Bacanora Lithium PLC (LON:BCN) shares rose on Monday following news late on Friday afternoon that it has signed the investment and offtake agreement with Gangfeng Lithium that was first announced in May.
Ganfeng is the world's largest lithium metals producer in terms of production capacity and the world's third largest lithium compounds producer.
Both agreements, which are on substantially the same terms as outlined in May, have now been submitted to the relevant authorities in China for approval and completion.
Completion of the investment is anticipated by the end of July 2019 and would form a major part of the company's finance package for an initial 17,500 tonnes per annum lithium carbonate operation at the large scale, high grade Sonora project in Mexico.
Under the terms of the deal Ganfeng will take a 29.99% stake in Bacanora in return for an investment of just over £14.4mln.
It will also take a 22.5% stake at the project level for just over £7.5mln. The offtake agreement allows Gangfeng to take 50% of stage 1 lithium production and up to 75% of Stage 2 lithium production.
“In conjunction with our existing senior debt facility from RK Mine Finance, we are now much closer to completing the construction funding for Stage 1 and transforming Bacanora into a major supplier of battery grade lithium to fast growing industries, such as electric vehicles and energy storage," said Bacanora chief executive Peter Secker.
Broker VSA Capital repeated a 'buy' and 114p price target on Baanora, shares in which were 1% higher at 50.50p in afternoon trading.
In a note to clients, VSA's analysts commented: “The shares have now close to doubled since our initiation and we believe that Ganfeng have been attracted to the Sonora project’s key fundamentals of low operating costs and the genuine capability to produce battery grade lithium rapidly and consistently.”
-- Adds share price, analyst comment --