Phase 2 HMW Offtake Process Advances

Galan Lithium Limited (ASX: GLN) (Galan or the Company) is pleased to announce that it is advancing offtake partnering process for Phase 2 production (Offtake Process) for its 100% owned Hombre Muerto West (HMW) Project (HMW Project or the Project) in Catamarca Province, Argentina.

• Galan has received many approaches for offtake and strategic financing for Phase 2 of its HMW project
  
• Direct enquiries have been received from reputable industry participants including car makers, chemical refiners, miners and traders
• The healthy volume of direct enquiries highlights the strength of the long term lithium market with the Phase 2 Offtake Process advancing to assess strategic opportunities
• The purpose of the Offtake Process for Phase 2 HMW is to maximise shareholder value in pursuit of Galan’s low-cost lower-risk lithium chloride development strategy to become the next lithium producer in Argentina
• The Phase 2 Offtake Process is running in parallel with permitting process
• Construction of Phase 1 is progressing well and on time for first production H1 2025

The Offtake Process follows on from the recently announced Phase 1 offtake and financing agreement with Glencore plc (ASX announcement dated 16 November 2023) and the positive Phase 2 Definitive Feasibility Study (DFS) (ASX announcement dated 3 October 2023). The Offtake Process is being led by Galan’s Managing Director and one of its other Directors, Mr Daniel Jiminez.

Mr Jiminez was employed for 28 years by world leader in the lithium industry, Sociedad Química y Minera de Chile (SQM), based in Santiago, Chile where he formulated the commercial strategy and marketing of SQM’s industrial products. Mr Jimenez was responsible for over US$900 million worth of estimated sales in 2018.

The HMW Project DFS was separated into two phases. The initial Phase 1 DFS was based on a production level of 5,367 ktpa lithium carbonate equivalent (LCE) in the form of lithium chloride concentrate (as governed by the production permits). The Phase 2 DFS increased the overall annual production rate to 20,851 recoverable tonnes LCE, contained in a concentrated lithium chloride product for a period of 40 years.

The HMW project requires Phase 1 capital expenditure of US$118.4m for commencement of commercial production in H1, 2025, followed by a further US$310.4m in capital expenditure for Phase 2. Part of the Phase 2 capital will be funded from Phase 1 production.

Phase 2 Offtake Process

In exchange for offtake production, the formal Phase 2 Offtake Process will also be seeking partners offering financing and funding options for the construction of Phase 2. Galan is, and will continue to, conduct discussions and negotiations directly with prospective partners, without the use of intermediaries. The Offtake Process for Phase 2 production will aim to:

• Further de-risk the HMW project;
• Obtain very competitive offtake terms;
• Secure attractive finance and funding options; and
• Attract a well-respected partner in the lithium brine space

The Phase 2 Offtake Process will run in parallel to its permitting process.

Phase 1 Offtake and Financing

As announced earlier this month, Glencore will purchase technical grade lithium chloride product from Galan’s high-grade, low-impurity HMW Project in Catamarca Province, Argentina. The offtake commitment does not require Galan to have secured an export licence for its lithium chloride. Glencore will accept offtake for Galan’s lithium chloride to be toll treated into lithium carbonate for sale and export from Argentina.

Pending the satisfactory completion of its due diligence, Glencore has the option to either purchase a lithium chloride product or toll treat lithium carbonate in Argentina. The binding agreement is for an initial five (5) year period for 100% of Galan’s Phase 1 production (5.4kt LCE per annum) and includes a prepayment option and project construction financing solution of between US$70-US$100 million. Any financing solution will be subject to customary conditions precedent for these types of transactions.

The binding agreement is for a five (5) year period from commencement of commercial production for 100% of Galan’s Phase 1 production estimated at 5.4kt lithium carbonate equivalent (LCE) in lithium chloride concentrate per annum. The price payable by Glencore will be referenced to a mutually agreed lithium carbonate price index over a quotational period less a marketing fee, discount and penalties (if any). The agreement is renewable subject to mutual agreement between Galan and Glencore.

Galan’s Managing Director, Juan Pablo (JP) Vargas de la Vega, said: “We are very pleased with the progress of the offtake process for Phase 2 of our HMW Project and highlights the strength in the long term lithium market. Subsequent to the delivery of a DFS for each of Phases 1 and 2, and securing Phase 1 offtake from Glencore, one of the world’s largest diversified natural resource companies, the interest in our project remains high. Glencore offers to provide or facilitate a Financing Prepayment Facility for US$70 to US$100 million, subject to conditions precedent, with no export licence required, clearly validates Galan’s low-cost low-risk lithium chloride development strategy to become the next lithium producer in Argentina. Galan’s robust 4 phase production strategy (up to 60ktpa LCE) provides an exceptional foundation for significant future economic upside.

Discussions are advancing in parallel with the continuing and timely construction of Phase 1 of the HMW Project. In unison, the permitting process is progressing with the support of the local Catamarca government and local communities. Galan remains on track for first pond fill in Q1 2024 and we are confident, based on current discussions, that we will secure a strategic partner for Phase 2.”

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