Lithium group Bacanora Minerals Limited (LON:BCN, CVE:BCN) has received its second piece of good news this week through an offtake deal and share subscription with a Chinese investment group.
The deal with NextView Capital follows the publication of a definitive feasibility study for the Sonora lithium deposit in Mexico that valued it at US$1.25bn.
NextView will take a 19.9% direct equity stake in Bacanora through a £31.2mln share subscription at 94.53p, while also agreeing to buy 5,000 tonnes per year of lithium from Sonora.
This will increase to 8,000tpa when production at the deposit increases to 35,000 tpa in the second phase of development and might eventually rise to 15,000tpa.
In late morning trading, Bacanora shares were 6.8%, or 6.5p higher at 102.5p.
Provides entry into key Chinese market
NextView will also help Bacanora to source the financing for Sonora, which is forecast at US$420mln for the first phase and US$380mln for phase 2.
President Yaping He is expected to join the Bacanora board as a non-executive.
A Feasibility Study at Sonora which confirmed a 35,000 tonnes per annum ('tpa') battery grade Li2CO3 operation at Sonora: estimated pre-tax project Net Present Value of US$1.25bn, an Internal Rate of Return of 26.2%, and life of mine operating costs of US$3,910/t of lithium carbonate.
Bacanora already has an offtake agreement in place with Japanese commodity trader and battery specialist Hanwa, which is also a 10% shareholder in the miner.
The association with NextView up the Chinese investment market for Bacanora, said Peter Secker, chief executive.
Because of the scale of the opportunity, Secker added Bacanora may look to increase Stage 1 production from 17,500tpa.
Secker, added: "NextView's investment and offtake agreement underlines both the quality of our asset and the progress we have made to date.
“We now have an excellent funding platform with which to move to the construction phase at Sonora in H1 2018.
“The recently completed FS shows why Sonora has and continues to attract such strong institutional interest: Together with highly favourable demand/supply dynamics for lithium carbonate driven by fast growing end markets such as electric vehicles and energy storage, the investment case for Bacanora is clear.
Yaping He added that China is the largest new energy vehicles market in the world and the tie-up with Bacanora gives NextView an excellent position in the market.
Cadence Minerals holding to be around 7%
Kiran Morzaria, Cadence’s chief executive officer, commented: "The announcement of the positive feasibility study and the addition of a cornerstone investor in one week show excellent progress is being made in the development of the Sonora lithium project.
“Critically via the offtake agreement associated with this investment, Sonora lithium carbonate product will gain a foothold into the Chinese market, which represents one of the largest growth areas for the electric vehicles and associated demand for battery grade lithium carbonate."
-- Adds share price, Cadence Minerals comment --