Ganfeng’s lithium expertise set to power Bacanora’s Mexico project

LONDON (Reuters) - London-listed Bacanora Lithium plans a $300 million capital raise early next year and says a deal with China’s Ganfeng Lithium Co Ltd puts it in a better position to raise cash than when it canceled a smaller share sale last year.

Bacanora’s Sonora lithium project in Mexico is one of many that have fallen behind schedule as production of the battery mineral tests traditional mining skills and the market is volatile because of uncertainty about supply and demand.

After withdrawing a planned London $100 million capital raise in July 2018, Bacanora announced in June this year it had reached an investment and offtake agreement with Ganfeng Lithium, one of the world’s biggest lithium producers.

The deal has helped to boost Bacanora’s share price more than 50% this year and it rose to its highest level in a month following Monday’s announcement of the deal’s completion.

Under the agreement, Ganfeng will become the biggest shareholder with a 29.99% equity interest in Bacanora and a 22.5% joint venture investment in the Sonora lithium project.

Wang Xiaoshen, the vice president of Ganfeng and the vice-chairman of its board of directors, was also on Monday named a director of Bacanora.

Bacanora CEO Peter Secker said he welcomed the “depth of knowledge” Ganfeng brought.

“Everyone was saying we had a lot of strong shareholders, but we did not have any lithium operating expertise,” he said.

Apart from Ganfeng, which will also get 50% of Bacanora’s lithium production, other top 20 shareholders are Hanwa of Japan, which has a contract for the other 50% and BlackRock, the world’s biggest asset manager.

Secker says a $300 million equity placing “in the early part of next year” will be more attractive as Chinese expertise, including in clay lithium deposits, such as Sonora, propels the project forward.

Construction should begin in the second quarter of 2020, with production starting in early 2022, roughly six months later than previously expected, Secker said.

In addition to the Sonora Lithium Project, Bacanora also has a 50% interest in the Zinnwald Lithium Project and the Falkenhain and Altenberg Licences in southern Saxony, Germany.

Secker said the focus was Sonora and Bacanora has said it plans to spin out the European assets.

Canaccord Genuity, which rates Bacanora “buy,” said in a note it saw “attractive upside for the stock”.

Over the last five years, Ganfeng has bought into four major international projects, two of which are Australian hard rock mines now producing, and has invested more than $530 million in mining developments, it said.

Reporting by Barbara Lewis in London; Additional reporting by Ernest Scheyder in Houston; Editing by Matthew Lewis