Bacanora Minerals Ltd’s (LON:BCN) Sonora project in Mexico can become one of the world’s foremost lithium deposits, said chief executive Peter Secker after a definitive feasibility study valued it at more than one billion dollars.
The study confirmed the favourable operating costs for a 35,000 tonnes per annum battery grade lithium carbonate operation, he said.
Net Present Value, aggregated net cash flows, is US$1.25bn at an 8% discount rate over an estimated nineteen years of operation, though potentially Sonora has enough metal to run for over 200 years.
Sonora is to be developed in two stages with the first phase to cost US$420mln 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 quailty to be used in electric batteries for vehicles and storage.
Operating costs are estimated at US$3,190 per tonne compared to a current spot for price for lithium carbonate of between US$12-20,000.
The DFS, however, 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.
Revenues were based on a flat US$11,000/t for battery grade, while the cost projection put 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.
By-product potential as well
There is also potential to sell up to 30,000tpa of potassium sulphate to the Mexican fertiliser industry as a by-product.
The numbers speak for themselves added Secker, who expects the pace of development to quicken now with commissioning of the mine and plant scheduled for 2019.
Speaking to Proactive, he said that the feasibility study had gone perfectly, especially where Sonora ranks on the global cost curve.
A mixture of equity, debt and project finance will make up the US$420mln construction cost and Secker is confident a strong institutional shareholder base will support the plans.
M&G is the largest shareholder while Blackrock, offtake partner Hanwa and Ignacious have stakes of 10%.
The finance package is expected to be arranged in the first quarter of 2018 with earthworks and construction to start in the following three months.
Secker added it is a "good time to be building a lithium mine".
“Battery growth in Asia is very strong and the lithium market is growing 15-20% year-on-year.”
In late morning trading, Bacanora shares were 3.2%, or 3.0p higher at 95.5p.
Kiran Morzaria, chief executive officer of Cadence Minerals Plc (LON:KDNC) – which owns around a 9% stake in Bacanora and 30% of the Mexalit and Megalit joint venture companies., commented: "These results confirm the potential of the Sonora Project to become a significant producer of battery grade lithium for the emerging industries of electric cars and advanced energy storage.
“Together with Bacanora's existing off take agreement, Bacanora is now moving onto the development phases of the Project and we look forward to its continued progress towards production."
-- Adds share price, detail, Cadence Minerals comment --