Galan Lithium (ASX:GLN) share price leaps 9% on 'excellent' project results

Preliminary results indicate Galan Lithium could be sitting on a $1.2 billion lithium resource…

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The Galan Lithium Ltd (ASX: GLN) share price is getting a jolt of enthusiasm on Tuesday.

At the time of writing, shares in the lithium explorer are up 9% to $1.635. However, earlier in trade Galan Lithium shares topped as much as $1.71, representing a 14% increase from its previous close.

Accounting for today's spectacular gain, the Galan Lithium share price is now up a gobsmacking 352% in 2021.

Why is the Galan Lithium share price flying higher today?

Investors are putting their money behind the Galan Lithium share price on Tuesday following the release of the company's preliminary economic assessment (PEA) for its project in Argentina.

The 100% owned Candelas project in Catamarca, Argentina delivered 'excellent' preliminary results. Galan Lithium highlighted a potential unleveraged pre-tax net present value of US$1,225 million. This was determined with an 8% discount rate and an internal rate of return of 27.9% over a four-year period.

Importantly, the company used a long-term average real lithium price assumption of US$18,594 per tonne. Considering the current going rate is around US$29,000 per tonne, this appears to be a relatively conservative estimate.

Furthermore, the assessment inferred a project life of 25 years, capable of producing 14,000 tonnes per annum of battery-grade lithium carbonate. Another important factor is the expected cost of production. The PEA indicates a competitive cash production cost of US$4,277 per tonne.

It is expected the development would take around US$408 million (A$570 million) in initial outlay to get the project off the ground. For context, based on the current Galan Lithium share price, the company currently has a market capitalisation of $473 million.

What did management say?

In the announcement, Galan Lithium's managing director Juan Pablo Vargas de la Vega said:

We are delighted by the strong and competitive results of the Candelas Project PEA. Our projects continue to show healthy economics and upside despite using a conservative long term price assumption at a time when new lithium projects are scarce. Galan now has two potential production fronts combining for a long-term production rate of 34ktpa of LCE. This rate could be even higher once we finish drilling at our flagship HMW project.

In addition, Vargas de la Vega stated:

We remain determined to bring our projects to market in the shortest possible time so that we can supply lithium for future lithium battery requirements needed for electric vehicles.

Lastly, the company has enjoyed a stellar run this year, riding on the coattails of strong lithium demand. In the past year, the Galan Lithium share price has skyrocketed 395% in value.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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