High grades, big profits and low costs: Phase 2 DFS shows Galan’s HMW lithium project ‘truly worthy’ of Tier 1 status
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Galan’s Phase 2 Definitive Feasibility Study has made its Hombre Muerto West lithium brine project in Argentina even more attractive.
HMW is the highest-grade lithium brine project in Argentina with a resource of 6.6Mt of lithium carbonate equivalent grading 880mg/l lithium.
The project, close to tenure held by majors Livent, Allkem and POSCO, also boasts very low levels of impurities.
Unsurprisingly, this makes for a very attractive project. Galan Lithium’s (ASX:GLN) Phase 1 DFS outlined an initial project capable of producing a premium 6% lithium chloride concentrate (comparable to 13% Li2O or 32% lithium carbonate equivalent) at a rate of about 5,400tpa of lithium carbonate equivalent from the first half of 2025.
This is expected to deliver attractive post-tax net present value 8% (NPV8) and internal rate of return (IRR) – both measures of a project’s profitability – of US$460m and 36%, respectively, as well as free cash flow of US$54m per year.
Capex is estimated at just US$104m with payback in two years while operational expenses were estimated at US$3,963/t of recoverable LCE.
Construction of Phase 1 is already underway with the first evaporation pond already 15% complete.
The Phase 2 DFS, which included a heap of optimisation work carried out since the release of the Phase 1 DFS in July 2023, has built on that foundation and made the project even more appealing.
Phase 2 increases annual production by about 286% to 20,851t of lithium carbonate equivalent contained in the same concentrated lithium chloride product for a period of 40 years from the second half of 2026.
This increases post-tax NPV8 and IRR to US$2bn and 43% while boosting annual free cash flow up to US$236m – demonstrating the benefits of increased scale.
Achieving this increased output and economics requires what Galan describes as a ‘moderate incremental’ capex of US$278m on top of the initial Phase 1 Capex of US$104m, bringing total capex up to US$382n.
Payback on this combined capex is still a relatively quick 2.9 years.
Phase 2 will also reduce opex intensity by 11% to US$3,510/t LCE, leaving HMW in the first quartile of the industry’s cost curve.
This makes for some attractive margins given the long-term average price of US$22,841/t LCE for the concentrated lithium chloride product and US$29,000/t LCE for lithium carbonate.
No Inferred resources are used in the Phase 2 production schedule with all production sourced from an Ore Reserve of 806,000t of LCE at 864mg/l lithium.
“The release of the Phase 2 DFS for Hombre Muerto West clearly demonstrate the world-class nature of Galan’s 100% owned project,” managing director Juan Pablo Vargas de la Vega said.
“The production volumes and low cost of production from HMW means it is truly worthy of being considered a tier one lithium brine project.
“These results fully support our DFS re-evaluation process and long-term production strategy, delivering a high-quality lithium chloride product into the market and providing Galan with strong early cash flows.”
Galan is currently in advanced negotiations for offtake and funding options for Phase 1.
It also expects to start in 2024 more studies for Phase 3 production from HMW in 2028 followed by Phase 4 production in 2030 from both HMW and the Candelas project.
Upside opportunities have also been identified that may add value to the latter three phases.
These include the potential for the northern mining tenements that are currently being explored to increase the quality and quantities of the Ore Reserves, which could increase the lithium grade in the raw brine feed and increase the LCE content in the lithium chloride product.
Potential also exists to increase the production of LCE contained in the lithium chloride by recovering the high lithium grade brine entrained in the discharge salt.
This article was developed in collaboration with Galan Lithium, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.