Ganfeng ups stake in Bacanora's Sonora Lithium

The AIM-traded firm said SLL is the operational holding company for the Sonora Lithium Project.

It described the move as a “significant milestone” in the development of Sonora, which was targeting production in 2023.

As part of the development timetable, Ganfeng was continuing its engineering programme, and had already completed its flow sheet design for the production of battery grade lithium.

Ganfeng was now integrating that work into the final engineering design, and remained on schedule to deliver its final engineering packages to Bacanora during the first half of 2021.

Bacanora said Ganfeng was working with its equipment suppliers to determine equipment delivery times to align with a target of production in 2023.

The company said that, as a result of the decision, it remained on schedule to start initial site works at Sonora in 2021, subject to the completion of financing, which would enable the start of production at the plant in 2023.

That timeframe coincided “well” with the anticipated increase in lithium demand from European, Asian and US electric vehicle manufacturers expected that year.

Under the terms of the SLL joint venture agreement announced on 20 May 2019, Ganfeng would exercise its right to subscribe for 73,955,680 new shares in SLL, resulting in Ganfeng owning 50% of the enlarged issued share capital of SLL.

The price of the new shares was based on the 20-day volume weighted average price of Bacanora’s shares.

As at 10 November, that was 29.59p, and as a result, Ganfeng would subscribe for 73,955,680 new shares in SLL, at a total value of £21.88m.

Ganfeng would apply to the relevant authorities in China, namely the State Administration of Foreign Exchange, to allow the funds to be remitted to the UK.

On completion of the exercise, the board of SLL would comprise two Bacanora-appointed directors and two Ganfeng-appointed directors.

Bacanora would remain as the project operator at Sonora, while Ganfeng would be responsible for leading the engineering, procurement and construction activities associated.

The current joint venture agreement would be amended to incorporate the updated provisions for the new 50-50 joint venture arrangement.

“We are delighted by this further show of confidence from our partner Ganfeng in the Sonora Lithium Project,” said Bacanora chief executive officer Peter Secker.

“Their investment further de-risks the Project and reduces the equity demands on Bacanora's own shareholders to fund phase one of the project.

“With recent trends in electric vehicle purchases showing significant year on year growth and lithium storage batteries starting to play a strategic role in the storage of renewable energy, the Sonora Lithium Project is now well placed to be in production in 2023 and delivering battery grade lithium products into the fast growing energy storage market.”

At 1252 GMT, shares in Bacanora Lithium were up 9.44% at 35.02p.