Ann: Catalina Consolidation Provides Potential Resource Increase, page-74

The other thing you need to ponder too is that fastmarkets work on a $5,000 USD cost to convert spodumene into carbonate and $USD5,500 for hydroxide. They use normally a multiple of about 7.2 tonnes of spodumene converts to 1 tonne of hydroxide and 7.5 tonnes of spodumene to1 tonne of carbonate. Those ratios are based on SC6, whereas the spod market has tended to be SC5.3 in recent times so those ratios of 7.2 and 7.5 would need to be tweaked higher to - 8.15 & 8.50 X respectively.

So last qtr Pilbara sold for circa $3,256 USD for 5.3 % spodumene concentrate. If you go 8.5 x 3256 USD + 5000 USD = 32,256 USD. That was probably pretty close to the carbonate spot price in Q2, give or take a bit . So you can see the economics of marginal spod production into carbonate or hydroxide probably plays a large role in setting the spot price in China. The two ( spod price and carbonate price) are connected now in a tug of war or feedback loop. The marginal swing producers are the higher cost Chinese lepidolite producers but the ancedotal information suggests once you get down near USD $30 K , those guys are out and sub-economic, hence why many of the converters reached a decision to floor price carbonate somewhere in and around $35 K mark, to ensure those lepidolite producers can hang around. 2nd hlf last year spod exporters had upper hand pulling the carbonate price up, 1st half this year that reversed as inventories had been built up giving converters the upper hand in pulling the spod price down.

Why is all this relevant for Galan ? Well there is some interesting insights here into our relative costing which is important to understand from a long run perspective and where we might sit on a all-of-industry cost curve. DFS Stage 1 had Opex cost at $3963 per tonne for our small pilot production plant producing circa 5.37 Ktpa LCE equivalent. Pilbara's cif cost in last qtrly was $ 673 USD for 5.3 % grade. Take the 673 USD cost and multiply by 8.50 ( the ratio fastmarkets would use for a 5.3 % concentrate) and you get $USD 5721 Opex cost right there on a LCE equivalent basis. So our sub economic small start up plant blows away the Opex cost on a converted basis to LCE of what Pilbara is achieving currently. This is the huge cost advantage of brine. These brine projects take time to start up but when they do start up they blow hard rock away on C1 cash costs of production.

We haven't added in the USD $ 5,000 or $5,500 cost yet for the converters to refine those 8.15/8.50 tonnes down to 1 tonne of Li2Co3 or LiOH either . You can bet that Andean donkey or Llama we saw appearing upthread that the cost to convert Lithium chloride in solution which is at double the concentration of lithia in hard rock concentrate and given that is in a solution form not a hard rock form that requires calcination, is going to be a heck of a lot cheaper to convert than the USD $5,000/USD $5,500 cost it takes into hyrdoxide or carbonate. So the cost curve advantage of using brine vs hard rock only get larger for the converter as we proceed downstream. If there is any extra logistical costs in moving this brine around its small beer compared to the USD $5,000/USD $5500 per tonne cost it takes to convert the hard rock which is mostly by the way of energy costs from calcination which is necessary to change the crystalline structure of spodumene to facilitate the acid leaching. Of course with all this energy required in calcination, a SC13 brine will also kill hard rock in terms of lower carbon emissions also.

So as all the hard rock projects make their way to production over the remaining decade, I seriously doubt any of them will be anywhere near as cheap in terms of Opex cost per tonne ( on a converted LCE basis) as the next generation brine projects that come on board, which hopefully Gln will be. This was always the historical advantage of brine, its way cheaper cost of production, way cheaper than hardrock or clays, but hard rock are undoubtedly much quicker to bringer online as we have seen in recent years. If we can get to market by 2025/2026 with a liquid spodumene at SC13 level, it will be the higher cost lepidolite and spod producers that drive the marginal pricing but as they will sit way further up the cost curve , liquid Sc13 should see some very nice margins that importantly should be sustainable right through future price cycles of the underlying lithium commodity. In a nutshell , owning brine at Hombre Muertro will be like owning iron ore in the Pilbara as neither is unlikely to be ever taken out in their respective industries as both will sit at the bottom of their sector's cost curves globally.