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Macquarie tips Bacanora to fly

Last updated: 10:30 31 May 2016 EDT, First published: 10:50 31 May 2016 EDT

picture of small piece of lithium
Not enough to go round according to forecasts

Bacanora Minerals Limited (LON:BCN) is set to become a “major, low cost lithium producer”, according to Macquarie, which tipped its share price to jump 23% over the coming year.

Macquarie is “bullish” on the medium-term prospects of the lithium market, as it predicts demand for electric car batteries will increase 31% by 2021.

Mass produced electric cars will run on lithium batteries.

The Australian bank has set a 12-month target price of 120p, up from the current market price of 99p.

In its research note, Macquarie said Bacanora “could eventually produce in excess of 10% of global supply of lithium carbonate” and was particularly upbeat about the firm’s Sonora project.

“Bacanora’s Sonora lithium project in Mexico has the potential to be a world-class mine,” said Macquarie in its note.

“Given the project’s large scale, expandability, close proximity to key markets in the US and Asia, and potentially low cost structure, we think the company is in a solid position.”

Macquarie also added that it was “bullish” on the medium-term prospects of the lithium market.

 

Good timing

The note from Macquarie comes off the back of Bacanora’s own comment that the development schedule for the Sonora project should dovetail neatly with the expected upturn in electric vehicle usage.

Colin Orr-Ewing, chairman, said: "The lithium market is a highly exciting sector to be in at the moment and … we are ideally positioned to capitalise on the strong and growing market for this important commodity.

A pre-feasibility study in April demonstrated the case for the building of a 35,000 tonne per year lithium carbonate facility at Sonora.

Bacanora is currently upgrading its pilot plant, which it will use for samples for potential offtake partners in Asia.

The plan is to develop Sonora in two stages, with phase 1 to be financed through a combination of debt, equity and offtake payments.

The overall timetable should align well with an expected lithium shortage as innovative technologies such as electric vehicles, energy storage and portable devices become more accepted, Orr-Ewing said.

Bacanora posted a net loss of US$1.6mln (US$98,000 profit) in the three months to March and recently raised £7.7mlm through a placing with Blackrock.

Shares were up 3p, or 3%, to 99p.

--Update for broker comment and share price--

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on 02/09/2021