Evening all.
I’ve been bullish on Galan since I came across them in December 2020, first buying in January 2021. This was chiefly due to what I considered a) a superior resource and b) an MD who had the technical expertise to identify/discover a world-class deposit (but would admittedly need a lot of help to take it to production).
In the almost two years since then, I’ve been very patient (to the point that I probably try to downplay what I rightly or wrongly perceive as hype). However more recently I’ve been musing over what I have had to gradually accept: Galan’s continued underperformance verses peers. For a long time I ignored this because the peer we were most often compared to was LKE, and I have never considered them a serious project (although it’s been an excellent investment for holders, well done to them: LKE has gone 10x from its early January 2021 price, versus GLN which has gone 3.3x).
The market has moments of inefficiency, but over a 24-month period it would normally act in an efficient way. The fact is that Galan has clearly lagged, including recently despite what I personally thought was an outstanding resource update. I think many here would be surprised that this did not provide the re-rate many hoped for, and instead simply created a trading opportunity for some.
So what? Well, there’s plenty of bulls here, and most on these threads would hold that GLN is somewhat/very/severely undervalued (as much of HotCopper thinks about their stocks!) so I guess the question I’m throwing around here is this: what am I/you missing, that the market clearly is not? I get the bullish angles already (we get posts on that every day) so what I’m interested in hearing form others are possible reasons for the market’s valuation of Galan over most of the last two years. Here’s what I’ve come up with:
- Concerns over a smallish team being able to deliver a big project? (You’d think having Jimenez onboard would mitigate this, but again - here we are capped at $441M and a massive resource with high grade, low impurities. Yet they seem to have delivered on the drilling, ponds, pump flows, camp, etc).
- Is it a timeline matter, that others are much closer to production than Galan? i.e. if we’re later to production then we’ll miss out on much of the lithium upside (coming online when a whole lot of new supply has entered the market)
- Does JP have some sort of ‘Just Another West Perth Resource Executive’ reputation that I’m unaware of? (Seems hard to believe, but perhaps it’s possible - and a few of them managed to sell shares near the top)
- Is brine really just that out of favour verses hard rock deposits? (I thought Joe Lowry made some pretty telling/tough comments to that effect in his recent write up, which is really what got me thinking about this again)
- Is the market concerned about our ability to raise equity or access debt to progress the project?
- Is it a reflection of sovereignty concerns about Argentina? (again, the usual finger pointing towards Allkem and Livent should help here, but does it?)
- Is the market confused/uncertain about the direction Galan will take, i.e. carbonate vs chloride?
- Does the lack of offtakes actually hurt our profile in some way? (I personally think most non-binding conditional offtakes are a load of fluff, but perhaps not having any at all sends a poor message)
To be clear, I’m not frustrated - just trying to dispassionately consider if there’s something I’ve missed in my considerations of this company. If I had to be held to something, I guess I’m leaning towards the small team / brine vs hard rock issues, noting that the big players with the best valuations are the Australian-based hard rock miners. I would welcome thoughts from others, if you’ve also been pondering this. Again, I’m not after a list of reasons to be bullish - I know all that stuff. I’d really like to dig into the reasons why the market continues to mostly give a collective shrug about this company / project. Cheers
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