Galan Lithium (ASX:GLN) has dismissed rumours floating in the press it’s received a takeover offer, and yet, confirmed a company has offered USD$50M for its Argentinian Salar del Hombre Muerto and Candelas plays.
The company in question proposing the US$50M offer is clean energy player EnergyX, domiciled in Puero Rico. On top of US$50M in cash, EnergyX has also offered US$50M of its own shares to Galan; EnergyX is not publicly listed but has previously moved to do so.
Except, whether or not Galan will see the entire US$50M payment remains unclear. There’s one pretty big catch buried in its Tuesday announcement.
“US$50 million, which it is noted would not be payable to Galan but rather to EnergyX’s wholly owned subsidiary which would own the Project Assets, with those funds to be committed and wholly dedicated to completing the first commercial phase of lithium production at Hombre Muerto West and maintaining the Project Assets.”
Perhaps more meaningful, EnergyX want to give Galan a 10% royalty for 10 years from the start of first production.
Shareholders haven’t loved the news. Galan shares were down -16.67% to 12.5cps as at 11.30am Sydney time on Tuesday. In the background, the ASX200 doesn’t know what it’s doing – but there’s no consistent sell-off to the same degree in Galan’s peers.
What’s not to love about a 10% royalty – especially given most royalty agreements rarely exceed 2%? Perhaps it’s because it remains unclear whether lithium prices will ever return to their early 2020’s highs at the top of the next commodity cycle.
That, or people believe Galan is worth more than a collective US$100M, intricacies of Tuesday’s deal be damned. Probably both.
GLN last traded at 12.5cps.