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Summary
- Shares of Bacanora Lithium surged 15.63 per cent within three trading sessions to GBX 37
- The board of Ganfeng Lithium Co. Ltd has approved the resolution to raise the stake in Sonora project to 50 per cent
- Ganfeng Lithium is entitled to receive approximately 73.96 million new shares of Sonora Lithium Ltd
Shares of London-headquartered lithium explorer Bacanora Lithium (LON: BCN), have gained more than 15 per cent in the last three trading sessions after the China-based Ganfeng Lithium raised the stake in Sonora project. The board of Ganfeng Lithium Co. Ltd, an offtake partner and cornerstone investor of Bacanora Lithium, had approved the resolution to raise the stake in the Sonora project to 50 per cent from 22.5 per cent earlier.
According to the arrangement, Bacanora Lithium Plc will continue to act as the operator in Sonora project, and Ganfeng Lithium will be largely responsible for maintenance of engineering, procurement and construction. The additional investment from Ganfeng Lithium in the Sonora project can return substantial gains in the near term with the invariably rising demand for the lithium metal from battery manufacturers and other industries.
Bacanora Lithium share price
Following the development, the shares of Bacanora Lithium surged 15.63 per cent within three trading sessions to GBX 37 (17 November) from a share price level of GBX 32 as on 12 November. A continuous uptick was observed in the past two days after the announcement steered the Bacanora shares to a one-month high.
Bacanora Lithium (1-month performance)
Bacanora Lithium shares have shown a considerable growth from the level of coronavirus pandemic-driven slump in March. From the yearly closing bottom of GBX 15, Bacanora shares have registered a return of nearly 147 per cent to-date.
Bacanora Lithium (YTD performance)
(Source: Thomson Reuters)
Ganfeng ups stake
Ganfeng Lithium is entitled to receive approximately 73.96 million new shares of Sonora Lithium Ltd (SLL) at a share price of GBX 29.59 translating into a total of £21.88 million. A 20-day volume weighted average price (VWAP) of Bacanora Lithium shares has been decided as the basis for calculating the price of new shares.
For the funds to be remitted to the UK, Ganfeng Lithium is likely to seek approval from the State Administration of Foreign Exchange (SAFE) of China. After the successful completion of acquiring the additional stake in the Sonora project, two appointed directors will be placed on the board of Sonora Lithium Ltd, each from Bacanora Lithium and Ganfeng Lithium.
Bacanora’s target
Ganfeng Lithium has completed the design for the production of battery-grade lithium metal continuing its engineering programme. As per the deal, the final engineering packages are expected to be delivered to Bacanora in the H1 2021 as Ganfeng is integrating the work into final designs.
On the other hand, Bacanora is on track to begin the initial site works at Sonora Lithium in 2021. The commencement at the Sonora Lithium is subject to the completion of financing as agreed in the stake raise deal.
CEO’s take
Ganfeng Lithium’s investment has de-risked the Sonora project, substantially reducing the equity demands on Bacanora shareholders to fund Phase 1 of the project, Bacanora CEO Peter Secker said. Sonora Lithium is well placed to deliver battery-grade lithium metal with the commencement of the production from 2023 as lithium-ion batteries will certainly have a strategic role in renewable energy storage with the rising demand for electric vehicles year-on-year, Seckar added.
