Lithium has been trending and Galan is tapping this sentiment
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Special Report: Lithium companies have been making gains on the market and Galan Lithium (ASX:GLN) has been enjoying the ride.
Managing director Juan Pablo Vargas de la Vega, who describes himself as a “mineral economist”, says while lithium prices are still low, as the market is still in an oversupply situation, punters were putting money into lithium companies on future tightening in supply.
“I think the market is not looking at the price now, but where it is going to be in three to five years time,” he told Stockhead.
“Even companies that are not making money today are seeing their share prices going through the roof on expectation of the future.
“So under that optic, then you know everything looks cheap today and that’s why people are buying today.”
He noted that prices are expected to recover in the next year or two, which would send markets jumping.
“I don’t think that we haven’t seen anything yet in terms of whether lithium can go to.”
Besides the current market sentiment, Galan Lithium itself has benefitted from a recent resource upgrade that took its resource up to just about 3 million tonnes of lithium carbonate equivalent at 858 mg/l Li, the third largest in Argentina’s Hombre Muerto salt flat basin.
This compares very favourably with the North Sal de Vida assets that South Korean steel-maker POSCO acquired from Galaxy Resources last year for $US280m on the basis of a 2.5Mt LCE resource grading 732 mg/l Li.
The resource upgrade also marks a major milestone for the company.
“We have gone from 685,000t of lithium carbonate equivalent that we had at Candelas 13 months ago to close to 3Mt this year,” Vargas de la Vega said.
Not bad for assets that he had identified a couple of years ago, which prompted Vargas de la Vega to quit his job, sell his car and take his savings with him to Argentina for a couple of months where his ability to speak Spanish, having good friends to back him up and years of experience negotiating contracts in South America put him in good stead.
That the company was able to raise $3m and keep its head above the water in a very challenging year is another admirable milestone.
“Galan has ownership to 100% of its projects with no JVs and that is commercially important for our future to attract future investment,” Vargas de la Vega said.
Galan recently upgraded resources for Hombre Muerto West (HMW) by 65 per cent to 2.3Mt of LCE at 946 mg/l Li, which has been responsible for a big re-rating of the company’s shares.
HMW comprises six exploration areas covering an estimated strike of 7.5km and width of up to 2.5km on the western shores of the Hombre Muerto, the world’s second best salar (salt flat) for the production of lithium from brines after the Atacama salar in Chile.
Importantly, it features high-grade, low-impurity brines that could be processed into high-grade lithium concentrate and high-grade lithium carbonate from the concentrate.
The company is currently progressing a preliminary economic assessment (PEA) that will generate engineering, operating cost and capital cost estimates required to support scoping studies for the production of battery and/or technical grade lithium carbonate.
Vargas de la Vega expects that the release of the PEA this quarter will allow the company to mark itself against the rest of the industry.
He added that while new technologies are available to process lithium brines, the company was sticking with evaporation ponds as it is a proven and affordable process.
“And if you want more proof of how good Hombre Muerto is, Galaxy recently raised close to $180m and most of that money is going to be used to develop their southern Sal de Vida project also using evaporation ponds,” Vargas de la Vega added.
“That shows that Galaxy fully believes in the project and they are our neighbours.”
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.