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Galan Lithium founder remains confident in Candelas amid drilling disappointment

Galan Lithium Ltd. founder and Managing Director Juan Pablo Vargas de la Vega is confident of the substantial upside in and around its Candelas project in Argentina despite his company's share price halving from an all-time high after making a high-grade lithium discovery on Feb. 13 to a disappointing result on March 11.

The company, a backdoor listing in August 2018, announced Feb. 6 that its maiden drill hole had intercepted highly conductive brines over more than 60 meters from about 235 meters, with "perfect permeable host lithologies" which supported the junior's theories that an underlying brine pool is present.

Then on Feb. 13, Galan confirmed a new high-grade discovery immediately to the southeast of the Hombre Muerto salar, from the same drill hole, C‐01‐19.

The hole hit 65 meters at an average of 862 milligrams per liter of lithium from 235 meters to 300 meters, with 119 meters of brine encountered from 235 meters to 354 meters, and low impurity levels.

SRK Consulting (Argentina) Senior Consultant Geologist Camilo de los Hoyos said at the time that preliminary field measurements and laboratory analyses on brine suggested Candelas "has the potential to become a world‐class soluble lithium deposit hosted in a unique geological setting."

De la Vega said in the Feb. 13 statement that encountering such lithium grades with low impurities in Galan's first hole encouraged the junior that Candelas could potentially host a significant resource of lithium-bearing brines.

Thus, when Galan went into a trading halt on March 4, the expectation of something bigger was such that the stock rocketed up to an all-time high of 61.5 Australian cents per share that day.

The much-anticipated March 11 announcement revealed geophysical profiling of C‐01‐19 indicated a brine section from 205 meters to 397 meters, and that brine section assaying had returned 192 meters at 802 mg/L lithium.

Though de la Vega told S&P Global Market Intelligence that the result was better than anything its neighbor Galaxy Resources Ltd. had come up with to date, Galan's March 11 statement also reported that the second hole, C‐02‐19, had failed to hit brine at a depth of about 465 meters.

He told conference delegates at the Battery Minerals Conference in Perth, Western Australia, on March 13 that intercepts from Galaxy's drilling of its Sal de Vida project's southern border which abuts Candelas are comparable to Galan's maiden intercept, thus highlighting Candelas' significance.

De la Vega told S&P Global Market Intelligence on the conference sidelines that Galan's failure thus far to hit brine in hole two meant it had not confirmed the southern extension of the ore body.

By March 13, Galan's ASX-listed stock had crashed to 29.5 cents, reflecting that "people have jumped to the conclusion that there's nothing, before we have time to step out and look at what we have."

As a former research analyst at Patersons Securities and Foster Stockbroking, de la Vega said he understands the rationale behind such investor skepticism, but said that "they're missing the big picture."

Drilling on hole two continues, and Galan holds budget for a further three holes for which it has permits and could finish drilling within the first half. However, operations are difficult being in the middle of the Andes Mountains.

"This is a marathon for me," de la Vega said. "I like to take a conservative approach. I like to think there are brines there [in hole two] but we're not going to know until we end up at basement."

On interpretation of geophysics, depth to basement can vary between 700 meters and 750 meters, so Galan could still have another 300 meters or so, and being the first company to drill the area, it has no other reference point, thus "everything is groundbreaking territory."

Upside for Galan beyond Candelas

For investors who are growing skeptical or impatient, he reminded that Galan also has several projects in the Western Basin on the Hombre Muerto salar's margins, which the company hopes to drill in the second half.

They are Rana de Sal, Deceo, Catalina, Pata Pila and Santa Barbara, located next to the salt lake and surrounding Livent Corp.'s ground.

Though they are of a lesser scale than Candelas' potential, there is more certainty as there is prior drilling in those areas, and believes they are "very prospective" after having run geophysics and surface sampling on them.

"Candelas was a new geological model, with some left-field ideas about the geology, but in the rest of the basin we have projects which are still large enough to be company-making, and people will be running [to us with investment] with the result," de la Vega said.

With the western projects, he said, "we know the grades are there, we know we have depth, and we are next to the salt flat, so it's more compelling in a way as you have more certainty that there are brines there."