Galan Lithium has turned down a US$150 million (A$240M) cash offer from China’s Zhejiang Huayou Cobalt Co and France’s Renault Group to acquire its Hombre Muerto West and Candelas lithium brine projects in Argentina, labelling the proposal “opportunistic” and “undervalued”.
The market responded swiftly, with Galan’s shares soaring more than 50 per cent to a high of 16 cents per share, from a market cap of $92 million the day prior to a high of $134 million intraday – a level well short of the proposed $240 million cash takeover.
The surge defied the broader market downturn, with the ASX benchmark index slipping about 1 per cent prompted by United States President Donald Trump’s retaliatory tariff announcements overnight.
The unsolicited, conditional and non-binding proposal from battery materials giant Zhejiang Huayou and EV producer Renault targeted Galan’s Argentine lithium assets in a world-class Lithium Triangle.
Conditions included due diligence, binding agreements and approvals from shareholders, regulators and the bidders’ boards.
Galan and its advisors rejected the offer, citing a belief that its flagship Hombre Muerto West project promised a superior outcome for shareholders in the long term. The project is nearing production of 5,400 tonnes per annum (tpa) of lithium carbonate equivalent.
Management is finalising offtake and financing deals for Hombre Muerto West’s phase one development, which the company says should be completed by the end of the year.
Galan is continuing discussions with partners including Chengdu Chemphys, which offered a potential US$40M (A$64.15M) funding and offtake package last August.
Galan placed US$3M (A$4.81M) in shares to a Chengdu Chemphys affiliate, Latam Resources, in January as a part of the August agreement.
The company also issued a secondary trading notice today, which confirmed the issuance of 5.7M shares last Friday, as part of an at-the-market subscription deed to ASX-listed Acuity Capital.
Galan’s Hombre Muerto West and Candelas projects have a 9.5-million-tonne lithium carbonate equivalent (LCE) resource at a high-grade 841 milligrams per litre (mg/L) and is steadily advancing to phase 1 production, now well past half-way completion.
The project lies just 100km south of Rio Tinto’s Rincon project, also within Argentina’s prominent Lithium Triangle. Rincon’s non-JORC 5.8-million tonne LCE resource was acquired by the mining giant in 2022 for a little over $1 billion, during a time of more buoyant lithium prices. Importantly, Galan’s Hombre Muerto salar features lithium grades double that of the Rincon project’s grade, which comes in at around 420mg/L.
Galan similarly rejected a bid for Hombre Muerto West and Candelas last August by declining a US$150M bid from EnergyX, a lithium technology startup backed by Lithium Triangle neighbours Posco Holdings.
Despite lithium carbonate prices languishing, the recurring interest from industry heavyweights highlights the projects’ status as prized assets in the lithium triangle, particularly as demand for high-grade, low-impurity brine grows with the shift to lithium ferrophosphate batteries in China and beyond.
The US$150M offer also highlights Galan’s low-cost profile. The company pegged its phase one production costs at US$3500/t lithium carbonate equivalent in its 2023 definitive feasibility study - reiterating its case for holding out on an asset sale.
Galan’s decision and the ensuing share price rally could signal a turning point for the company. With phase one production on the horizon and a robust resource base, it appears poised to capitalise on its assets should a cash injection from a partnership or capital raising push it over the production finishing line.
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By Andrew Todd
