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Bacanora puts $100m placing on ice

The prospective lithium miner will begin construction of Sonora without full funding in place
July 23, 2018

Citing “current volatility in global commodities markets”, Bacanora Lithium (BCN) has suspended plans to raise up to $100m (£77m), casting doubts over the $460m of funding needed for stage one of its Sonora project in north-west Mexico.

IC TIP: Hold at 68p

The decision to pull the plug came just two days after the placing was announced, alongside conditional investment commitments of $90m from Oman’s sovereign wealth fund and off-take partner Hanwa.

With no sign of book-building success, a mini-Mexican stand-off ensued, and the shares chopped down from 80p to 65p. Convinced of the project’s long-term viability, and unwilling to sacrifice existing investors’ holdings, Bacanora walked away.

Speaking to Investors Chronicle, chief executive Peter Secker said prospective investors have been spooked by “a lot of research saying [the price of] lithium carbonate is going to $8,000 per tonne”. Bacanora currently estimates lithium carbonate sells for between $16,000 and $20,000 a tonne.

“The banks don’t understand the lithium market,” Mr Secker said. “Demand is growing a lot faster than supply can match and that will become a lot more apparent.”

Existing investors will hope that the market makes its mind up by the first quarter of 2019. That’s when current facilities, including $150m of debt provided by Red Kite Mine Finance, will likely have been consumed by the front-end engineering and earthworks required for a mine capable of producing 17,500 tonnes of lithium carbonate per year.

“We have to balance the differential,” acknowledged Mr Secker, adding Bacanora “will monitor this on a monthly basis for the next six months". The chief executive will spend the next six weeks in Mexico, before returning to Europe.