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15.10.2019

Bacanora Lithium jumps on strategic deal with Ganfeng

Shares of Bacanora Lithium climbed more than 20 % on October 14 after the lithium developer closed a GBP 21.96 mill. strategic investment deal with Ganfeng Lithium. The Chinese producer will become its largest shareholder, with a 29.99 % stake in the London-based company and a 22.5 % joint venture investment in the Sonora lithium clay project. Ganfeng’s investment is set to boost Bacanora’s finance package for the development of the Mexico-based asset, which is forecast to produce an initial 17,500 t/a of lithium carbonate.

Last year, the company withdrew from a US$ 100 mill. share sale at the last minute due to weak investor demand. The company, which says Ganfeng’s investment puts it in a better position, now plans to launch a US$ 300 mill. capital raise early in 2020. As part of the strategic agreement closed with Ganfeng, the top Chinese producer will be granted exclusive offtake rights to purchase 50 % of all lithium products produced at Sonora for the life of the mine during Stage 1 of operation. Additionally, Ganfeng will have the option to increase its offtake to 75 % during Stage 2, when the operation will boost its output to 35,000 t/a. Ganfeng will pay market-based prices for every tonne of lithium carbonate sold under the offtake deal.

Sonora has an estimated measured and indicated mineral resource of over 5 mill. t of lithium carbonate equivalent and additional inferred resources of 3.7 mill. t of lithium carbonate equivalent. Looking ahead, Bacanora continues to progress final design work for the mine, concentrator and kiln sections of the processing plant, with construction set to start in the second quarter of 2020 and production starting in early 2022. A total of US$ 420 mill. is needed to start construction. Ganfeng has also announced its intention to advance the development of the Sonora lithium clay project during the second half of 2019.

It’s been a busy year for the Chinese lithium giant, which despite the decline in lithium prices and negative investor sentiment toward the sector, has continued to expand its dominance in the space. With interests in six lithium resources in Australia, Argentina, China and Ireland, and its primary source of lithium raw materials in Mount Marion in Western Australia, Ganfeng has also signed lithium supply agreements with carmakers and battery manufacturers around the world. In early 2019, the company made news headlines when it inked a long-term lithium deal with German carmaker Volkswagen. Ganfeng also has supply agreements in place with Tesla, carmaker BMW and Korean battery maker LG Chem. In August, the Chinese producer closed a US$ 160 mill. investment in Lithium Americas’ Cauchari-Olaroz project in Argentina. The deal, which was announced in April, will see the Asian top lithium producer increase its current 37.5 % interest to 50 %, forming a 50/50 joint venture with Vancouver-based Lithium Americas. Ganfeng purchased its stake in Lithium Americas from another top producer SQM last year. Ganfeng is aiming to have a production capacity of 200,000 t/a of lithium carbonate equivalent by 2025, although the company has said final capacity expansion will be based on changes in future market demand for lithium products. (Investing News Network, October 14, 2019)