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Bacanora Lithium mulls Zinnwald spin-out as it pushes ahead at Sonora

Commissioning at Sonora in Mexico is intended in 2020
electric car
Lithium will be the linchpin of EV adoption

Bacanora Lithium PLC (LON:BCN) is considering a spin-out of its lithium project at Zinnwald in Germany.

Peter Secker, chief executive, says there is very little for the potential of Zinnwald in Bacanora’s share price currently.

WATCH: Bacanora Lithium to spin out Zinnwald as finance discussions advance for flagship Mexico project

A separate company will enable the market to see its worth, he told Proactive.

Elsewhere, Bacanora is on schedule to award an engineering contract at its flagship Sonora lithium project in Mexico by the first quarter of 2019.

Secker said the company is still on track with the 2020 commissioning schedule.

Talks are ongoing to fund the project, he added, with Bacanora keen for one cornerstone investor to back the project.  

Bacanora is looking for US$100mln in equity funding to pay for the 17,500 tonnes per annum first phase of a lithium carbonate operation at Sonora.

Citibank recently joined Canaccord as part of the team raising the money.

Secker says there is phenomenal interest in lithium and all other electric vehicle battery metals with ‘lots happening’.

First phase at Sonora

Sonora’s first phase is expected to cost US$420mln with a further US$40mln needed for working capital.

Red Kite Finance has agreed a US$150mln loan facility, while long-term backer Hanwa and SGRF, the Oman sovereign wealth fund, will put up the final US$90mln once the rest of the construction money has been arranged.

Sound economics

Secker said challenging market conditions forced the postponement of a placing earlier in the year but the economics of the project were still sound.

 “Thanks to expected LOM operating costs of US$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. 

A definitive feasibility study valued it at more than one billion dollars and confirmed the favourable operating costs for a 35,000 tonnes per annum battery grade lithium carbonate operation.

Net Present Value, aggregated net cash flows, is US$1.25bn at an 8% discount rate over an estimated 19 years of operation, though potentially Sonora has enough metal to run for over 200 years.

Two-stage development

Sonora is to be developed in two stages with the first phase to cost US$460mln and produce 17,500 tonnes of lithium carbonate per year.

The second phase will kick in after four years, cost US$380mln and double production to 35,000tpa.

Bacanora will process the lithium oxide ore itself to produce a carbonate of sufficient quality for use in electric batteries for vehicles and storage.

Operating costs are estimated at US$3,910 per tonne.

The DFS used a price of US$11,000 per tonne, which generates an internal rate of return of 26% and average annual earnings of US$229mln.

The cost projection puts Sonora below new lithium brine operations being established in Argentina.

Sonora has a resource of five million tonnes, comprising 1.9Mt of measured resources and 3.1Mt indicated of lithium carbonate equivalent with a further 3.7Mt in the inferred category.

There is also potential to sell up to 30,000tpa of potassium sulphate to the Mexican fertiliser industry as a by-product.

 

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