Our Strategy & Vision
Bacanora intends to become an international lithium production company with a portfolio of global projects. The Board’s strategy to achieve this goal involves a number of steps:
- Find world class projects that can address the increasing demand for Lithium for Electric Vehicles and energy storage industries.
- The Sonora Project has identified its NI 43-101 Measured, Indicated and Inferred Resource of 8.8mt of LCE resources suitable for open-pit mining to ultimately produce battery-grade lithium carbonate.
- The Zinnwald project has identified its NI 43-101 compliant Measured and Indicated Resource of 124,974 tonnes of contained Lithium, which is expected to supply battery-grade lithium fluoride to meet chemical industry requirements.
- Complete feasibility studies to evaluate and quantify the economic potential of its projects.
- In January 2018, Bacanora published a feasibility study on a small part of the Sonora Project that showed a pre-tax NPV of $1.25bn, 26% IRR and an operating cost of around $4,000 per tonne.
- In June 2019, Bacanora published the feasibility study for the Zinnwald Project in Germany that showed a pre-tax NPV of €428m and 27.4% IRR over a 30 year mine plan, equating to less than 50% of the current identified mineral resources.
- Complete the detailed design of the mines and processing plants for Sonora and Zinnwald.
- Bacanora is finalising its Front End Engineering Design (“FEED”) for the Sonora Lithium Project. The Company has chosen ICA Fluor to complete this work stream, who have extensive experience in delivering engineering projects of this size and scale. Furthermore, within six months, Ganfeng, the world’s largest lithium metals producer by production capacity and the world’s third largest lithium compounds producer, will complete a review of the engineering design and capital costs of Stage 1. with a view to reducing costs and accelerating the timetable to construction.
- Bacanora is currently exploring funding options to finance the exercise of its option to purchase the remaining 50% of DL and support the detailed design work for the project.
- Validate the quality of its end product by securing high quality off-take partners.
- Bacanora has used its Sonora pilot plant, which has been in operation for a number of years to provide regular samples of its Lithium carbonate to prospective offtakers. This initially led to Hanwa, one of Japan’s largest metals trading houses, signing a 10 year offtake agreement for Stage 1 of production and investing in the Company directly. In May 2019, the Company announced that Ganfeng, the world’s largest lithium metals producer by production capacity and the world’s third largest lithium compounds producer, signed a long term offtake agreement for 50% of Stage 1 production and up to 75% of Stage 2 production, as well as investing in the Company at both a Group level and an asset level.
- The Company has already commenced discussions with potential offtake partners in Germany for the outputs from the Zinnwald Lithium Project.
- Complete the funding required to construct its projects.
- Bacanora has secured $150m of debt funding from RK Mine Finance and has a commitment for an additional $25m of equity finance from Hanwa. Ganfeng has invested an initial £22m to acquire 29.99% of the Company and 22.5% of the Sonora project at the project level with the option to acquire up to 50%. The Company intends to raise the remaining funding requirements needed to construct the Stage 1 mining and processing operation in Sonora.
- Bacanora is in discussions with interested strategic third parties in relation to funding the construction of the Zinnwald Lithium Project, which may include a separate listing of Deutsche Lithium.
- Construction and commissioning of its Lithium processing plants.
- Bacanora is finalizing its FEED work for its Stage 1 17,500 tpa Lithium Carbonate plant. The Company will also work with Ganfeng on further optimization and cost reductions over the next six months.
- DL intends to commence the detailed design engineering phase of the Zinnwald Project in 2020, during which a detailed schedule for the project development will be completed.
Bacanora is currently at the exploration and development stage of its two main projects and will only move into construction on the completion of its fund raising. In terms of how the Company expects its main operations to evolve, this will include inter alia:
- Property, plant and equipment
- The Company’s property, plant and equipment comprise primarily the Pilot Plant in Hermosillo, the land covering the mining concessions; and office furniture and IT equipment in Mexico and the UK.
- 2. As both the Sonora and Zinnwald Projects move into their respective phases of construction and production, they will have the property, plant, and equipment detailed in the Technical Reports for each Feasibility Study.
- 1. At Sonora, Bacanora’s existing staff maintain the Pilot Plant and have had no material issues in ongoing functions, continuing to produce regular samples of lithium carbonate. The construction of the chemical plant will be done under an Engineering, Procurement and Construction (EPC) contract, which will include all relevant inspections, guaranteed cost to complete and process guarantees. Once construction is complete, the Company will maintain its own facilities.
- Delivery and transportation
- 1. To date, the Company has only shipped samples to prospective buyers by air. Once the project is in production, however, it is envisioned that the lithium carbonate will be shipped by road from the chemical plant to the Port of Guaymas, at which point ownership will pass to the Group’s offtake partners, who will then freight the product by sea to their end customers.
- Sales and marketing
- The Company intends to sell its lithium production to its offtake partners, who will then sell the product on to end-users. This is in line with the wider industry requirements for battery-grade lithium products, where users typically require long-term supply contracts. The Group will work in conjunction with its offtake partners to assist them in this process, but does not envisage a dedicated internal sales and marketing function.
- Suppliers and contractors
- The main suppliers of its raw materials, such as Soda Ash, will be local Mexican suppliers, and the Group is in discussions to secure such supplies, once the construction phase is completed.
- Energy will primarily come from the consumption of gas, which will be initially supplied by trucked LNG, and then via a gas pipeline as outlined in the Feasibility Study.
- Research & Development
- The Company currently has no patents registered on its production techniques and intends to use a well-established sulphate roast processing route.
- As at 30 June 2019 the Company employs over 30 people in Mexico, including contractors, who work mainly on the Pilot Plant. There are 12 people at the Company’s head office in the UK, including the Board.
- Environmental, occupational, health and safety
- The Group monitors its Health, Safety, Environment and Community (HSEC) obligations as a basic Key Performance Indicator (KPI) (see below). It also has a number of Corporate Social Responsibility Policies, which are published on the Company’s website at http://www.bacanoralithium.com/investor-relations/csr-documents/. As its projects move into its construction and production phases, the appropriate local level policies will also be put in place.