Galan Lithium snaps up majority stake in Greenbushes South

Special Report: Galan Lithium has picked up an 80% interest in the Greenbushes South lithium project in WA, just 3km south of the world class Greenbushes lithium mine.

The acquisition by Galan Lithium (ASX:GLN), which comes via a deal with Lithium Australia (ASX:LIT), secures and consolidates a significant package of exploration ground for the company at Greenbushes of around 396km².

That figure includes both the Greenbushes South project and a separate exploration licence of around 43km²held 15km south of the Greenbushes mine – the largest hard rock lithium mine in the world.

Greenbushes South covers the southern strike projection of the geological structure which hosts the Greenbushes spodumene (hard rock lithium) deposit.

Earlier exploration activity at Greenbushes South identified pegmatites – host rock for spodumene – which will provide immediate exploration targets for Galan’s new joint venture with Lithium Australia.

Speaking on the day of the announcement, Galan Managing Director JP Vargas de la Vega said the pickup would complement the company’s Argentinian lithium assets.

“We are delighted to acquire a majority stake in a highly prospective lithium project in a world-renowned lithium district and increase our existing lithium exploration ground at Greenbushes in WA,” he said.

“Nethertheless, Galan remains strongly focused on advancing our tier one lithium project in Catamarca, Argentina. We have secured an outstanding exploration opportunity in Western Australia to add to our existing portfolio of assets in Argentina that have a potential production profile.

“We will proceed to exploring this tenure in a methodological step-by-step manner and progress tenement applications to grant. We are pleased to joint venture with Lithium Australia and look forward to updating the market with our developments in due course.”

From its famed neighbouring deposit, Talison Lithium produces a concentrate of spodumene to feed mineral conversion plants in China and Western Australia, as well as consumers in Europe, North America and China.

Talison is a 51:49% joint venture between China’s Tianqi Lithium Corporation and US-owned Albemarle.

Australian miner IGO (ASX:IGO) recently struck a deal to acquire a 24.99% stake in the project and a 49% share of its Kwinana processing facility from Tianqi for $1.9 billion.

Galan Greenbushes — The Greenbushes South lithium project. Pic: Supplied

Terms of the deal

Under the deal struck between GLN and LIT, an unincorporated JV will be formed through the issue of 1,221,000 fully paid ordinary shares in Galan.

Galan will sole-fund JV expenditure until the completion of a preliminary feasibility study on Greenbushes South, at which point the parties will have the option contribute on a pro-rata basis or withdraw and retain a 2% net smelter royalty.

Should LIT’s share dilute to below 10%, it will withdraw from the JV and convert to the royalty.

The acquisition is expected to be completed within five business days, with sale and purchase of the exploration and prospecting licence applications subject to regulatory approvals.

A handy addition

The Greenbushes South lithium project adds to an already impressive portfolio for Galan, with the flagship Hombre Muerto West (HMW) lithium brine project in Argentina the jewel in the crown.

A preliminary economic assessment completed on HMW in December found the project would have cash costs of around US$3518 per tonne of lithium carbonate produced – among the lowest in the industry.

Pre-tax net present value and internal rate of return – both measures of a project’s profitability – were estimated by Galan to come in at US$1 billion and 22.8 per cent respectively.

Roskill is currently forecasting an average long-term lithium carbonate price (2020-2040) of US$11,687 per tonne.

The company’s focus in 2021 is further maturing that project, carrying out tests and studies to further optimise its processes and reduce capex and opex estimates.

The addition of Greenbushes South gives Galan a further foothold in WA, while also developing its flagship South American project – a substantial presence in two of the strongest lithium jurisdictions in the world.