China’s Ganfeng Lithium to buy 30% stake in London-listed Bacanora
China’s Ganfeng Lithium, the country’s second-biggest producer of the electric car raw material, has agreed to buy a 30 per cent stake in London-listed Bacanora Minerals, which is building a lithium mine in Mexico.
Bacanora said Hong Kong-listed Ganfeng would pay £14.4m in cash for the stake at a price of 25p a share, just below its current share price of 26.75p a share, helping it fund the cost of construction for the project.
Ganfeng, which has deals to supply lithium to Volkswagen and Tesla, will help Bacanora commission its Sonora project, in return for long-term supplies of lithium.
Bacanora has struggled to raise financing to fund the $420m it needs to build the Sonora project, which aims to extract lithium from clay, which hasn’t been commercially attempted before. Last July Bacanora cancelled a proposed $100m share sale at the last minute due to weak demand.
Peter Secker, chief executive of Bacanora, said the company now had “a clear line of sight towards commencing construction” of the project.
Most of the world’s lithium is produced from hard rock mines in Australia or from brines in South America. Prices for lithium carbonate, the most common form in batteries, have fallen by over 40 per cent over the past year due to increased supply of the metal from mines in Australia.
Ganfeng has been one of the most acquisitive lithium companies over the past few years, buying stakes in mines in Australia and Argentina in return for supplies of lithium which it processes in China for the electric car industry.
“Our proposed investment in Bacanora Lithium and the Sonora Lithium Project would form a cornerstone in Ganfeng’s growth strategy to become the world’s largest lithium producer,” Wang Xiaoshen, the deputy chairman of Ganfeng, said. “Specifically, the Sonora project is large and scalable, with low operating costs.”
Along with the equity investment Ganfeng will have the option to buy 22.5 per cent stake directly in the Sonora project for £7.56m, and nominate one director to the board of the project-level company. It would also have the right to increase that stake to 50 per cent within 24 months, Bacanora said.
As a result of the investment Ganfeng will be granted the right to purchase 50 per cent of all the lithium produced at Sonora for the life of the mine during the Stage 1 production, Bacanora said.