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Bacanora reveals renewed prospects

The Ganfeng Lithium deal has brought the developer closer to construction at its Mexican project after a weaker 2018
October 22, 2019

Lithium was back in the headlines this month as three scientists won the Nobel Prize in Chemistry for their work developing lithium-ion batteries. Bacanora Lithium’s (BCN) efforts to finance its $420m (£325m) Sonora clay mine in Mexico will probably not be recognised as highly, but the company might have found a path to production even as lithium prices remain subdued.

IC TIP: Hold at 33p

This recovery has come through selling just under 30 per cent of the company and separately 22.5 per cent of the project to major Chinese battery player Ganfeng Lithium. 

As a developer, Bacanora is some years away from producing revenue, so its ability to maintain cash balances is key. The 12 months to 30 June showed $14.8m in cash on the books after a $25m drawdown from the $150m debt package last year. The cash has since been topped up by Ganfeng’s £22m payment for the company and project stakes. 

Alongside Sonora, the company is also chipping away at the 50-per-cent-owned Zinnwald brownfield lithium project in Germany, targeting supply for the country’s automakers. The capital cost of around €160m (£138m), including €82m for a chemical plant, means this will be another challenge. 

BACANORA LITHIUM (BCN)  
ORD PRICE:33pMARKET VALUE:£64m
TOUCH:32.5-34p12-MONTH HIGH:59pLOW: 12p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE:16.9¢NET CASH:$14.8m
Year to 30 JunTurnover ($m)Pre-tax profit ($m)*Earnings per share (¢)*Dividend per share (¢)
2015--2.2-2.4nil
2016--9.5-8.5nil
2017--14.3-11.0nil
2018--12.8-9.0nil
2019--11.1-8.0nil
% change--14--
Ex-div:na   
Payment:na   
*Bacanora changed its reporting currency from CAD to USD in 2018