SP Angel Morning -correction3 Jul 2019 07:50
Bacanora Lithium (BCN) 44.5p, Mkt Cap £60m – Correction - Genfeng signs agreement to buy 29.99% of Bacanora for £14.4m
Genfeng Lithium (of China) has signed its previously announced strategic investment agreement to buy 29.99% of Bacanora for £14.4m.
Genfeng is also making a project level investment in Sonora Lithium, for 22.5% of the project holding company of £7.6m.
Genfeng has an option to increase its interest in Sonora Lithium to 50% within 24 months at a share price based valuation at the time of investment.
Offtake agreement:
Genfeng is also entitled to take 50% of Bacanora’s Stage 1 lithium production plus 75% of Stage 2 lithium production.
Sonora project review
Genfeng will complete a review within six months of the EPC engineering design and capital costs of Sonora Lithium Project with a view to reducing costs and accelerating the timetable. It will also provide a plant and process commissioning team to assist Bacanora in delivering first production in 2021
Production
Bacanora plans to produce 17,500 tpa of lithium carbonate during phase 1 of the project before doubling output to 35,000 tpa during phase 2.
Capex
Overall capital cost estimates for Phase 1 amount to US$420m of which, according to the January 2018 feasibility study, approximately US$232m is attributable to the beneficiation plant, lithium extraction plant and the shared plant services.
Hanwa Corporation
In April 2017, Bacanora Lithium secured a five year lithium product offtake agreement with the major Asian battery chemicals trader, Hanwa Corporation of Japan and in June this year announced that they had agreed to extend the offtake partnership by a further 5 years, effectively underpinning the Phase 2 expansion of the project.
We understand that Hanwa Corporation remain as a key shareholder in Bacanora and interested in the Sonora project.
Last year Bacanora announced that plans by the Chinese investor NextView, to invest an initial £31m in Bacanora had failed to materialise.
Conclusion: Bacanora’s Sonora project plans to produce lithium carbonate from clay in Mexico. The project has run a fairly large scale C$20m pilot plant over more than two years to confirm the extraction process and train local staff.
While Chinese and Japanese companies are not normally natural bedfellows in mining and committing 100% of offtake feels unusual if not slightly unwise, Hanwa Corp. (Japanese) appear to continue to remain interested 50% of the Stage 1 offtake which then would convert to 25% at Stage 2.
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