Shares in Bacanora Minerals (BCN) rallied at the end of 2017, when the prospective lithium miner announced a placing to raise £31.2m from a cornerstone investor. For early-stage resource projects, any major capital funding feels like vindication, but Bacanora shareholders could feel especially pleased: at 94p a share, Chinese fund NextView Capital was paying the market rate.
A month after a deadline for the placing, the would-be backer has failed to pay up. No news on this front has been bad for Bacanora's shares so far this year, and so was confirmation this week that discussions with NextView Capital have not resulted in a suitable alternative proposal. Shares in the Aim-traded company fell by as much as 15 per cent on Wednesday, compounding already subdued sentiment.
It was all going so well. Two days prior to news of NextView’s funding commitment, Bacanora published its defined feasibility study (DFS) for the Sonora project in Mexico, assigning it a pre-tax net present value of $1.25bn (£904m) at an 8 per cent discount. It wasn’t difficult to see why NextView might have been persuaded to take a stake: the DFS pointed to a 26.1 per cent internal rate of return and life-of-mine operating costs of $3,910 per tonne, which would put Sonora in the lowest quartile of the industry cost curve. In return, the Chinese group was promised a seat on the board and buyers’ rights to 5,000 tonnes of lithium carbonate a year.
That no longer looks like it will happen. Neither Bacanora nor NextView have provided a reason for the apparent volte face, although analysts at SP Angel speculated that there could be parallels with other cases where “Chinese investors’ plans are thought to have been countermanded by government instructions”.
Indeed, the issue looks to be NextView’s liquidity, rather than its view on the lithium market. Shortly after agreeing to secure the 19.9 per cent stake in Bacanora, NextView made a C$265m (£150m) takeover bid for Toronto-listed Lithium X Energy (CVE:LIX), the operator of two lithium brine projects in Argentina. Although Lithium X accepted the offer, funding for that deal also appears to have fallen short of the mark, and could soon trigger a C$20m reverse break-fee for the Canadian group. At the time of writing, Lithium X said NextView had received just C$64.6m towards the deal, and was waiting on alternative funding from a commercial lender.
