Bacanora Lithium makes good progress at Sonora

Lithium exploration and development company Bacanora Lithium updated the market on its activities at its two projects in Sonora, Mexico and at Zinnwald, Germany on Friday, reporting that a number of recent milestones in the front-end engineering design had been completed at Sonora.

The AIM-traded firm said the front end engineering design (FEED) was for an initial 17,500 tonnes per annum (tpa) lithium carbonate processing facility, and said engineering mass balances and designs for kiln and crystallisers components had now been received,, enabling the final quotes for EPC design and agreement to be actioned.

Preliminary site earthworks were also now complete, resulting in downward revisions to expected overall bulk earthworks costs, due to the recently-acquired plant location at Las Perdices being “considerably flatter” than the originally-proposed site.

A new road design for site access was also complete, enabling construction work to commence, with site visits also undertaken by proposed energy suppliers, and final energy supply proposals expected.

Bacanora said the FEED was on course to be completed by year-end.

On the financial front at Sonora, Bacanora said ongoing site visits by potential strategic investors at both the corporate and project levels were taking place to secure outstanding development capital for the project.

To date, $240m - or 52% - of the $460m required for first stage production of 17,500 tpa of lithium carbonate at Sonora had been conditionally committed.

That included a $150m senior debt facility secured with RK Mine Finance, $65m conditional equity from the State General Reserve Fund of Oman, and a $25m conditional equity commitment from Bacanora's off-take partner, Hanwa.

Subject to completion of funding discussions and FEED, the first stage project commissioning target at Sonora was expected to be in the second half of 2020.

At Zinnwald in Germany, Bacanora said its ongoing feasibility study for the production of higher-value downstream lithium products for the European battery and automotive sectors was taking place.

It said initial lithium fluoride samples produced from Zinnwald concentrates as part of that study provided proof-of-concept of strategy to produce high-value lithium products at Zinnwald, with the initial sample quality in excess of 99% purity, which it said was indicative of its potential to be battery grade.

Samples were to be distributed to potential end users for evaluation test work.

Bacanora had completed a resource upgrade at Zinnwald to 142,240 tonnes of contained lithium, and was now completing the reserve estimate, detailed mine design and production scheduling, it explained.

Flow sheet engineering, mass balance and preliminary process design work was said to be underway, with negotiations for a selection of lithium fluoride plant site locations also ongoing.

The feasibility study remained on track for completion in the second quarter of 2019.

“The production of initial lithium fluoride samples from concentrates at Zinnwald represents another key milestone and closely follows the recent resource upgrade at the project to 142,240 tonnes of contained Li in the measured, indicated and inferred categories,” said Bacanora chief executive officer Peter Secker.

“Located in the heart of Germany's industrial region on a granite hosted belt that has historically produced lithium, Zinnwald's potential to play a strategically important role in Europe's rapidly emerging battery technology sector has always been clear to us.

“We are therefore highly encouraged that the results of various work streams of the ongoing feasibility study are only serving to strengthen our conviction and with this in mind, we are looking forward to the completion of the study in the second quarter of 2019.”

Secker said the progress being made at Zinnwald, together with the $1.25bn valuation assigned by the December 2017 feasibility to the Sonora project in Mexico, highlighted the “huge disconnect” that had opened up between Bacanora's current $55m market capitalisation and the underlying fundamental value of its lithium assets.

“The valuation anomaly is arguably far wider than the figures suggest when full account is taken of Bacanora's status as one of the few pure play and publicly traded developers of what is a critical battery technology metal.

“With advanced discussions ongoing with potential funders, both at the corporate and project level, for the outstanding finance required to commence the construction phase of an initial 17,500 lithium carbonate operation at Sonora, and excellent progress being made at Zinnwald, we are confident this valuation anomaly will soon begin to close.”