Galan Lithium confirms tier-1 status with robust phase 2 DFS results

Galan Lithium (ASX: GLN) has confirmed the tier 1 status of its 100% owned Hombre Muerto West (HMW) project in Argentina with exceptional results from a phase 2 definitive feasibility study (DFS).

The new study identified that the HMW project has the potential to produce a premium high grade lithium chloride (LiCl) concentrate with strong financial returns.

The new figures have estimated a moderate incremental capital expenditure (Capex) of approximately $4.3 million, which is in addition to the phase 1 capex of approximately $1.6 million.

Robust payback numbers

These numbers have helped determine a short payback period for phases 1 and 2 of 2.9 years.

This is supported by an estimated post-tax net present value of approximately $3.1 billion, and an internal rate of return of 43% with an estimated free cash flow of approximately $3.7 million per annum.

Most notably, the DFS identified a significant increase in production to 21 kilotonnes per annum (ktpa) of lithium carbonate equivalent (LCE) up from the estimated 5.4 ktpa LCE forecast for Phase 1.

Managing director Juan Pablo Vargas de la Vega, said the company had elected to separate the development of the HMW project into two phases.

The initial Phase 1 DFS was based on a production level of 5.4 ktpa lithium carbonate equivalent (LCE) in the form of lithium chloride concentrate. For phase 2 the company proposes to increase the overall annual production rate to 20,851 recoverable tonnes LCE, contained in a concentrated lithium chloride product for a period of 40 years.

Leader in lithium brine industry

He said the phase 2 DFS results and analysis have now provided the company with outstanding outcomes that confirm Galan’s belief HMW is a tier one project within the lithium brine industry.

“The release of the phase 2 DFS for Hombre Muerto West clearly demonstrates the world-class nature of Galan’s 100% owned project,” he added.

“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.”

“We are extremely confident about the future of HMW, both in the short and long term. Construction of phase 1 is already well underway with the first evaporation pond already 15% complete.”

Calibration model studies

A calibrated model was used to predict and evaluate the brine extraction capacity for the phase 2 production plan and the extracted lithium concentrations for a 40 year period.

The predictive scenario considered a total of 23 wells distributed across two well fields (West well field (20 wells) and Santa Barbara well field (3 wells).

Located in a first-class neighbourhood

The Hombre Muerto West Project is part of the Hombre Muerto basin, one of the most prolific salt flats in the world.

It sits in close proximity to other world class lithium projects owned by Allkem (ASX: AKE), Posco and Livent.

This may provide the company with significant advantages with regard to infrastructure and market access.

Environmental monitoring underway

The company is currently running environmental monitoring activities on site as required under its permitting. These activities include data collection for weather, water sources and control of the sewage system.

A phase 1 construction permit was granted by the authorities in August 2023. Galan immediately commenced construction of the evaporation ponds, expansion of the camp facilities, procurement of long lead items, tendering of major contracts and recruiting personnel.

The construction period for phase 2 is from H2 2024 to H1 2026, with the production of lithium chloride from phase 2 expected to commence in H2 2026.

Galan expects to continue with the expansion of the HMW Project through the implementation of successive phases.

The construction for phase 2 is subject to the approval of the 20.85 ktpa LCE permit application, which will ideally be approved in H2 2024.