London-listed exploration and development company Bacanora Lithium, which earlier this week announced a funding package for the development of the initial 17 500 t/y lithium carbonate (Li2CO3) operation at Sonara, Mexico, has canned its proposed $100-million placing, citing “difficult market conditions”.
Instead, the company will focus on completing the front-end engineering design, while it continues discussions with several additional parties to secure the remainder of the construction funding needed to begin construction of the lithium mine.
Bacanora still needs about 48% of the $460-million that is required for Stage 1 production. To date, it has announced equity and debt funding commitments totalling $240-million, including a $150-million senior debt facility with RK Mine Finance and conditional strategic investments from the State General Reserve Fund of Oman, the sovereign wealth fund of the Sultanate of Oman, and from Bacanora's offtake partner, Hanwa, for a combined total of $90-million.
"Challenging market conditions have led us to take the decision not to proceed with the placing at this stage,” said CEO Peter Becker.
Bacanora’s stock dropped sharply this week, following the announcement of the placing. On Monday, the company traded at £0.81, before falling to £0.65 a share on Tuesday – a level at which it remained on Wednesday.
A December 2017 feasibility study has confirmed the positive economics and favourable operating costs of a 35 000 t/y battery grade Li2CO3 operation at Sonora. Using revenues based on a flat $11 000/t for battery grade Li2CO3 over the life-of-mine (LoM), which is significantly below the current Li2CO3 price range of $16 000/t to $20 000/t, the study estimated a pre-tax project net present value of $1.25-billion, an internal rate of return of 26.2%, and LoM operating costs of $3 910/t Li2CO3.
“From the perspective of a lithium developer such as ourselves, being a low-cost producer is key to successfully navigating price volatility. Thanks to expected life-of-mine operating costs of $3 910/t of Li2CO3, once fully operational, Sonora will be among the lower cost producers of battery grade lithium carbonate in the world. Whilst recent fluctuations in lithium pricing forecasts continue, the development of the Sonora project remains our priority. Thanks to the combination of a large lithium resource, conventional processing techniques, and having all relevant approvals in place, Sonora is a highly valuable strategic asset,” Becker said.