been conducted on the project and published in 2021 which shows strong projected economics for the envisioned operation. The project is envisioned to produce approximately 20,000 tons of lithium carbonate per annum with a pre-tax NPV8% of USD$ 2.193 billion, an internal rate of return of 37.5% and a payback period of fewer than 3 years.

The Candelas project of the company is a 100%-owned 24,000-hectare land package which consists of 14 exploration permits. The project is located within the province of Puna in Argentina and has also been the subject of a preliminary economic assessment (PEA) with it envisioned to produce approximately 14,000 tons of lithium carbonate per annum. The PEA also shows a pre-tax NPV8% of USD$ 1.225 billion, an internal rate of return of 27.9% and a payback period of 4 years.

The Greenbushes South joint venture project of the company is located south of the Greenbushes Lithium Mine in Western Australia. The mine is located at one of the world’s largest and highest-grade hard rock spodumene deposits.

HMW Recent Activity

Galan Lithium Ltd. on the 24^th of October 2022 announced that the mineral resource estimate of its Hombre Muerto West (HMW) project had increased by 2.5 times. The updated mineral resource estimate shows a total contained Lithium Carbonate Equivalent (LCE), which consists of measured, indicated and inferred resources of 5.8 million tons. The average lithium concentration across the measured, indicated and inferred resources is 866 ppm Li, with the total brine volume being 1,258 million cubic metres (Mm³). JP Vargas de la Vega, the Founder and Managing Director of Galan Lithium Ltd. states that the newest mineral resource estimate places the company's combined resources, consisting of the HMW and Candelos projects as the highest-grade project in Argentina.

“Our last combined resource was 6.5 million tons, and the highest-grade project in Argentina, high-grade on purities. We’re doing now a DFS on Hombre Muerto West, finishing in Q1 next year and we have applied for a pilot plant as well, an extension pilot plant which should get permits by Q2 next year.”

The company is also underway advancing the pilot plant of the HMW project. Galan Lithium Ltd. announced on the 2^nd of November 2022 that it had applied to scale up the HMW project piloting stage to 4,000 tons per annum lithium carbonate equivalent (LCE). The application includes the construction of 120 hectares of evaporation ponds. Vargas de la Vega explains that the approval for the pilot plant is expected in Q2 2023, with the company upon receiving approval planning to commence with the plant construction.

“We applied for the permits a month ago, so we expect to have that approved in Q2 next year, and construction should start thereafter. That would take us around 9 months to complete. The concentration process starts pretty much as soon as we’ve finished the first pond, just to have to operate, so that’s for 120 hectares worth of ponds. The first product from that should come online in Q1 2024.”

The company will be able to fund the plant through its current financial position but may investigate funding the construction through alternative avenues according to Vargas de la Vega.

“The pilot plant is sitting on the magnitude of around USD$ 40 million or USD$ 50 million in Capex; maybe closer to USD$ 40 million. We haven’t nailed the number down yet, but we’ve got a cash position of USD$ 47 million. Look, things could change significantly once we get the permit in hand, and then we’ve seen that there’s a lot of interest on loans and prepayments. So, we don’t necessarily have to fund this with equity. Being here in London, I’ve seen so much interest in getting the physical lithium out. So, as a result, I think that funding the Capex for the pilot plant will be not a walk in the park, but a lot easier than what it was trying to get money 3 years ago.”

ESG factors

Galan Lithium Ltd. believes it has a secure relationship with both the community and the Argentinian government regarding its HMW and Candelas projects. Vargas de la Vega explains that the governmental and local support is due to the company’s endeavours to not only advance its Argentinian projects but also its focus on employment equity.

“I’ll start with the government. We have a very good relationship with them. They understand what we’re doing, and they’ve been changing the image of how a junior company can be a producer within Catamarca. The community is something that we’ve engaged with very much from the beginning. We have hired local people from the Antofagasta, the La Sierra area, and we’ve been increasing the number of females in our labour force as well, not only at camp but also at the office in Catamarca.”

Galan Lithium Ltd. is also focused on training and empowering the local community, with the company focused on giving its local community employees the correct tools and opportunities to be able to grow in the organisation.

“We make sure for instance that some of the people that we’ve taken are being trained for instance as camp managers, not necessarily being cleaners. We don’t want that. We want to educate them. We want to make sure that they’re part of us. And I’m always saying this is a marathon. We want to work with people, and we want to make sure that they are okay.”

The focus of Galan Lithium Ltd. on the advancement and welfare of its local communities has led to the company enjoying the support of the local community to the extent where in the past the community has stepped in as protector to an extent, stating in a forum that they want solutions to any challenges that may be faced to ensure the projects reach production, Vargas de la Vega explains:

“When we presented for drilling permits, you have to go and talk to the community, it’s a big assembly, and then you put your point forward. I remember that the locals were okay with what we were presenting. I explained, ‘This is far as we go, this is what we can do.’ So, we always say what we’ll do, and we don’t over-promise things. There was a group of environmentalists at the time, and they started making a lot of noise. It was interesting enough that at the end of that presentation, the locals turned around and said, ‘What are you doing here? We’ve never seen you before. We understand your concerns but, well, do something about it, but just help us otherwise, but don’t come to complain and not offer solutions.’ These are the answers and responses that we’re getting from the locals.”

Future

Galan Lithium Ltd. Plans to actively advance its HMW project to production throughout 2023, with the company not currently looking to sell the asset to any major mining company. Vargas de la Vega explains that the project has the potential to have a payback period of less than a year with the current lithium price forecast.

“If you look at the prices that we’ll face in another 2 years when we get a loan, the EBITDA even at 4,000 tons could be north of USD$ 100 million just from selling concentrate. And the payback of this will be less than a year. From then onwards, we’ll be a proven technology, a proven product, and a proven systematic approach to how to produce lithium. Then we’ll increase our production to - the current study is looking at 20,000 tons of lithium carbonate equivalent. We believe that, given that we increased our resources significantly, we can increase that number down the track.”

Galan Lithium Ltd. plans to publish a definitive feasibility study of the HMW project in Q1 2023, with the company also planning to continue its exploration initiatives at the HMW project according to Vargas de la Vega. The company aims to enter production at the HMW project in 2026.   

“So, we’re doing all the studies, making sure that we tick the boxes. We’ve done the pumping tests that we announced by the way a few days ago, and the pumping tests of 3 wells indicated that we are on track for that 4,000 tons with 3 wells. We need to build more wells, and I believe that we can get to 20,000 tons by 2026 and in production.”

Galan Lithium is also advancing its Greenbushes South joint venture project located in Western Australia. Vargas de la Vega explains that the company will look at future exploration drilling initiatives in 2023. 

“If we have another listing on the ASX, I like to think that we could go and drill it sometime in Q1 or Q2 next year. We’re seeing things that are an anomaly and I think that we’re trying to exhaust every possible way of having targets.”

The company has allocated a full-time geologist as well as earmarked funds for the continued advancement of the project in the coming year. Galan Lithium Ltd. has also entered into a binding agreement to acquire the remaining 20% of the project to fully own it.

“We do have a full-time geologist looking at it. We are spending time and we’ve got a budget. Last time we did a cap raise, we saved 10% of that for Greenbushes and we probably spent a little bit of that. But drilling will be the next leg.”

Galan Lithium Ltd. believes in the future of the lithium market and its projects, with Vargas de la Vega explaining that the future of electrification is certain.

“We’re seeing strong interest from many parties everyday. 3 years ago, the market was completely different. I think that the boat has sailed with lithium. It’s no turning back on not having lithium batteries and driving electric vehicles anymore. Lithium is running in a parallel universe if you want to call it that in terms of valuation and the market will remain very strong and tight. We’re going to take advantage of that.”