Offtake Deal with Chemphys Signals Strong Future for Lithium, Galan Lithium Exec Says

On the heels of a new memorandum of understanding (MOU) for a potential offtake deal, Galan Lithium (ASX:GLN) Managing Director Juan Pablo Vargas de la Vega has expressed confidence in a “very strong” future for lithium.

On August 26, Galan signed an MOU with Chinese battery producer Chengdu Chemphys Chemical Industry for an offtake prepayment agreement. Once a definitive deal is reached, Chemphys will purchase a total of 23,000 tonnes of lithium carbonate equivalent, as a lithium chloride product, over the first five years of Phase 1 production from Galan’s Hombre Muerto West project in Argentina. The Chinese firm will also provide Galan with a prepayment facility of US$40 million for the offtake.

“It tells you that the long-term future for lithium and the lithium battery revolution that we are seeing is very strong,” de la Vega told the Investing News Network.

“When you look at the converters, they’re in expansion mode, the battery makers are in expansion mode because they have to supply lithium to the battery converters. This tells you a story that China is hungry for further feed, and this feedstock, in our view, won't be enough in the long term. So what has to give is price. Price will come back," he said.

"I cannot tell exactly when that's going to happen — whether it's three months, six months, 12 months … and by the time we start coming to production, we believe that we'll be in a different pricing environment, and we'll be set to start taking the rewards from all the hard work that we've been doing all these years to become a producer," de la Vega added.

Galan is in a strong position to also look into Phase II and take production from 5,000 tonnes up to 21,000 tonnes, he added. Galan is on track to begin production at its Hombre Muerto West project in 2025.

Watch the full interview with Galan Lithium Managing Director Juan Pablo Vargas de la Vega above.