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Bacanora Minerals Ltd: THE INVESTMENT CASE

Bacanora positions itself in two lithium hot spots

The company is putting together a feasibility study that should be complete by the end of the first quarter next year.
Bacanora positions itself in two lithium hot spots
INVESTMENT OVERVIEW: BCN The Big Picture
The company is carrying out infill drill work.

Bacanora Minerals Ltd (LON:BCN CVE:BCN) has positioned itself for the expected surge in demand in lithium with assets in two of the current hot spots.

Already the owner of the Sonora deposit in Mexico, the dual-listed group has just agreed to take a 50% stake in the Zinnwald lithium project in Germany with the option to take full ownership within two years.

Mark Hohnen, chairman, said: "Zinnwald is a strategic asset located in close proximity to a thriving market for lithium and energy products.”

Sonora remained at the heart of the portfolio said Hohnen, but Zinnwald provided exposure to an exciting new geographic market and adds hard rock mineralisation to the portfolio. 

 

German lithium demand growing rapidly 

Zinnwald, in southern Saxony, is currently owned by SolarWorld, the largest solar panel producer in Europe. 

The deposit has historically been a producer of lithium carbonate in a belt that also contains tungsten and tin, but it is the location that has seemingly attracted Bacanora.

German demand for lithium is growing rapidly says Bacanora, as development of electric cars and renewable energy storage builds momentum.

The consideration is €5mln plus a further €5mln contribution towards the cost of completing a feasibility study, which will take 18-24 months

Bacanora also has a two year option to take full control for a further €30mln. 

Hohnen said the project will complement Sonora where a feasibility study is on track for completion in 2017 and negotiations are underway for offtake deals with groups in Asia.

Broker Numis, which has a target price of 130p against 81p in the market currently, said that  the feasibility study will include both an evaluation of the potential value of by-product tin and tungsten credits and whether to produce carbonate or hydroxide as a final product.

The project has a European standard M&I Resource of 511,000t compared with 4.5Mt at Sonora.

Bacanora will outsource the exploration work to a German consulting group so that it doesn't distract the company's technical team in Hermosillo.

 

Watch: Bacanora eyes up lithium growth opportunities in Germany with new acquisition

Sonora study due late in 2017

Work to upgrade the resource at the Sonora is well underway.

A near 4,000-metre infill drilling programme has been completed that will be crucial in this regard and 1,870 samples have been collected.

The results thus far have been encouraging.

The resource upgrade is an integral plank to a feasibility study being compiled for Sonora, in the north of the country, which is expected eventually to support a 35,000 tonne a year mine. Initial production will start at half that figure.

Work on this crucial document will include a preliminary reserve model and mine plan.

Bacanora said consultant Ausenco is just over a third of the way through the process engineering for the feasibility study.

This means the initial flow sheet has been finalised, quotes are being sought for larger equipment and machinery and the development and optimisation of the preliminary operating cost models has begun.

At the same time, the expanded pilot plant that has been operating since May is producing battery-grade lithium carbonate samples.

Having this saleable material will help when it comes to engaging with potential buyers of Sonora’s output known as off-takers.

The market appears to be moving in the direction of companies such as Bacanora that have projects in development with a significant increase in the price of the mineral.

Demand has been driven by the electric car market with lithium a central element to batteries used the vehicles rolling off the Tesla, Toyota and Nissan production lines.

Asia and electric cars will continue to drive the market for lithium said chief executive Pete Secker, but the potential for storage for renewable energy is what caught its eye in Germany.

Sonora is scheduled to start production in 2019, by which time an investment will have been made at Zinnweld giving it a potential second revenue stream.

Bacanora said it is currently working with a firm called SignumBox to develop long-term lithium pricing scenarios and supply and demand models.

Rare Earth Minerals (LON:REM) has a 19.12% stake.

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Bacanora Minerals Ltd Timeline

Newswire
October 18 2016

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