Exec Summary….Galan Lithium Limited (GLN) - Good value amid the...

Exec Summary….

Galan Lithium Limited (GLN) - Good value amid the brine development rush

GLN, in conjunction with Hatch, is advancing the Hombre Muerto West (HMW) project towards completion of its DFS by end-2022 and FID by Jun.Q’23 (Figure 1). The ultimate plan will combine HMW (20ktpa LCE) and Candelas (14ktpa) for a total output of 34ktpa with costs in the first and second quartile, respectively (Figure 2). The latest successful drilling at HMW is building towards a higher output project, perhaps 25ktpa. GLN is also working on a fast-track plan to deliver revenue sooner through sales of lithium chloride concentrate to the array of lithium developers in the surrounding areas – in particular Livent, POSCO, and Allkem, which are expanding or developing projects around HMW (Figure 4). The recent decline across the lithium sector represents a BUY opportunity, with a PT of A$2.42/sh fully diluted (prior A$2.43) after adding 1.5m new performance shares.

Ponds completed and filled, drilling continues:
*GLN has begun evaporation testing, with the ponds completed (Figure 3) and filled in the past month. Pilot work includes finished Lithium Carbonate product and intermediate chloride concentrate for the fast-track plan.
*Recent drilling 1km from the apparent salar foreshore hit basement at a depth of 450m, showing that the extent of the lithium brine resource continues much farther and deeper than previously understood.
*GLN plans to complete an updated JORC resource statement in the Sep.Q’22 but plan to continue drilling through the rest of 2022 to establish a substantial (and high-grade) volume of lithium resources to underpin the DFS and FID.

DFS due Dec. Q’22, potential for expansion case:
The DFS is on-track for completion by the end of 2022. The base case is 20ktpa LCE but there is scope for a higher 25ktpa production rate from a larger resource.The fast-track option of selling an intermediate lithium chloride product to the raft of expanded and new Lithium Carbonate plants in the region could see a lower capex and earlier revenues in CY’24, vs CY’25 in our model.

HMW, high-grade, long-life project:
HMW is the highest-grade lithium brine project in Argentina at 946mg/L Li (Figure 5), supporting a +40-year project at 20ktpa LCE, first quartile cash costs, and for a capex of US$439m. HMW is a significant project that, as it is de-risked over the next 12 months, is likely to attract off-takers, strategic investors, and funding. Ongoing optimisations will provide additional catalysts.

Key Dates Ahead:
Sep.Q’22 – HMW JORC Resource update
Dec.Q’22 – HMW Feasibility Study, Reserve update
Early CY2025 – First lithium production