LONDON (Alliance News) - Bacanora Lithium PLC on Monday announced a major new investment from a Chinese lithium producer.
Bacanora, which is looking to develop its flagship Sonora lithium mine in Mexico, has signed non-binding heads of terms with Ganfeng Lithium Co Ltd.
China's Ganfeng is the world's largest lithium metals producer by production capacity and the world's third largest lithium compounds producer.
Ganfeng would take 30% of Bacanora for GBP14.4 million, via 57.6 million new shares at 25 pence each. It would also get the right to nominate a director to the Bacanora board.
Bacanora shares were 6.7% higher on Monday morning at 28.55p each, though did touch 33.88p in earlier trade.
Further, Ganfeng would also get the right to an initial 23% in the subsidiary of Bacanora which owns Sonora, for GBP7.6 million in cash.
Ganfeng would also get an option to increase the interest in the project up to 50% within 24 months of completion of the initial deal.
Once signed up, Ganfeng would review the current plan for Sonora to try and reduce the cost of construction from the current USD420 million.
Ganfeng will get exclusive rights to 50% of all lithium products produced during stage one at Bacanora, and then have the option to increase this to 75% for stage two.
Bacanora Chief Executive Peter Secker commented: "The proposed strategic investment from Ganfeng, a top three lithium producer, will be a major milestone in the development of the Sonora project."
"Not only will it provide industry validation of Sonora's clear potential to become a key supplier of battery grade lithium but, subject to Ganfeng exercising its option to increase its interest in the Sonora project to 50%, our share of the capital costs required to construct an initial 17,500 tonne per year lithium carbonate operation at Sonora would be halved."
"With a senior debt facility with leading resource finance provider RK Mine Finance secured and the proposed strategic investment from Ganfeng, we have made significant progress towards the completion of the construction funding of the Sonora project," Secker added.
Wang Xiaoshen, the deputy chair of Ganfeng, said: "Our proposed investment in Bacanora Lithium and the Sonora lithium project would form a cornerstone in Ganfeng's growth strategy to become the world's largest lithium producer."
"Specifically, the Sonora deposit is large and scalable, with low operating costs. We look forward to working closely with the Bacanora team to realise Sonora's potential and bring into production the world's first lithium clay project."
Bacanora has been trying to secure funding for Sonora for some time. Bacanora secured USD150 million from RK Mine Finance last July, but had in April last year cancelled a GBP31 million private placing after an investor failed to pay up.
Later in July, Bacanora then cancelled a planned USD100 million fundraise due to "currently volatility on global commodities markets.
Bacanora's Ganfeng announcement was noted on Monday by Cadence Minerals PLC, which as of the end of April held 1.6% of Bacanora.
