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,
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
"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
"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
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 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