Galan Lithium : Updated HMW Economic Study - NPV Increases to US$2.2b

For personal use only

ASX ANNOUNCEMENT

9 December 2021

Updated Economic Study for Flagship HMW Project - NPV

Increases to US$2.2b on Revised Lithium Price

______________________________________________________________

Highlights:

• New stronger, compelling economic results for Galan's flagship HMW project with unleveraged Pre-tax NPV of US$2,193m (8% discount rate), IRR of 37.5% and less than (3) year payback period
• Pre-taxNPV8 up 120% from US$1.0b to US$2.2b and Average life-of-mine annual EBITDA of US$287m (from US$174m)
• Long term average real lithium price assumption (2025-2040) of US$18,594/t LCE battery grade used as the basis for the economic assessment
• Updated HMW economic study retains long-life 40 years+ project of 20ktpa of battery grade lithium carbonate (LCE) including competitive cash production cost for Li2CO3 of US$3,518/t in the first quartile of global lithium cost production curve
• Galan has two (2) PEA study level projects (HMW and Candelas) with combined long term production potential of 34ktpa LCE
• Combined HMW and Candelas Pre-tax NPV8 of US$3.4 billion
• HMW's new drilling campaign, pilot plant and engineering works are advancing in preparation for commencement of DFS

Galan Lithium Limited (ASX: GLN) (Galan or the Company) is very pleased to announce the results of an updated Preliminary Economic Assessment (PEA) study for its 100% owned flagship Hombre Muerto West (HWM) Project ("the Project") in Catamarca Province, Argentina.

The original PEA (as per ASX announcement dated 21 December 2020) was based on an average Li price of US$11,687/t to the year 2040. The updated HMW economic study uses the same conservative Li price of US$18,594/t as used in the study for Galan's second project (Candelas) (as per ASX announcement dated 30 November 2021). The updated economic study retains the original production profile of 20,000 tonnes per annum of battery grade lithium and no changes or improvements were made to Capex/ Opex estimations used in the original PEA study. The updated economic study results also reflect recent changes to the tax legislation in Argentina.

The preparation of the Project's original PEA disclosed in December 2020 was carried out by several well-regarded consultants. The mineral resource estimate was prepared by SRK, the lithium recovery method was designed by Ad-Infinitum, while Worley Chile reviewed the potential recovery method, the project's potential layout and infrastructure, capital and operating cost estimates and preliminary economic evaluation. The other sections of the original PEA were managed by employees of Galan Lithium Limited. The updated economic study results were managed by Ad-Infinitum and employees of Galan.

__________________________________________________________________________________

Level 3, 30 Richardson Street, West Perth, WA 6005	PO Box 396, West Perth, WA, 6872
Ph. [phone]	Fax. [phone]
www.galanlithium.com.au	ABN: 87 149 349 646

Key financial comparative highlights are presented in Table 1.

Table 1: Preliminary Economic Assessment Comparative Results

only

Parameters

Units

Original PEA

Updated PEA

Values 21 Dec 2020

Values 9 Dec 2021

Lithium Carbonate Production

Tonnes/year

20,000

20,000

Project Life Estimate (excluding ramp-up)

Years

40

40

Capital Cost (CAPEX)

US$M

439

439

Capital Cost (ex-contingency and indirects)

US$M

338

338

Average Annual Operating Cost (OPEX)

US$/tonne

3,518

3,518

use

Average Li2CO3 Selling Price (2025-2040)

US$/tonne

11,687

18,594

Average Annual EBITDA

US$M

174

287

Pre-Tax Net Present Value (NPV)

US$M

1,011

2,193

After-Tax Net Present Value (NPV)

US$M

684

1,338

Pre-Tax Internal Rate of Return (IRR)

%

22.8

37.5

After-Tax Internal Rate of Return (IRR)

%

19.1

33.1

Payback Period (After-Tax)

Years

4.3

2.75

personal

Since the release of the original HMW PEA Study in December 2020, Galan has confirmed laboratory

lithium chloride concentrations of 6% Li several times and confirmed production of lithium carbonate

battery grade of 99.88% LCE from its concentrate. It has also received permits for new drilling and Stage

1 construction permits for the HMW camp and pilot plant. During 2022, the Company will be undertaking

a definitive feasibility level study (DFS) with the appointment of an independent, well credentialed

engineering firm imminent. Galan also expects the new HMW drilling to increase its Indicated Resources

as well as a likely move into the Measured and Indicated Mineral Resource category. A key part of the

DFS will be the formulation of a more robust hydrogeological model that supports the base case

production level at HMW and potentially increases the production profile beyond 20ktpa along with a

Reserve statement.

Galan's Managing Director Juan Pablo (JP) Vargas de la Vega said:

"These updated project economics for Hombre Muerto West just shows how very strong and healthy

our flagship project is. Despite using a conservative long-term price assumption, HMW has delivered a

phenomenal pre-tax NPV of nearly US$2.2 billion. The Company is in an enviable space whereby it has

two study level projects that can potentially deliver combined long term production levels of 34ktpa LCE

For

along with NPV's that are above US3.4 billion.

As we have previously said, Galan remains excited about the potential value add for our shareholders once we enter the lithium market with prices expected to be +US25k/t LCE. Our projects would now be among the lowest cost of any future producers in the lithium industry, due to their high grade and low impurity setting, green credentials and a low carbon footprint. Galan is excited to be a part of the solution to the global decarbonisation story".

Cautionary Statement

The original Preliminary Economic Assessment (PEA) was a preliminary technical and economic study (equivalent to a JORC Scoping Study) of the potential viability of the HMW Lithium Brine Project required to reach a decision to proceed with more definitive studies. It is based on preliminary/low-level technical and economic assessments that are not sufficient to support the estimation of Ore Reserves or provide certainty that the conclusions/results of the PEA will be realised. Further exploration and evaluation

For personal use only

work and appropriate studies are required before Galan will be in a position to estimate any Ore Reserves or to provide any assurance of an economic development case.

The economic analysis results should be treated as preliminary in nature and caution should be exercised in their use as a basis for assessing project feasibility. The PEA was based on material assumptions including assumptions about the availability of funding. While Galan considers all of the material assumptions to be based on reasonable grounds, there is no certainty that they will prove to be correct or that the range of outcomes indicated by the PEA will be achieved.

To achieve the range of proposed feasibility studies and potential mine development outcomes indicated in the PEA, additional funding will be required. Investors should note that there is no certainty that Galan will be able to raise funding when needed. It is also possible that such funding may only be available on terms that may be dilutive to or otherwise affect the value of Galan's existing shares. It is also possible that Galan could pursue other 'value realisation' strategies such as a sale, partial sale or joint venture of the project. If it does, this could materially reduce Galan's proportionate ownership of the project.

All of the material included in the mining schedules used in the PEA are within Galan's Indicated Mineral Resources.

Process and engineering works for the PEA were developed to support capital and operating estimates (and following AUSIMM Guidelines for this study level) and given the preliminary and confidential nature of the plant information, the capital cost margin of error is ±30% on the 'factored cases' estimated figures and operating cost is ±30%. Apart from the change to the average long term lithium price assumption (2024-2040) of US$18,594/t LCE, all other original PEA assumptions were the same as those contained in the ASX announcement dated 21 December 2020 entitled "Compelling Preliminary Economic Assessment Results for 100% owned Hombre Muerto West (HMW) Project in Catamarca, Argentina" and available www.galanlithium.com.auand www.asx.com. Galan has concluded it has a reasonable basis for providing the forward-looking statements in this announcement.

The Mineral Resources information in this report is extracted from the ASX announcement entitled "Huge Increase in Hombre Muerto West (HMW) Indicated Resource - Now Over 2 Million Tonnes" dated 17 November 2020 available at www.galanlithium.com.auand www.asx.com. Galan confirms that it is not aware of any new information or data that materially affects the information included in the original market announcement and, in the case of Mineral Resources or Ore Reserves, that all material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially changed. Galan confirms that the form and context in which the Competent Person's findings are presented have not been materially modified.

Given the uncertainties involved, all figures, costs and estimates quoted are approximate values and within the margin of error range expressed in the relevant sections throughout this announcement, investors should not make any investment decisions based solely on the results of the original PEA or the updated economic study results presented in this announcement.

____________________________________________________________________________________

For personal use only

Project Background

Location

The Hombre Muerto West (HMW) Project is part of the Hombre Muerto basin, one of the most globally prolific salt flats, located in the Argentinean Puna plateau of the high Andes mountains at an elevation of approximately 4,000 m above sea level (asl). The project is in the geological province of Puna, 90 km north of the town of Antofagasta de la Sierra, province of Catamarca, Argentina as shown in Figure 1. The HMW Project is located to the West and South of the Salar del Hombre Muerto.

The HMW Project is in close proximity to other world class lithium projects owned by Galaxy Resources, Posco and Livent. It is around 1,400 km northwest of the capital of Buenos Aires and 170 km west- southwest of the city of Salta (in a straight line).

Tenements

The HMW Project originally comprised six exploration permits Rana de Sal (I,II and III), Pata Pila, Catalina, and Deceo III (Figure 2), covering an area of ~9,493 hectares. It also includes the Santa Barbara suite of concessions. The Company also recently completed the purchase of a 100% interest in the Del Condor and Pucara lithium brine salar projects that abut Galan's original HMW tenure in Argentina (ASX:GLN 4 November 2020). The Del Condor, Pucara and Casa del Inca concessions comprise claim blocks totalling 2,104 hectares, included in Figure 2. These three concessions have not been used for the development of this study because at the completion of engineering design, the acquisition of these tenements was not completed.

Design work shows the HMW brine wells will be located in the Rana de Sal and Pata Pila areas. The main objective of these wells is the extraction of brine, rich in lithium, from the Salar which is then pumped to the first preconcentration solar evaporation ponds.

Climate

The climate in the HMW Project area is classified as cold, high altitude desert with sparse vegetation. Solar radiation is intense (especially during the summer months of October to March) resulting in high evaporation rates. Very strong winds are also typical, reaching speeds up to 80 km/h during the dry season. However, in summer, warm to cool winds normally develop after midday and reduce in strength during the evening hours.

Precipitation data from meteorological sources showed a mean annual precipitation of around 86.4 mm. Precipitation typically occurs between the months of December and March, during which about 82% of annual rain fall occurs. From April to November, it is typically dry with average daily mean temperatures of approximately 5.3°C

For personal use only

Figure 1: HMW Project, Hombre Muerto Salar, Catamarca Argentina