VSA Morning Miner, 11/11/19
Bacanora Lithium (LON:BCN)
Bacanora Lithium (BCN LN) has provided a market update demonstrating the positive progress being made with its strategic partner Ganfeng Lithium, the third largest lithium producer in the world. Ganfeng have commenced their review of the hydrometallurgical circuit and have agreed with BCN that they will themselves engineer this section of the process plant given their expertise. We believe that this will provide two benefits; technical derisking and access to Ganfeng’s current equipment suppliers which may result in capital cost reductions.
Whilst Ganfeng’s particular expertise is in the back end of the plant BCN is also progressing the front-end beneficiation stage as well as the pyrometallurgical stage of the plant with support from Nutec Bickley. On completion of Ganfeng’s review the company will have firm estimates for engineering costs for Phase 1 and will then finalise the project financing package. We believe that 80% of the project financing is currently secured by strategic partners or debt funding, which is more easily secured than equity.
In line with the company’s guidance we have maintained total initial capex of US$420m although believe that savings are a potential upside which would also benefit phase 2 enhancing our NPV figure of US$914m which is underpinned by low unit costs and strong cashflows. Sonora is one of the few projects globally capable of delivering genuine battery grade material at low unit costs and with the scale of resource that means the project could be expanded to meet the significant expected growth in lithium demand.
Please click here for our full recent update report.
We reiterate our Buy recommendation and 114p target price.