VSA Capital Market Movers – Bacanora Lithium

Bacanora Lithium (LON: BCN) announced the commencement of initial post-financing construction last week to secure the equity component of the project finance which, when combined with the existing credit facility, meets BCN’s requirement of its stake in the 50/50 joint venture to finance for Sonora. This is a crucial moment for the company as it moves into the next phase of development.

VSA Morning Miner, 02/10/21

Bacanora Lithium (LON: BCN)

Bacanora Lithium (LON: BCN) announced the commencement of initial post-financing construction last week to secure the equity component of the project finance which, when combined with the existing credit facility, meets BCN’s requirement of its stake in the 50/50 joint venture to finance for Sonora. This is a crucial moment for the company as it moves into the next phase of development. With the financing now decalcified, we believe the stock will become a more attractive game for lithium prices and sentiment in this sector, as the focus will be on construction through 2023.

Initial work begins with the construction process and the initial activity includes preparing the soil and removing vegetation in the plateau area south of the ore body where the processing plant is to be built. BCN has hired additional local staff, including ecologists and a biologist, to oversee this work as it is being carried out in accordance with agreed environmental permits. Work on modernizing the main access road to the site will also begin to provide access for heavy machinery needed for the bulk earthworks later in the year. Work on accommodation and ancillary facilities on site will begin in the second quarter of 2021. Ganfeng will deliver final engineering packages to BCN in the second quarter of 2021 while long lead items will be arranged for delivery in 2022.

We note that at this early stage of construction, BCN is keen to hire local staff. This is a reminder that Sonora is an industrial region with a skilled workforce and that it is important to BCN to maximize local participation in the project. This has become even more important given the impact COVID-19 has on the local economy, and BCN has put in place labor practices to minimize the risk of infection.

We repeat our buy recommendation and the price target of 120 pence.

Oliver O’Donnell, CFA, Head of Research & Natural Resources Analyst | T: +44 (0) 20 3617 5180 | E: [email protected]
Paul Renken, Senior Geologist | T: +44 (0) 20 3005 5011 | E: [email protected]

VSA Capital Research | T: +44 (0) 20 3005 5000 | E: [email protected]

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