Master Investor13 Apr 2021 08:22
Bacanora (LON:BCN) (market cap £139m at 42p) saw its shares take off in mid-November when the long-awaited full endorsement from China’s Ganfen Lithium – the world’s largest lithium metal producer – arrived. Having been a key cornerstone investor for the last two years, Ganfen, is moving to be a full joint venture partner with a 50% equity stake, and will lead all the mine and plant construction. With Ganfen’s investment funds received, initial site works have already started, and lithium carbonate production is now slated to begin in 2003, three years later than hoped for two years ago.
That means that all the finance (loans, equity, and take-off deals) to build a first stage plant to produce half the eventual planned 35,000 tonnes of lithium carbonate per annum has now been secured. The first stage will cost some $450m, in return for which it is estimated Sonora will earn a $1.25bn 8% NPV with a 26% IRR and an almost unlimited mine life. On that prospect, and like those of HZM at a somewhat similar stage of development, BCN’s shares look attractive for the longer term now that they have relapsed from their 65p peak.
As I say, it was probably the Ganfen deal which set off the lithium price generally. But it is not easy to pin down, because only recently has any sort of lithium price index been created. Prices are usually set confidentially for bulk deals between buyer and seller, and according to market commentators who track them, the average price throughout the year fell from about $17,000/tonne in 2018, to $8,000/tonne in 2020.
But they are now reporting an 88% increase so far in 2021 to an average of $12,635 per tonne, purportedly on market shortage, as many producers sell out of product inventory.
So, although that means the lithium price might progress from now onwards only in fits and starts, its indications of a revival in the battery minerals market generally has spurred investors towards the smaller potential suppliers of that market.
https://masterinvestor.co.uk/equities/johns-mining-journal-bacanora-lithium-and-armadale-capital/
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