{"id":2429,"date":"2023-11-29T01:31:26","date_gmt":"2023-11-29T01:31:26","guid":{"rendered":"https:\/\/economicherald.net\/?p=2429"},"modified":"2023-11-29T01:31:26","modified_gmt":"2023-11-29T01:31:26","slug":"red-hot-galan-lithiums-world-class-hmw-is-attracting-strong-offtake-financing-interest-for-phase-2-development","status":"publish","type":"post","link":"https:\/\/economicherald.net\/?p=2429","title":{"rendered":"Red hot: Galan Lithium\u2019s world class HMW is attracting strong offtake, financing interest for Phase 2 development"},"content":{"rendered":"<p>Strong interest received for both offtake and strategic financing for Phase 2 development of Galan Lithium\u2019s HMW project<br \/>\nEnquiries from car makers, chemical refiners, miners and traders<br \/>\nGlencore has signed binding offtake and financing deal for HMW Phase 1<br \/>\nVolume highlights continued long-term strength of lithium market<\/p>\n<p>\u00a0<\/p>\n<p><strong><em>Special Report:<\/em><\/strong><strong> Galan Lithium is receiving approaches for offtake and strategic financing for Phase 2 development at Hombre Muerto West, just two weeks after inking a key deal with Glencore.<\/strong><\/p>\n<p>Earlier this month, global mining and trading house Glencore <a href=\"https:\/\/stockhead.com.au\/resources\/validation-of-our-world-class-project-galan-lithium-catches-rocket-after-inking-offtake-funding-deal-with-glencore\/\"><strong>signed a binding agreement<\/strong><\/a> to purchase up to 100% of the proposed lithium chloride concentrate production from Phase 1 operations at the Hombre Muerto West project in Argentina.<\/p>\n<p>Importantly for <a href=\"https:\/\/stockhead.com.au\/company\/galan-lithium-gln\/\"><strong>Galan Lithium (ASX:GLN)<\/strong><\/a>, the five-year offtake deal includes an accompanying offer to provide or facilitate finance of up to US$100 million that essentially de-risks the Phase 1 development by covering its construction capex requirements.<\/p>\n<p>HMW\u2019s Phase 1 operation is expected to produce 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 for the first five years of commercial production.<\/p>\n<p>This will deliver attractive post-tax net present value 8% (NPV8) and internal rate of return (IRR) \u2013 both measures of a project\u2019s profitability \u2013 of US$460m and 36%, respectively, as well as free cash flow of US$54m per year.<\/p>\n<p>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.<\/p>\n<p>Highlighting Glencore\u2019s confidence in HMW, the major has also secured the first right to negotiate in respect of marketing and\/or financing with regards to future expansion under the proposed <a href=\"https:\/\/stockhead.com.au\/resources\/high-grades-big-profits-and-low-costs-phase-2-dfs-shows-galans-hmw-lithium-project-truly-worthy-of-tier-1-status\/\"><strong>Phase 2 operations<\/strong><\/a>.<\/p>\n<p>\u00a0<\/p>\n<h2><strong>Interest in HMW \u201cremains high\u201d<\/strong><\/h2>\n<p>With Glencore\u2019s deal all but guaranteeing that Phase 1 of the HMW will proceed, it is no surprise that there is strong interest in participating in Phase 2 of the project.<\/p>\n<p>GLN says it has received direct enquiries from reputable industry participants including car makers, chemical refiners, miners, and traders \u2013 highlighting the strength of the long-term lithium market.<\/p>\n<p>In exchange for offtake production, the company is seeking partners offering financing and funding options for the construction of Phase 2.<\/p>\n<p>Phase 2 seeks to maximise shareholder value by increasing production as well as improving profitability.<\/p>\n<p>The Phase 2 DFS released in early October sees annual production increasing 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.<\/p>\n<p>Economies of scale serves to increase\u00a0post-tax NPV8 and IRR to US$2bn and 43% while boosting annual free cash flow up to US$236m.<\/p>\n<p>This requires a capex of US$278m in addition to the US$104m for Phase 1 with payback on the combined capex still a relatively quick 2.9 years.<\/p>\n<p>Phase 2 will also reduce opex intensity by 11% to US$3,510\/t LCE, leaving HMW in the first quartile of the industry\u2019s cost curve.<\/p>\n<p>\u201cWe are very pleased with the progress of the offtake process for Phase 2 of our HMW project and highlights the strength in the long-term lithium market,\u201d managing director Juan Pablo Vargas de la Vega said.<\/p>\n<p>\u201cSubsequent to the delivery of a DFS for each of Phases 1 and 2, and securing Phase 1 offtake from Glencore, one of the world\u2019s largest diversified natural resource companies, the interest in our project remains high.<\/p>\n<p>\u201cGlencore offers to provide or facilitate a Financing Prepayment Facility for US$70 to US$100 million, subject to conditions precedent, with no export licence required, clearly validates Galan\u2019s low-cost low-risk lithium chloride development strategy to become the next lithium producer in Argentina.<\/p>\n<p>\u201cGalan\u2019s robust 4 phase production strategy (up to 60ktpa LCE) provides an exceptional foundation for significant future economic upside.\u201d<\/p>\n<p>\u00a0<\/p>\n<h2><strong>Upcoming activities<\/strong><\/h2>\n<p>GLN is on track for first evaporation pond fill in Q1 2024 while Phase 1 construction is progressing well and on time for first production in H1 2024.<\/p>\n<p>It adds that the Phase 2 offtake process is running in parallel with the permitting process.<\/p>\n<p>\u00a0<\/p>\n\n<p><span class=\"mce_SELRES_start\">\ufeff<\/span>\u00a0<\/p>\n<p><em>This article was developed in collaboration with Galan Lithium, a Stockhead advertiser at the time of publishing. <\/em><\/p>\n<p><em>\u00a0<\/em><\/p>\n<p><em>This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.<\/em><\/p>\n<p><span class=\"et_bloom_bottom_trigger\"><\/span><\/p>\n<p>The post <a href=\"https:\/\/stockhead.com.au\/resources\/red-hot-galan-lithiums-world-class-hmw-is-attracting-strong-offtake-financing-interest-for-phase-2-development\/\">Red hot: Galan Lithium\u2019s world class HMW is attracting strong offtake, financing interest for Phase 2 development<\/a> appeared first on <a href=\"https:\/\/stockhead.com.au\/\">Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"<p>Strong interest received for both offtake and strategic financing for Phase 2 development of Galan Lithium\u2019s HMW project Enquiries from car makers, chemical refiners, miners <a href=\"https:\/\/economicherald.net\/?p=2429\" class=\"read-more-link\">[more&#8230;]<\/a><\/p>\n","protected":false},"author":0,"featured_media":2430,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-2429","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.5 - 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