Ganfeng makes strategic investment in Bacanora Lithium
Bacanora Lithium announced the signing of a non-binding heads of terms for a strategic investment in both Bacanora and its flagship Sonora Lithium Project in Mexico by Ganfeng on Monday.
The AIM-traded firm said completion of the strategic investment would form a major part of its finance package for the construction of an initial 17,500 tonnes per annum (tpa) lithium carbonate operation at the large scale, high grade Sonora Project.
As part of the investment, Ganfeng would subscribe for a 29.99% equity interest in Bacanora for a cash consideration of £14,400,091, being 57,600,364 new ordinary shares in the company at a price of 25p per share.
Subject to the completion of the private placement, Ganfeng would have the right to nominate one director to the main board of Bacanora, and would also be granted pre-emption rights in relation to new share issues proportionate to its interest in the firm.
In addition, as part of the strategic investment, Ganfeng would be granted the right to acquire an initial 22.5% interest in a subsidiary of Bacanora which holds the Sonora Project, for a cash payment of £7,563,649, equivalent to a price of 25 pence per share on the same basis as the private placement.
Subject to the completion of the project level investment, Ganfeng would have the right to nominate one director to the board of the project level company.
Ganfeng would also be granted an option to increase its interest in the project level company to up to 50% from 22.5%, within 24 months of the completion of the project level Investment.
The valuation of any additional investment in the project level company by Ganfeng would be based on the share price of Bacanora at the time of the additional purchase.
The £14,400,091 capital raised via the private placement and the £7,563,649 via the project level investment would be used for the continued development and commercialisation of the Sonora Project, the board explained.
Under the proposed terms of the Strategic Investment, Ganfeng would play an active role in this process.
Within six months of the strategic investment, Ganfeng would complete a review of the current EPC engineering design, focusing on reducing the capital cost of the Sonora Project from the current figure of approximately $420m and accelerating the construction timetable from that envisioned in the feasibility study.
Based on the results of this review, Ganfeng would assist with finalising an EPC engineering contract for the mine and plant construction, and would work with Bacanora during the construction, commissioning and early operations phases of the Sonora Project.
It would also provide a plant and process commissioning team to assist Bacanora in commissioning the Sonora Project.
Conditional on the completion of the strategic investment, Ganfeng would be granted exclusive offtake rights to purchase 50% of all lithium products produced at Sonora for the life of the mine during the first stage of planned production of lithium carbonate.
Ganfeng would also have the option to increase its off-take to 75% of all lithium products during the second stage of production, and would pay market-based price for every tonne of lithium carbonate sold under the offtake agreement.
“The proposed strategic investment from Ganfeng, a top three lithium producer, will be a major milestone in the development of the Sonora Project,” said chief executive officer Peter Secker.
“Not only will it provide industry validation of Sonora's clear potential to become a key supplier of battery grade lithium but, subject to Ganfeng exercising its option to increase its interest in the Sonora Project to 50%, our share of the capital costs required to construct an initial 17,500 tpa lithium carbonate operation at Sonora would be halved.
“With a senior debt facility with leading resource finance provider RK Mine Finance secured and the proposed strategic investment from Ganfeng, we have made significant progress towards the completion of the construction funding of the Sonora Project.”