Bacanora Lithium (BCN)




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Bacanora Lithium pleased with progress at Sonora Project

By Josh White

Date: Monday 11 Nov 2019

LONDON (ShareCast) - (Sharecast News) - Bacanora Lithium updated the market on its activities at the Sonora Lithium Project in Mexico on Monday, following the recent completion of the strategic investment by global lithium company Ganfeng Lithium.
The AIM-traded firm said the Bacanora project team were continuing to progress the final design work for the mine site, infrastructure, concentrator and kiln sections of the processing plant.

Representative samples had been sent to Ganfeng in China, and Ganfeng's technical review of the hydrometallurgical circuit had started, with a view to potentially sourcing key sections of the lithium production equipment from their current equipment suppliers.

That work was expected to be completed in the first half of 2020.

As part of the technical review, both Bacanora and Ganfeng were continuing to develop testwork programmes for the potential production of other downstream high value lithium products, in addition to the battery-grade lithium carbonate used in the company's feasibility study.

The results of that work would be reviewed over the next few months.

Bacanora said the feasibility study indicated "highly favourable" economic indicators for a battery grade lithium carbonate operation at Sonora, including a $1.25bn net present value, an internal rate of return of 26%, and operating costs "among the lowest in the industry" at around $4,000 per tonne of lithium carbonate.

As it had previously noted, Bacanora intended that the three primary parts to its production circuit would be delivered in a certain time frame under individual contracts with associated process guarantees, from "experienced" engineering groups.

It explained that engineering and flow sheet testwork for the design of the front-end ore concentrator and mechanical processing was underway for completion in the first half of 2020, with pyrometallurgical engineering - primarily for the kiln designs - being engineered by Nutec Bickley, with final detailed design and process guarantees there also to be completed in the first half of 2020.

The hydrometallurgical plant, including the production of the final battery grade lithium product, would be engineered by Ganfeng themselves due to their expertise in the field, with completion also in the first half of 2020.

On the financing front, Bacanora explained that once Ganfeng has completed its review, the company would deliver final engineering costs for the first stage of the project, following which it would look to finalise a funding package.

It said that at the current stage, it believed that the engineering costs would remain in line with the 2018 feasibility study forecast of around $420m.

The recent 29.99% equity investment by Ganfeng Lithium and their 22.5% investment at the project level, in combination with a combined 100% off-take held by Ganfeng and Hanwa Corporation for the first stage of production of 17,500 tonnes per annum of lithium products at the project, demonstrated the "strong support" that both those cornerstone investors had shown in Sonora, the board explained.

Combined, Ganfeng and Hanwa had a see-through ownership of more than 50% of Sonora.

In the last 18 months, Bacanora had already secured a $150m debt facility with RK Mine Finance, and said it was continuing to explore additional sources of project funding.

The 22.5% project investment and 29.99% equity investment from Ganfeng, in addition to ongoing support from Bacanora's other shareholders and off-takers, ensured a "very solid position" for finalising the project funding stage of the Sonora development, the board said.

It had $40m of cash at the end of October, which would enable it to start the bulk earthworks on site in the first half of 2020, and start to upgrade the primary access road to site.

The company said it would also be able to use part of those funds to place the initial orders for some of the longest lead-time items in the concentrator, pyrometallurgy and hydrometallurgy sections of the lithium plant.

Looking at the market in general, the company said there had been a number of media reports in recent months highlighting the impact of an over-supply of lower grade bulk spodumene concentrates from Australia into the Asian lithium converter markets.

It explained that recently, a number of those projects had been delayed, closed, reported decreased production or put on care and maintenance.

With the majority of those concentrate operations being at the higher cost level, that supported the Bacanora strategy of developing a fully integrated lithium project that produced a final battery grade lithium product at "much lower costs" rather than an intermediate concentrate, the board claimed.

"Recent research reports predict the lithium industry would need $30bn in investment in upstream capacity to meet its forecast of one million tonnes of supply by 2025 - a threefold increase on current levels," said Bacanora chief executive officer Peter Secker.

"In order to secure funding, any new lithium project needs to be low on the operational cost-curve, without having to rely on by-product credits to artificially lower that cost per tonne."

Secker said a project would also needs to have reliable engineering cost estimates.

"A project needs to be of sufficient scale, in a location with a favourable environmental and political climate and deliver a high-grade end product.

"The Sonora Lithium Project is one of the very few projects globally that can deliver on all of these factors."

At 1604 GMT, shares in Bacanora Lithium were down 1.79% at 27.5p.

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BCN Market Data

Currency UK Pounds
Share Price 23.00p
Change Today 1.00p
% Change 4.55 %
52 Week High 37.25
52 Week Low 15.00
Volume 15,959
Shares Issued 222.98m
Market Cap £51.29m

BCN Star Ratings

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26.4% below the market average26.4% below the market average26.4% below the market average26.4% below the market average26.4% below the market average
65.77% below the sector average65.77% below the sector average65.77% below the sector average65.77% below the sector average65.77% below the sector average
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47.51% below the market average47.51% below the market average47.51% below the market average47.51% below the market average47.51% below the market average
58.06% below the sector average58.06% below the sector average58.06% below the sector average58.06% below the sector average58.06% below the sector average
Income Not Available
Growth Not Available

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Trades for 24-Sep-2020

Time Volume / Share Price
08:27 8,632 @ 22.00p
08:13 4,420 @ 22.40p
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08:00 2,232 @ 22.40p

BCN Key Personnel

CEO Peter Secker
CFO Janet Boyce

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