(Alliance News) - Bacanora Lithium PLC on Wednesday said it intends to sell its shareholding in Zinnwald lithium project to Erris Resources PLC in exchange for a majority stake in Erris.
The lithium explorer said it is in discussions to sell its 50% shareholding in Deutsche Lithium GmbH, the owner of Zinnwald project, to Erris for a 70% ownership stake in Erris and a net profit royalty. Bacanora's stake in Erris, however, is expected to reduce after Erris raises new capital through a share placing to fund the further development of Zinnwald.
Under the proposed deal, Bacanora will provide EUR1.4 million cash to Erris, the guaranteed investment committed by Bacanora into Zinnwald.
The investment commitment was made under a joint venture agreement with now-defunct SolarWorld AG, the 50% owner of Deutsche Lithium. SolarWorld entered into administration in August 2017.
"The proposed transaction will allow Bacanora to focus wholly on bringing its world class Sonora lithium project, located in Mexico into production, maximise shareholder return on the investment to date in Zinnwald; generate a clear see-through value for its shareholders; and lead in turn to Zinnwald being brought to production by a new, dedicated management team," Bacanora explained.
"While negotiations are at an advanced stage, there is no guarantee that a final agreement will be reached," the company added.
Zinnwald is a late stage lithium project located in Erzgebirge region of Saxony, Germany. A 2019 feasibility study on the project estimated pretax, discounted at 8%, net present value of EUR428 million; an internal rate of return of 27%; and an average life of mine annual adjusted earnings of EUR58.5 million.
Bacanora and Erris both issued interim results as well on Wednesday.
For the six months to June 30, Bacanora Lithium recorded a widened pretax loss of USD4.7 million versus a USD4.9 million loss a year ago, partly due to increased foreign exchange losses. No revenue was generated in either financial periods.
General and administrative costs fell to USD2.4 million from USD2.8 million.
Shares in Bacanora were up 6.1% at 24.40 pence each in London on Tuesday afternoon.
Europe focused mineral explorer Erris separately confirmed the talks to buy the 50% interest in the Zinnwald project and said the project has attractive economics, a fast-track development potential and excellent location.
If the Zinnwald stake acquisition goes through, Erris intends to divest its Loch Tay project in Scotland to the existing shareholders. The company's investments in Abbeytown in Ireland and Brannberg in Sweden will be retained on a care and maintenance basis.
Erris is planning to raise new capital through issuing new shares at 5 pence per share for working capital purposes. The stock last traded at 6.48p in London, before being suspended due to the proposed reverse takeover of Zinnwald stake.
Shares in Erris will resume trading on AIM after the company announces a final call on the Zinnwald deal.
Erris posted a pretax loss of EUR408,769 for the six months to June 30, widened from EUR265,303 a year ago. No revenue was generated in the interim period versus EUR15,835 a year ago.
Administrative expenses increased to EUR368,074 from EUR235,971.
By Tapan Panchal; tapanpanchal@alliancenews.com
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