Galan Lithium is celebrating after signing a binding offtake deal with Glencore. Pic via Getty Images
‘Validation of our world-class project’: Galan Lithium catches rocket after inking offtake, funding deal with Glencore
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- Glencore commits to five-year offtake deal for Phase 1 lithium chloride production from Hombre Muerto West project in Argentina
- An accompanying offer to provide or facilitate finance of up to US$100 million effectively covers Phase 1 construction capex
- Offtake with Glencore does not require an export license
- Glencore in the mix for larger Phase 2 production line as Galan confirms discussions ‘open and well advanced’
Special Report: Renowned global mining and trading house Glencore has agreed to purchase up to 100% of the proposed lithium chloride concentrate production from Phase 1 operations at Galan Lithium’s Hombre Muerto West project, as well as provide the emerging Argentine lithium developer with US$70-100 million of prepayment finance.
This is arguably the biggest milestone in Galan Lithium’s (ASX: GLN) quest to become Argentina’s next lithium producer during the first half of 2025.
Under the terms of the binding term sheet announced today, Glencore – one of the world’s largest diversified natural resource companies – will purchase technical-grade lithium product from Galan’s Hombre Muerto West (HMW) project in Argentina’s Catamarca province.
Glencore will accept offtake for Galan’s lithium chloride to be toll treated into lithium carbonate for sale and export from Argentina.
In a further boost for Galan, the offtake commitment does not require an export licence.
The binding agreement covers the first five years of commercial production from Phase 1 operations, estimated at 5,400t LCE per annum. The price payable by Glencore will be referenced to a mutually agreed lithium carbonate price over a quotational period, less any marketing fee, discount or penalties.
Glencore could also be in the mix for further offtake from HMW with Galan currently advancing discussions for its larger Phase 2 production line.
Two for the price of one: Glencore offers to help finance construction
If a binding offtake agreement with one of the biggest names in the industry wasn’t enough cause for celebration, an offer from Glencore to provide or facilitate a financing prepayment facility for up to U$100 million will almost certainly have Galan management raising a glass or two today.
The facility remains subject to certain conditions precedent being met, including due diligence to Glencore’s “absolute discretion”.
In another sign of Glencore’s confidence in the HMW project and Galan’s ability to manage the development, both parties have agreed Glencore should have first right to negotiate in respect of marketing and/or financing with regards to future expansion under the proposed Phase 2 operations.
According to the recent DFS, Phase 2 is set to deliver a 286% uplift in production at HMW to 20,851t LCE over a period of 40 years, beginning in the second half of 2026. NPV and IRR are also boosted to US$2 billion and 43% respectively, while annual free cash flow increases to US$236 million.
Payback on the combined capex of US$382 million (including US$104 million for the already under construction Phase 1) is just 2.9 years.
The first evaporation pond at HMW was reportedly 15% complete when the Phase 2 DFS was released early last month.
Galan no longer just a small player in the ‘Lithium Triangle’
HMW is located on the Hombre Muerto Salar within what is known as South America’s “Lithium Triangle”. It sits alongside many high-grade, low-impurity lithium brine deposits such as Livent Corporation’s El Fenix, Allkem’s (ASX: AKE) Sal de Vida and POSCO’s Sal de Oro lithium projects.
Allkem and Livent are in the process of finalising a US$10.6 billion merger to create the world’s third largest lithium producer, to be known as Arcadium Lithium.
Galan managing director Juan Pablo (JP) Vargas de la Vega, who first identified the HMW opportunity back in 2017, declared the company a major step closer to achieving its dream of becoming a “significant and reliable” lithium producer.
“The agreement with Glencore is validation of the quality of our world-class project and endorses the calibre and experience of Galan’s team,” he 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 endorse our lithium chloride concentration strategy to deliver the HMW project and provide returns to shareholders in a shorter timeframe.
“As always, we are grateful to our community and government in Argentina for their invaluable support of our development at HMW.”
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.
