GLN

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17.0¢ galan lithium limited

Looking more closely at the CXO numbers if you exclude inventory...

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HOOPZ

375 Posts.

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05/01/24

18:32

Post #: 71748661
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Originally posted by HOOPZ: ↑

While everyone is focusing on lithium cost curves here is something to consider. In the Phase 2 DFS the cash cost for the chloride product is US$3,510 per tonne of LCE (i.e. on a Lithium Carbonate Equivalent basis). In generating this number they have assumed a 90% recovery rate in the conversion from chloride to LCE volumes (which basically increases the costs by 10% to allow a more accurate LCE volume representation):

To understand what this would mean in the hard rock world I have converted this to an equivalent of various grades of Spodumene Concentrate in the table below. Basically, the Lithium Oxide (Li2O) percentage (e.g. 6%) is multiplied by the Li2O to LCE conversion factor of 2.437 and then a 90% recovery rate is applied to determine how many tonnes of SC is required to produce 1 tonne of LCE (i.e. the SC to LCE column). The Galan opex of $3,510 is then divided by this value to bring the Galan LCE cost back to a Spodumene Concentrate equivalent (the last column):

Basically, this tells us that the cost of Galan's Lithium product is equivalent to a Spodumene Concentrate 5.5% producer having a cash cost of US$430 per tonne or a SC5.0 producer having a cash cost of US$391 per tonne on an FOB basis.

In the September 2023 quarterlies:
1) PLS had a cash cost of US$489 (FOB) for a 5.2% product compared to Galan's SC5.2 equivalent cost of US$406 (i.e. Galan is 17% less)
2) CXO had a cash cost of A$904/US$587 (FOB) for a 5.0% product, compared to Galan's SC5.0 equivalent cost of US$391 (Galan is 33% less)
3) SYA had a cash cost of A$1,231/US$800 (FOB) for a 5.5% product, compared to Galan's SC5.5 equivalent cost of US$430 (Galan is almost half the cost)

A tough market is where the size (small resources are even less likely to be economic) and quality of the resource is critically important. Unlike, 2022 where you could throw darts to work out which lithium companies to invest in, times have certainly changed. Given the EV sales rates I can't imagine this environment will last for long, but the lesson regarding cost curves might be more long lasting.

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Looking more closely at the CXO numbers if you exclude inventory movements their cash costs might be closer to A$1,889 or US$1,227 which would be over 3 times the SC5.0 Galan equivalent cost. I was thinking their costs looked a little light on, compared to the others, to be announcing what they did this morning.

GLN Price at posting: 67.0¢ Sentiment: Buy Disclosure: Held
35 Upvote

8 Great analysis

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Looking more closely at the CXO numbers if you exclude inventory...

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Looking more closely at the CXO numbers if you exclude inventory...

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