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Bacanora Lithium PLC (BCN)

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Thursday 13 December, 2018

Bacanora Lithium PLC

AGM Statement

RNS Number : 3605K
Bacanora Lithium PLC
13 December 2018
 

Bacanora Lithium plc / Index: AIM / Epic: BCN / Sector: Natural Resources

13 December 2018

Bacanora Lithium plc ("Bacanora" or the "Company")

AGM Statement

 

Bacanora Lithium plc (AIM: BCN), the London traded lithium company, is holding its Annual General Meeting ('AGM') later today.  At the meeting, Mark Hohnen, Chairman of Bacanora, will make the following statement:

 

"2018 has been a transformational year for our Company, with a number of milestone achievements being met, including the completion of the Feasibility Study ('FS') for our Sonora lithium project in Mexico ('Sonora'); finalisation of the debt financing for Sonora; significant equity investment commitments from SGRF, the sovereign wealth fund of the Sultanate of Oman, and Hanwa, our offtake partner; the appointment of Citigroup as our financial advisor and broker; and ongoing progress with the FS for the Zinnwald Project in Germany ('Zinnwald').

 

"As well as running through the economics of a 35,000 tpa lithium carbonate ('Li2CO3') operation at Sonora - US$1.25 billion pre-tax Net Present Value ("NPV"), 26.1% Internal rate of return ("IRR"), and Life of Mine ("LOM") costs of ~US$4,000 per tonne of Li2CO3 - our final results on 15 October 2018 referred to forecasts that demand for lithium could rise to more than 450,000 tpa by 2025 from today's 250,000 level.  Less than two months later, those forecasts are now on the conservative side.  Thanks to growing industries, such as electric vehicles and energy storage, both key consumers of the critical technology metal, forecasts are now more than twice that number.  Currently, for instance, UBS is forecasting demand will hit 900,000 tpa by end of 2025, whilst Seeking Alpha believe demand could be more like 1.3mtpa by 2025*.  It is numbers like these, particularly when one considers approximately 250,000t of lithium are expected to be produced in 2018***, that lie behind our firm belief that Bacanora is in the right commodity at the right time.

 

"Leading Chilean producer Sociedad Quimica y Minera de Chile ('SQM') reported average LCE contract prices in Q2 2018 were higher than Q1's US$16,400/MT**.  If substantial new sources of supply fail to come on stream, further strengthening in LCE contract prices can be expected.  This is particularly important as demonstrated by Albemarle Corp's recent postponement, due to regulatory scrutiny, of its expansion plans in Chile, bringing new supplies of lithium to the market is not without its obstacles. 

 

"There has been a recent flurry of corporate activity in the industry.  China's Tianqi Lithium Corp has acquired a 23.77% interest in SQM for US$4.066 billion.  Albemarle Corp is paying US$1.15 billion in cash for a 50% stake in the Wodgina lithium development project in Western Australia's Pilbara region.  Chinese lithium producer Ganfeng successfully listed in Hong Kong raising over US$420million in the process after securing industry heavyweights as cornerstone investors. 

 

"We continue to be in discussions with a number of industry and finance parties with regards to completing Sonora's finance package at the asset level.  Bearing in mind our offtake partner Hanwa, SGRF, the sovereign wealth fund of the Sultanate of Oman, and RK Mine Finance all carried out due diligence ahead of agreeing to provide funds for the construction phase at Sonora, we remain confident the outstanding funds will be secured in due course.  We recently announced the appointment of Citigroup Global Markets Limited ("Citi") to lead the equity financing of the Sonora project alongside Canaccord Genuity, both of whom shall also act as joint corporate brokers.

 

"Our confidence also stems from Sonora's competitive position as a soft rock deposit which allows it to benefit from having the same low cost profile as the brine deposits of South America on the one hand, and the short production timelines similar to the high cost hard rock producers on the other.  At ~US$4,000 per tonne, Sonora's LOM operating costs lie well below current contract selling pricing levels and occupy a position at the lower end of the industry cost curve.  This compares very favourably to hard rock deposits which, due to the need for drilling, blasting, crushing and grinding, are among the highest cost producers.  Unlike brine deposits however, Sonora's processing route does not require a multi-year evaporation process.  Instead a simple and proven processing route that has been used over the last three years in our pilot plant to produce >99.5% battery grade LCE is planned at the Sonora plant.  This is expected to take just five to seven days to process ore into lithium carbonate, which matches the production rates of the higher cost hard rock deposits. 

 

"With LOM operating costs of ~$4,000/t lying well below current contract selling prices around $16,400/t, Sonora is ideally placed to capitalise on the expected strong growth in lithium demand, especially when compared to the higher cost producers such as the new mines being brought on stream in Australia.  It is this fundamental competitive advantage that lies behind our confidence that we will secure the remaining funds on favourable terms, at either the asset or corporate level.  To ensure we are able to commence construction at the earliest opportunity, we are pressing ahead with engineering and site preparation work.  Front End Engineering Design ("FEED") design work is being completed and this will confirm the final Engineering, Procurement and Construction ("EPC") terms and quotes ahead of finalising contracts. 

 

"Whilst we seek to realise the value from Sonora, we are also looking to realise the underlying value of our Zinnwald Project in Germany.  We are in discussions with financial advisors with regards to listing Deutsche Lithium GMBh, our subsidiary which holds Zinnwald, on at least one public market in 2019.  This will follow the completion of the FS at Zinnwald in Q2 2019, which is evaluating the production of higher value downstream lithium products for the European battery and automotive sectors.  Having already produced lithium fluoride ('LiF') samples with over 99% purity from concentrates at Zinnwald and having recently announced a resource upgrade to 142,240 tonnes of contained Li (NI43 101, Measured + Indicated + Inferred), we are confident the FS will confirm Zinnwald's status as a valuable, strategic asset. In addition, the Company holds the Falkenheim exploration licences with an additional 40,000 tonnes LCE located very close to Zinnwald. Located in Europe's industrial heartland, these two assets represent a compelling investment proposition in their own right.

 

"We have made good progress over the last twelve months and expect a number of significant milestones over the next twelve months-such as the commencement of construction at Sonora, completion of the FS at Zinnwald in Q2 2019 and a public listing for our German subsidiary, which will begin to realise the value in our business.  We are focused on ensuring that the considerable value of our asset base is fully realised for the benefit of our shareholders."

 

(*Seeking Alpha in November 2018)

(**SQM Quarterly Q2, 2018)

(***SignumBox 2018)

 

**ENDS**

For further information, please contact:

Bacanora Lithium plc

Peter Secker, CEO

Janet Boyce, CFO

[email protected]

Cairn Financial Advisers LLP, Nomad

 

Sandy Jamieson / Liam Murray

 

+44 (0) 20 7213 0880

Citigroup Global Markets, Broker

Tom Reid / Patrick Evans / Matthew Kenney

+44 (0) 20 7986 4000

Canaccord Genuity, Broker

 

Martin Davison / James Asensio

 

+44 (0) 20 7523 8000

St Brides Partners, Financial PR Adviser

Frank Buhagiar / Gaby Jenner

+44 (0) 20 7236 1177

 

ABOUT BACANORA LITHIUM:

 

Bacanora owns ten mining concession areas covering approximately 100 thousand hectares in the northeast of Sonora State in Mexico. Seven of these ten mining concessions (the 'Sonora Lithium Project'1) were included in the Feasibility Study announced 12 December 2017.  The Company, through drilling and exploration work to date, has established a Measured plus Indicated Mineral Resource estimate of over 5 Mt (comprising 1.9Mt of Measured Resources and 3.1Mt of Indicated Resources) of LCE2 and an additional Inferred Mineral Resource of 3.7 Mt of LCE.  The Company's Feasibility Study has established Proven Mineral Reserves (in accordance with NI 43-101) of 1.67 Mt and Probable Mineral Reserves of 2.85 Mt LCE and confirmed the economics associated with becoming a 35,000 tpa lithium carbonate and 30,000 tpa SOP producer in Mexico.  In addition to the Sonora Lithium Project, the Company also has a 50% interest in the Zinnwald Lithium Project and the Falkenhain Licence in southern Saxony, Germany.  Each of the Zinnwald Lithium Project and the Falkenhain Licence are located in a granite hosted Sn/W/Li belt that has been mined historically for tin, tungsten and lithium at different times over the past 300 years. The strategic location of the Zinnwald Lithium Project and the Falkenhain Licence provides close geographical proximity to the German automotive and downstream lithium chemical industries.

 

1.     The Sonora Lithium Project is comprised of the following lithium properties: La Ventana lithium concession, which is 100 percent owned by Bacanora and El Sauz and Fleur concessions, which are held by Mexilit S.A. de C.V. ('Mexilit') which is owned 70 percent by Bacanora and 30 percent by Cadence Minerals Plc.

2.     LCE = lithium carbonate (Li2CO3) equivalent; determined by multiplying Li value in percent by 5.323 to get an equivalent Li2CO3 value in per cent. Use of LCE is to provide data comparable with industry reports and assumes complete conversion of lithium in clays with no recovery or process losses.

 

Cautionary Statement Regarding Forward-Looking Information

 

Except for statements of historical fact, this news release contains certain "forward-looking information" within the meaning of applicable securities law. Forward-looking information is frequently characterized by words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate" and other similar words, or statements that certain events or conditions "may" or "will" occur.  In particular, forward-looking information in this press release includes, but is not limited to: the updated estimation of resources, followed by mine design and mine planning activities and the completion of a feasibility study for the Zinnwald Lithium Project in Q2 2019.  Although we believe that the expectations reflected in the forward-looking information are reasonable, there can be no assurance that such expectations will prove to be correct. We cannot guarantee future results, performance or achievements. Consequently, there is no representation that the actual results achieved will be the same, in whole or in part, as those set out in the forward-looking information.

 

Forward-looking information is based on the opinions and estimates of management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those anticipated in the forward-looking information. Some of the risks and other factors that could cause the results to differ materially from those expressed in the forward-looking information include, but are not limited to: commodity price volatility; general economic conditions in Canada, the United States, Mexico and globally; industry conditions, governmental regulation, including environmental regulation; unanticipated operating events or performance; failure to obtain industry partner and other third party consents and approvals, if and when required; the availability of capital on acceptable terms; the need to obtain required approvals from regulatory authorities; stock market volatility; competition for, among other things, capital, skilled personnel and supplies; changes in tax laws; and the other risk factors disclosed under our profile on SEDAR at www.sedar.com. Readers are cautioned that this list of risk factors should not be construed as exhaustive.

 

The forward-looking information contained in this news release is expressly qualified by this cautionary statement. We undertake no duty to update any of the forward-looking information to conform such information to actual results or to changes in our expectations except as otherwise required by applicable securities legislation. Readers are cautioned not to place undue reliance on forward-looking information.

 

IMPORTANT NOTICE

The contents of this announcement have been prepared by and are the sole responsibility of Bacanora.

 

[The contents of this announcement have been approved solely for the purposes of section 21(2)(b) of the Financial Services and Markets Act 2000 by Citigroup Global Markets Limited, whose registered office is at Citigroup Centre, Canada Square, Canary Wharf, London, E14 5LB. Citigroup Global Markets Limited, which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the United Kingdom, and Canaccord Genuity Limited, which is authorised and regulated by the Financial Conduct Authority, are each acting exclusively for Bacanora and no one else in connection with the Project, and will not regard any other person as their client in relation to the Project and will not be responsible to anyone other than Bacanora for providing the protections afforded to their respective clients, nor for providing advice in relation to the Project or the contents of this announcement or any transaction, arrangement or other matter referred to herein.

 

None of Citigroup Global Markets Limited, Canaccord Genuity Limited nor any of their respective subsidiary undertakings, affiliates or any of their respective partners, directors, officers, employees, advisers, agents or any other person accepts any responsibility or liability whatsoever for, or makes any representation or warranty, express or implied, as to the truth, accuracy, completeness or fairness of the information or opinions in this announcement (or whether any information has been omitted from the announcement) or any other information relating to Bacanora, or any of their subsidiaries or associated companies, whether written, oral or in a visual or electronic form, and howsoever transmitted or made available or for any loss howsoever arising from any use of this announcement or its contents or otherwise arising in connection with it.Each of Citigroup Global Markets and Canaccord Genuity, Broker (together, the "Banks") is acting exclusively for Bacanora and no one else in connection with any matter referred to in this announcement and will not be responsible to anyone other than Bacanora for providing the protections afforded to their respective clients nor for providing advice in relation to any matter referred to in this announcement. Neither the Banks nor any of their respective subsidiaries, branches or affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of the Banks in connection with this announcement, any statements contained herein or otherwise.


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.
 
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