The Australian miner Galan Lithium Ltd (ASX:GLN) has signed an agreement with Glencore plc (LON: GLEN) that will provide the Swiss oil and gas giant with high-grade, low-impurity lithium chloride once Galan starts production in the upcoming years.
Galan Lithium announced last week that the agreement will go for five years from the start of production –expected in June 2025– and involves a financing prepayment facility of $70-$100 million subject to some conditions being met.
Under the offtake agreement, Glencore commits to acquiring 100 per cent of Galan’s Phase 1 production, which is estimated at 5.4 kilotonnes of lithium carbonate equivalent (LCE) in lithium chloride concentrate annually.
The price Glencore pays will be determined by referencing a mutually agreed lithium carbonate price index, with adjustments for a marketing fee, discount and potential penalties. The agreement is subject to renewal based on mutual consent between Galan and Glencore.
Glencore will purchase high-quality lithium chloride produced at Galan’s Hombre Muerto West (HMW) flagship project in the Catamarca Province, Argentina. The project covers approximately 11,600 hectares and its pilot plant operations are rapidly expanding.
Galan is not required to secure an export license for its lithium chloride.
“Our agreement with Glencore significantly de-risks our project and we are very well poised to secure finance for Phase 1 of the HMW Project,” Galan´s managing director Juan Pablo Vargas de la Vega said.
“Importantly, Glencore’s funding assistance via the prepayment facility endorses our lithium chloride concentration strategy to deliver the HMW project, and provide returns to shareholders, in a shorter time frame,” Vargas added.
Galan Lithium currently operates two flagship projects, Hombre Muerto West and the Candelas project in the Hombre Muerto Salar in Argentina.
Glencore making strides in the lithium sector
Glencore marked its foray into the lithium market this year through a significant investment with Tantalex Lithium Resources Corp. (CSE: TTX) (FSE: DW8) (OTCQB: TTLXF) which explores lithium in the Democratic Republic of Congo (DRC). Under the deal, Glencore will pay staggered $5 million as part of the marketing off-take agreement and has agreed to finance a third of the capital requirements for the project if it meets the conditions.
In September, Glencore announced a supply deal with Sigma Lithium Corporation (NASDAQ: SGML) (BVMF: S2GM34) (TSXV: SGML) of over 20,000 tonnes of Sigma Lithium´s green lithium from the Vitoria port in Brazil.
Other deals include a $400 million financing deal with France’s Eramet for an Argentina lithium project. The deal involves jointly marketing 50,000 metric tons of lithium produced on its Argentina site.
Salar del Hombre Muerto hosts lithium-rich deposits
In 2022, the total lithium production in Argentina was nearly 38,000 metric tons, derived from operations such as Sales de Jujuy, managed by Allkem Limited (ASX: AKE), and the Fénix project in the Salar del Hombre Muerto, operated by Livent Corporation (NYSE: LTHM).
Both of these projects are anticipated to double their output to 42,500 mt in the coming years, contributing significantly to Argentina’s growing presence in the global lithium market.
Companies operating in the Salar del Hombre Muerto have seen noticeable lithium resource expansions this year. According to some reports, the SHM is set to have 800,000 tons of lithium-rich brines
Lithium South Development Corporation (TSXV: LIS) (OTCQB: LISMF) (Frankfurt: OGPQ) has operations in the salar encompassing 3,287 hectares and recently expanded its lithium resource by 175 per cent.
Lithium South´s Hombre Muerto North Lithium Project is surrounded by two leading lithium producers. Korean giant POSCO Holdings (KRX: 005490) is building a US$4 billion lithium project adjacent to Lithium South. While Allkem and Livent –under the new merger– will develop the west and east portions of the Salar.
Lithium South Development Corporation is a sponsor of Mugglehead News Coverage