Don't Let FOMO Make You Invest in This Dodgy Lithium CompanyLithium is hot right now, with many investors getting caught up in the hype and chasing the next big thing. But Galan Lithium (GLN) is one lithium company you'll want to avoid at all costs.
Here's why this speculative stock is doomed to fail.Firstly, Galan's project economics are laughable. The company claims its Hombre Muerto West project in Argentina can produce battery-grade lithium carbonate at an all-in sustaining cost of just US$4,372 per tonne. How exactly are they achieving costs nearly 60% below established producers? Smells fishy if you ask me.And even if we take their numbers at face value, current lithium prices would still mean razor thin margins. With lithium carbonate prices down 40% from last year's highs, Galan's project is barely economic even in their own optimistic projections. Just one more leg down in prices and this thing is underwater.Then there's the not-so-small matter of funding the $100 million required for Stage 1 of construction. So far Galan has raised less than $25 million, and with a measly $250 million market cap, massive dilution via capital raises seems inevitable.
Management claims they'll secure "non-dilutive" funding but we've seen this movie before. It inevitably ends in a heavily discounted placement that craters the share price.Speaking of management, Galan is led by a team with zero experience building and operating a lithium brine project. The technical challenges and risks they will encounter are immense, and frankly it's doubtful this group is up to the task. And have you heard the CEO speak?
Talk about uninspiring. Good luck convincing investors and partners to hand over billions to this bunch.And if all those risks weren't enough, Galan's project is located in economic basket-case Argentina. Hyperinflation, currency controls, regulatory uncertainty - I wouldn't invest a dollar in this country let alone hundreds of millions. We've all seen what happened to Neo Lithium when the Argentinian government unexpectedly vetoed its takeover despite previous approvals.Look, FOMO is real in lithium right now. But don't let greed cloud your judgement. Galan Lithium is a disaster waiting to happen. The project doesn't stack up, management is iffy, funding is a long shot, and Argentina is a trainwreck. Maybe buy the stock if it ever gets to 5 cents but for now, avoid like the plague.
Expand
(20min delay)