Bacanora Lithium PLC (LON:BCN) said it expects to reopen the Hermosillo pilot plant at its flagship Sonora lithium project in Mexico in June and that it has a “strong cash position” to weather market fluctuations caused by the coronavirus pandemic.
The AIM-listed firm said despite the virus outbreak it was continuing to progress all feasible workstreams, with significant attention focused on the completion of project work in Sonora, although this had been affected by delays in Asia and North America.
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It said kiln optimisation testwork focusing on waste hear recycling and kiln retention time is ongoing in the US, with kiln design and engineering work completion now scheduled for the end of the third quarter of 2020.
Meanwhile, Bacanora said the Ganfeng Lithium test plant and project team in China have resumed work on the Sonora flowsheet optimisation and process engineering, with completion also expected in the third quarter after which Ganfeng will provide Bacanora with an Engineering, Procurement and Construction (EPC) style engineering proposal to produce downstream battery-grade lithium products from Sonora.
AFC also said GR Engineering Services is continuing to expedite the completion of the Front End Engineering Design (FEED) process for the concentrator circuit, which is scheduled to provide Bacanora with an initial engineering EPC proposal in the third quarter.
Looking to the lithium market, Bacanora said electric vehicle (EV) demand in Europe increased by 50% during the first quarter of 2020, while automotive companies also outlined plans to spend over US$140bn on EV production.
As a result of the industry shift, the company said lithium demand is expected to grow by 800% by 2030 and that it will continue to target completion of financing for the Sonora project and initiate site works in the first half of 2021.
This timetable, Bacanora said, will allow it to commence lithium deliveries to its offtake partners, Ganfeng Lithium and Hanwa Corp, in 2023.
The company added it has a “strong cash position” of US$45mln and is “well placed to weather the ongoing market fluctuations and continued effects of [coronavirus]”.
"The entire team at Bacanora and our partners continue to work as best as we can during this pandemic. We remain fully focussed on progressing the final parts of the detailed design work for our flagship Sonora Lithium Project”, said Bacanora chief executive Peter Secker in a statement.
“Bacanora also boasts a strong cash position and benefits from the support of its cornerstone shareholders, who are globally significant players in the electric vehicle industry.
"The company's strategy remains the same and with the goal to deliver first product to its off-take partners in early 2023, importantly coinciding with the expected significant growth in EV demand", he added.
In a note to clients, analysts at VSA Capital reiterated their ‘buy’ rating and 114p target price on Bacanora, highlighting that the flowsheet optimisation and process engineering being carried out by Ganfeng on Sonora “may well result in an overall reduction in [capital expenditure] for the Sonora project which would further enhance the strong projected economics”.
The analysts noted that with demand for lithium expected to rise amid the shift to electric vehicles, recent weakness in the sector presented “a significant buying opportunity within a larger, long term structural shift”.
Shares in Bacanora were 1.1% lower at 22p in early trading.