Ganfeng Lithium, Bacanora Lithium sign investment, offtake agreement

By Martim Facada
Published: Monday, 01 July 2019

Ganfeng Lithium has signed an investment and offtake agreement with Bacanora Lithium to accelerate Bacanora’s stage 1 lithium production.

Chinese lithium producer Ganfeng Lithium and junior miner Bacanora Lithium's investment and offtake agreement is currently pending on approval and completion by the relevant authorities in China. 

Under this agreement, Ganfeng will purchase 29.99% of Bacanora’s equity at a cost of £14.4 million ($18.26 million) and 22.5% of Bacanora's subsidiary Sonora Lithium for £7.6 million.

Ganfeng also has the option to increase up to 50% of its share at Sonora Lithium within the next 24 months at the share price of Bacanora at the time of subsequent investment, Bacanora said. 

The agreement gives Ganfeng rights to 50% of the expected 17,500 tonnes per year of stage 1 production of lithium carbonate at Sonora's operations in Mexico and up to 75% of the 35,000 tpy of lithium carbonate during stage 2 production of the same project.

The offtake agreement was established at a market-based price per tonne. Although the companies did not specify the price reference agreed upon, Fastmarkets last assessed the battery-grade lithium carbonate (min 99.5% Li2CO3) spot price at $11-12.50 per kg on a cif China, Japan and Korea basis.

Ganfeng will provide a plant and process-commissioning team throughout Bacanora's stage 1 production, which is scheduled to begin in 2021. The stage 2 production schedule is yet to be defined.   

"We are not just committing immediate financial and technical support to the Sonora Project, but also advancing Ganfeng's growth strategy to become the world's largest lithium producer," Wang Xiaoshen, deputy chairman at Ganfeng, said.

"Over the rest of 2019, we will work closely with Bacanora's management team to optimize project capital costs and evaluate potential economies of scale in the Sonora Project," Xiaoshen added. 

"The signature of these agreements with Ganfeng is another significant milestone in the development of the Sonora project. Ganfeng's operational expertise and industrial credibility is a strong endorsement of the Sonora Project's potential to break the lithium industry's current supply duopoly of hard-rock and brine, and combine the speed of production of the first with the low operational cost per tonne of the second," Peter Secker, Bacanora’s chief executive officer said.   

This agreement follows the non-binding heads of terms deal reached between both companies on May 20, while the investment is expected to be made by the end of July 2019. 

Ganfeng will be granted preemption rights proportionate to its shareholding in Bacanora and will appoint one director to Bacanora’s board and another director to Sonora’s board. 

Sonora’s feasibility study anticipates an operating cost of $4,000 per tonne of lithium carbonate and the investment for the two production stages is expected to cost $800 million.

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