Great feedback for all who couldn't make it, thanks for taking the time to attend, ask and share
@paulgf. A comment from me on this:
JP started the Q&A section by stating that the market's reaction today was disappointing and also analysts like Macquarie are not fully appreciating how much of a game changer this MOU is by letting them fully explore a plethora of alternatives outside of local market options for the chloride.Unfortunately, I think this is showing a fair bit of naivety from JP. The simple fact is that
they have signed a binding term sheet with Glencore for the first five years of offtake. The fact that finance was an "offer" and that the offtake was not directly linked to Glencore also supplying finance, now leaves Galan in a very weak position, even with an export license seemingly now an eventual certainty with local government support. Galan have effectively forward-sold the first five years of their 5.3ktpa production to Glencore, who will capture the margin upside and leave precious little on the table for Galan. Unless Galan can un-bind the offtake term sheet they have signed with Glencore, there is simply no point talking about exploring
"a plethora of alternatives outside of local market" because 100% of the phase 1 production is spoken for. This is why funding phase 1 is such a critical hurdle and it's futile getting dreamy-eyed thinking about phase 2 (or beyond to a phase 3 carbonate plant) until that US$90M gap is filled.
Separately, the 7% royalty may be high (and yes, the phase 1 and 2 DFS economics need to be re-worked now) but that's simply the cost of doing business in a country like Argentina. I mean, it could have been >10%. If Argentina are serious about fiscalling re-floating their boat, they need to extract their pound of flesh from the resources sector, and accepting that is part of the country risk. So that's not really the issue to me - the issue is trying to attract financing partners whilst not having any production over the first five years left to offer as offtake. I suspect it'll be hard to back out now - you don't screw around with Glencore. I think JP actually understands the position he is in, which is why they had to tap Acuity for cash and tried to bury the news on a Friday evening. Actions speak louder than words.
(20min delay)