Caution. If you don't like long texts, you should stop reading now. But for those who want to invest in Galan, the following may be of interest. Of course, this is my personal view and not an investment advice.
Oh man, the positive response to my post blows me away.
Thanks a lot guys.
@ spovend thanks for the info on the PEA of Candelas, I'll update that in my slide (think I don't need to post that here again though).
@ mondyinvest Yes, the financing risk is the not yet completely clarified, I have indeed listed in my risk profile with "no FID".It is important to me to emphasize that I refer my capital analysis
only to HMW!I am happy to present my opinion on this topic for discussion.I think the risk, according to the information from DFS 1 is very manageable.
For this I would like to make a risk analysis "no FID":In my assessment model, I have assumed for the financing of DFS 2.
I have assumed US$400 million.This value can only be estimated, but is extra high by me. JP said in the webinar that CAPEX for DFS 2 would not be linear, e.g. not 3x. Nevertheless, I took $400 million.
DFS 1 (page 29) states that
roject FundingThe relatively simple technology and high economics of the HMW project provide Galan with the basisbasis for raising additional financing in the debt and equity markets. This may include other financingchannels that could benefit shareholders. However, there is no certainty that Galan will be able to raise theraise the necessary financing. Galan has not yet entered into formal financing discussions with any party.In order to achieve the range of outcomes indicated in the DFS, funding of a portion of the $104 million (excluding contingencies)Capital costs will likely be required. Typical project development financing includes a combination of debt, equityand equity capital. The company could also choose to pursue other financing options, which could includeA corporate transaction or other value realization strategies, such as an offtake with anPrepayment, sale, partial sale or joint venture of the HMW Project. Galan believes that there is areasonable basis to believe that the required future financing for Phase 1 of the HMW Project DFS will bewill be available when it is needed. However, the economic analysis does not take into account the cost of funding beyond the application of thebeyond the application of the 8% discount factor, which is based on conventional mining methods and a very shortcapital payback period. There is also the possibility that such financing may only be available on terms that wouldresult in dilution or otherwise adversely affect the value of Galan's existing shares. The reasons on which thisreasonable basis include:
Project Funding
The relatively simple technology and high economics of the HMW project provide Galan with the basisbasis for raising additional financing in the debt and equity markets. This may also include other financing channelsthat could benefit shareholders. However, there can be no certainty that Galan will be able toraise the necessary financing. Galan has not yet entered into formal financing discussions with any party.In order to achieve the range of outcomes indicated in the DFS, funding of a portion of the $104 million (excluding contingencies)Capital costs will likely be required. Typical project development financing includes a combination of debt, equityand equity capital. The company could also choose to pursue other financing options, which could includeA corporate transaction or other value realization strategies, such as an offtake with anPrepayment, sale, partial sale or joint venture of the HMW Project. Galan believes that there is areasonable basis to believe that the required future financing for Phase 1 of the HMW Project DFS will bewill be available when it is needed. However, the economic analysis does not take into account the cost of funding beyond the application of thebeyond the application of the 8% discount factor, which is based on conventional mining methods and a very shortcapital payback period. There is also the possibility that such financing may only be available on terms that wouldresult in dilution or otherwise adversely affect the value of Galan's existing shares. The reasons on which thisreasonable basis include:
- The availability of financing for high quality projects remains robust
- Early offtake opportunities due to more flexible commercial outcomes.
- The HMW Phase 1 project will produce a high quality, concentrated lithium chlorideproduct with a Li content of 6% (equivalent to 12.9% Li2O or 31.9% LCE).
- HMW Project Phase 1 is technically simple and has a rapid payback of only 2.2 years fromProduction
- The strategic nature of lithium, particularly in the context of pressing global climate issues
- The release of Phase 1 of the HMW Project DFS allows Galan to share results withpotential financiers
- The HMW Project has significant growth in its Ore Reserves as it moves further down the Phase2 DFS encompassing 20ktpa LCE production.
- There are significant capital savings and other sunk costs that flow through to Phase 2 DFS
- Two years earlier cash flow from lithium chloride production versus lithium carbonateproductionActually, this is all self-explanatory and shows that there are many possibilities for further financing besides a CR. I think a combination is the most likely. In general, I would like to note here that a CR is often seen as a threat scenario, because admittedly there have been cases where this has been very detrimental to shareholders.
With Galan, however, this risk is very limited. I am talking about
"only" 400 m for the HMW project.
The payback period is only 2.5 years!I am an entrepreneur myself. If I were to go to a bank here in Germany with a business plan showing this payback period and cash flow for 40 years, they would immediately put me in chains and not let me go until I had signed their financing agreement.
We are shareholders as part owners of the company Galan, fortunately. However, in addition to the considerable opportunities for share price gains if the project is successful, we also share risks, such as financing.The long text from DFS 1 is due to the unusually diverse options we - Galan - have to successfully finance the project!
Typical project development financing involves a combination of debtand equity.The following financing options are conceivable:
1. loan
2. off-take with prepayment
3. corporate transaction
4. sale of Candelas
5. sale of Greenbushes South
6. partial sale of HMW
7. partial sale of Candelas
8. partial sale of Greenbushes South
9. joint venture of the HMW - project
10. joint venture of the Candelas- project
11. joint venture of the GB-South
12. CR
A combination of these possibilities is, as said, probable, common and conceivable.The risk of failure of the project is minimal. And again I'm talking predominantly only about HMW here. Candelas could eventually deliver 1/3 of the maximum production capacity of 60,000 ktpa as planned.Gb-South is a black hole to begin with. But it's hard for me to imagine that Albemarle paid $30 million to LPI for the neighboring land just to build parking lots on it.
I for one see Galan, as a kind of flagship project for the reactivated LI-Cl technology and also for Argentina.
I can imagine that other projects will follow the same path in the future.Galan is a first mover with a forgotten but proven technology!
LIQUID SPODUMENE!DYOR and have a nice day
Smith71
(20min delay)