TIDMBCN
RNS Number : 1545Z
Bacanora Minerals Ltd
13 December 2017
Bacanora Minerals Ltd ('Bacanora' or the 'Company')
Feasibility Study Estimates Net Present Value of US$1.25 billion
and Internal Rate of Return of 26% for the Sonora Lithium
Project
Bacanora Minerals Ltd., the London and Canadian listed lithium
company, is pleased to announce that the results of the Feasibility
Study ('FS') for the Sonora Lithium Project(1) in Mexico ('Sonora'
or 'the Project') confirm the positive economics and favourable
operating costs of a 35,000 tonnes per annum ('tpa') battery grade
Li(2) CO(3) operation. The FS estimates a pre-tax project Net
Present Value ('NPV') of US$1.253 billion at an 8% discount rate
and an Internal Rate of Return ('IRR') of 26.1%, and Life of Mine
('LOM') operating costs of US$3,910/t of lithium carbonate ('Li(2)
CO(3) ').
Highlights
Strong economic potential of two stage open-pit operation at
Sonora: Stage 1 - 17,500 tpa for 4 years; Stage 2 - 35,000 tpa
-- Estimated Project pre-tax IRR of 26.1%; NPV of US$1.253
billion (at 8% discount rate) with a simple Stage 1 project payback
of four years. Revenues are based on a flat US$11,000/t for battery
grade Li(2) CO(3) over LOM, significantly below the current Li(2)
CO(3) price range of US$12,000 - 20,000/t(2) ,(3)
-- Low estimated LOM operating costs of US$3,910/t of Li(2)
CO(3) - lower than the new lithium brine operations being reported
in Argentina(3)
-- Average LOM annual earnings before interest, taxes,
depreciation and amortisation ('EBITDA') estimated at US$229
million per annum
Sonora: a large lithium deposit
-- Measured plus Indicated Mineral Resource estimate of over 5
million tonnes ('Mt') (comprising 1.9 Mt of Measured Resources and
3.1Mt of Indicated Resources) of lithium carbonate equivalent
('LCE')(4) and an additional Inferred Mineral Resource of 3.7 Mt of
LCE
-- Low stripping ratio: open-pit mine design indicates a total
of 37.1 Mt of ore to be mined over the planned 19-year mine life
with an average stripping ratio of approximately 3.4:1 over LOM
Conventional flow sheet: uses established sulphate route
processing technology
-- Integrated plant designed to initially process 1.1Mt of ore
per year during Stage 1, subsequently increasing to 2.2 Mt per year
for Stage 2
-- Stage 1 capital cost estimate of US$420 million includes -
mining, processing plant, infrastructure, construction of Tailings
Management Facility ('TMF'), general administration costs as well
as the requisite contingencies
-- Potential to sell up to 30,000 tpa of potassium sulphate
('SOP', 'K(2) SO(4) ') for sale to the Mexican fertiliser
industry
Next Steps: advance Sonora towards production to satisfy
expected continuing growth in demand for lithium driven by growing
sectors such as electric vehicles and energy storage
Subject to Board approvals and other key milestone events,
project detailed design is expected to commence in late Q1,
2018.
Peter Secker, CEO of Bacanora, commented, "The FS confirms the
Company's long held view that Sonora has the potential to become a
significant supplier of battery grade lithium to growing
industries, such as electric vehicles and energy storage, and at
the same time to generate positive value for shareholders. The
numbers speak for themselves: a US$1.25 billion Pre-Tax NPV, a 26%
IRR and, at a US$3,910/t operating cost, a favourable position on
the global industry cost curve, which puts Sonora on a par with the
lower cost brine operations.
"Thanks to the work we carried out in parallel with the FS,
notably the securing of a long term off-take agreement and
strategic partnership with leading Japanese trading house Hanwa,
the issuance of an environmental permit, and the acquisition of
surface rights, we are in a position to commence the development
phase of Sonora. Our objective is to transform Bacanora into the
next significant producer of lithium carbonate and in Sonora we
have the asset that we expect to enable us to do so. Bacanora is
entering a new and exciting stage in its development and I look
forward to providing further updates on our progress in due
course."
Key Elements of the Feasibility Study
Project Introduction
The Sonora Lithium Project is located in northern Sonora State,
Mexico, approximately three hours drive north east of the state
capital of Hermosillo, a city of over one million people. Access to
the site is by road from either Hermosillo or the US border town of
Agua Prieta. The Project has access to significant support
infrastructure including paved roads, process water and local
labour.
The FS demonstrates the attractive economics of Sonora and key
findings are shown in table below:
Table 1:
Feasibility Study Key Indicators Value
----------------------------------------------------------------- ----------
Pre-tax Net Present Value ($ 000) 1,253,027
----------------------------------------------------------------- ----------
Pre-tax IRR (%) 26.1%
----------------------------------------------------------------- ----------
Simple Payback Stage 1 (years) 4
----------------------------------------------------------------- ----------
Initial Construction Capital Cost Stage 1 ($ 000) 419,616
----------------------------------------------------------------- ----------
Construction Capital Cost Stage 2 ($ 000) 380,262
----------------------------------------------------------------- ----------
Av. LOM operating costs ($/t Li(2) CO(3) ) 3,910
----------------------------------------------------------------- ----------
Av. operating costs ($/t Li(2) CO(3) net of K(2) SO(4) credits) 3,418
----------------------------------------------------------------- ----------
Post-tax NPV (at 8% discount) ($ 000) 802,464
----------------------------------------------------------------- ----------
Post-tax IRR (%) 21.2%
----------------------------------------------------------------- ----------
Av. annual EBITDA with co-products ($ 000) 229,362
----------------------------------------------------------------- ----------
Annual Li(2) CO(3) production capacity Stage 1 17,500 t
----------------------------------------------------------------- ----------
Annual Li(2) CO(3) production capacity Stage 2 35,000 t
----------------------------------------------------------------- ----------
Annual K(2) SO(4) production capacity Stage 2 30,000 t
----------------------------------------------------------------- ----------
(* All costs are in US dollars)
The Sonora lithium property hosts a large lithium deposit. The
polylithionite mineralisation is hosted within shallow dipping
sequences, outcropping on surface. As part of the FS, a Mineral
Resource estimate was prepared by SRK Consulting (UK) Limited
('SRK') in accordance with National Instrument 43-101 - Standards
of Disclosure for Mineral Projects ('NI 43-101'). The following
tables present the summary of current lithium resources for the
Project, these Mineral Resources are inclusive of Mineral
Reserves.
Table 2: Measured and Indicated Mineral Resources
Category Cut-off Tonnes (000t) Li (ppm) K (%) LCE (000t) LCE attributable
(Li ppm) to Bacanora (000t)
----------- ---------- -------------- --------- ------ ----------- --------------------
Measured 1,000 103,000 3,480 1.5 1,910 1,776
----------- ---------- -------------- --------- ------ ----------- --------------------
Indicated 1,000 188,000 3,120 1.3 3,130 2,345
----------- ---------- -------------- --------- ------ ----------- --------------------
Total 1,000 291,000 3,250 1.4 5,038 4,119
----------- ---------- -------------- --------- ------ ----------- --------------------
Table 3: Inferred Mineral Resources
Category Cut-off Tonnes (000t) Li (ppm) K (%) LCE (000t) LCE attributable
(Li ppm) to Bacanora (000t)
---------- ---------- -------------- --------- ------ ----------- --------------------
Inferred 1,000 268,000 2,650 1.2 3,779 3,220
---------- ---------- -------------- --------- ------ ----------- --------------------
Notes: (i) Mineral Resources that are not Mineral Reserves do
not have demonstrated economic viability.
(ii) Tonnes rounded to the nearest thousand.
(iii) LCE is the industry standard terminology for, and is
equivalent to, Li(2) CO(3) . 1 ppm Li metal is equivalent to 5.323
ppm LCE / Li(2) CO(3) . Use of LCE is to provide data comparable
with industry reports and assumes complete conversion of lithium in
clays with no recovery or process losses.
(iv) Reported from a block model above 1000 ppm Li and above a
simple open pit shell generated using the technical and economic
parameters established during the FS, with the exception of the LCE
selling price of US$ 14,300 (which represents a 30% premium on top
of the US$11,000 used for the Mineral Reserve estimate).
Mining Operations
The mining operation for the Project is planned as an open-pit
development using a combination of continuous miners to mine the
ore zones and a truck/shovel fleet to remove the waste material.
Mining operations will be augmented with an ancillary fleet of
dozers, graders and water trucks. The Mineral Reserve estimate was
prepared by Independent Mining Consultants Inc. ('IMC') in Tucson,
Arizona. The Mineral Reserve estimate includes an ore recovery
factor of 100% and mining dilution of 100 mm at the top and bottom
of the mineralized beds, with the grades of the elements in the
adjacent lithologies.
Table 4: Mineral Reserves: (Cut-off grade of 1,500 ppm Li)
Category Tonnes Ore Li (ppm) K (%) LCE (000t) LCE attributable
(000t) to Bacanora (000t)
---------- ----------- --------- ------ ----------- --------------------
Proven 80,146 3,905 1.64 1,666 1,550
---------- ----------- --------- ------ ----------- --------------------
Probable 163,662 3,271 1.36 2,849 2,126
---------- ----------- --------- ------ ----------- --------------------
Total 243,808 3,480 1.45 4,515 3,676
---------- ----------- --------- ------ ----------- --------------------
Notes: (i) Mineral Resources that are not Mineral Reserves do
not have demonstrated economic viability.
(ii) Tonnes rounded to the nearest thousand.
(iii) LCE is the industry standard terminology for, and is
equivalent to, Li(2) CO(3) . 1 ppm Li metal is equivalent to 5.323
ppm LCE / Li(2) CO(3) . Use of LCE is to provide data comparable
with industry reports and assumes complete conversion of lithium in
clays with no recovery or process losses
During the initial 19-year mine life, 37,058,000 tonnes of ore
with a Li grade of 4,151 ppm will be mined and processed with a
stripping ratio of 3.4:1.
Processing
Metallurgical testwork for the FS was carried out at SGS
Laboratories ('SGS') in Perth, WA, and ANSTO Laboratories ('ANSTO')
in Sydney, NSW, Australia. The process engineering and design for
the process plants and infrastructure was completed by Ausenco Pty
Ltd ('Ausenco'). The process plant design comprises a
pre-concentration stage to produce an initial concentrate prior to
roasting. The concentrate is subsequently heated in a kiln, at
approximately 950 degrees Celsius, in combination with re-cycled
sodium sulphate ('Na(2) SO(4) '), which is a by-product produced
from the Sonora lithium plant, to produce an intermediate lithium
sulphate ('Li(2) SO(4) ') product. This sulphate material then
undergoes hydrometallurgical treatment, filtration, cleaning,
precipitation and packaging, to produce a >99.5% Li(2) CO(3)
final battery grade product. The integrated plant has been designed
to initially process 1.1 Mt of ore per year, during Stage 1 of the
Project, subsequently increasing to some 2.2 Mt per year at Stage
2, producing 17,500 tpa and 35,000 tpa of lithium carbonate,
respectively.
The plant design also includes a circuit to produce up to 30,000
tpa of K(2) SO(4) /SOP product through a series of evaporation and
precipitation stages.
Capital Costs
The initial mining fleet, comprises a continuous miner to
excavate the ore zones and a front end loader and a 90 tonne haul
truck fleet to remove the non-mineralised waste material. In
addition, there is an ancillary mobile fleet including dozers,
graders and front end loaders, which will also be purchased. The
initial capital cost for the mining operation is estimated to be
US$17.6 million.
The metallurgical processing facility capital cost estimate is
based on an on-site processing plant comprising all new equipment,
to produce battery-grade lithium carbonate.
The capital cost estimates for the process plant,
infrastructure, Tailings Management Facility ('TMF') construction,
Engineering, Procurement, and Construction Management ('EPCM')
fees, and general and administration costs were compiled by
Ausenco.
Table 5: Construction Capital Costs
Category Estimate Stage Estimate Stage
1 (US$000) 2 (US$000)
-------------------------- --------------- ---------------
Mining 17,611 17,614
Beneficiation plant 18,483 18,483
Lithium processing
plant 158,288 158,285
Plant Services 55,334 55,334
Infrastructure 58,841 23,581
EPCM/Owner cost/Indirect 72,912 72,393
Contingency 38,147 34,569
-------------------------- --------------- ---------------
Total 419,616 380,262
-------------------------- --------------- ---------------
The LOM sustaining mining and processing capital requirement is
approximately US$140.6 million.
Energy
Energy has been a significant focus of the FS and the Company
has received a number of proposals for the supply of both natural
gas (via pipeline) and LNG to the Project. There is a significant
operating cost saving in using natural gas rather than LNG and the
Company is currently working with a shortlist of potential pipeline
and natural gas suppliers to ensure that natural gas supplies from
Agua Prieta to the project site are available in time for the
commissioning Stage 1 of the Project. In addition to supplying
natural gas for the kiln circuit, the energy supply package would
include the installation of a gas turbine combined cycle plant on
site to produce high voltage electricity for the processing
plants.
Operating Cost Estimate
The mining and processing operating costs are for an operation
achieving average annual production of approximately 17,500 rising
to 35,000 tonnes of battery-grade, 99.5% Li(2) CO(3) . The
estimated average operating cost for the mine, primary and
secondary processing facilities are as follows:
Table 6: Project Operating Costs
Category Stage 1 Stage 2 Average LOM
(US$/t Li(2) (US$/t Li(2) (US$/t Li(2)
CO(3) ) CO(3) ) CO(3) )
------------ -------------- -------------- --------------
Mining 295 499 490
Processing 3,093 3,266 3,198
G&A 263 209 222
Total 3,651 3,974 3,910
------------ -------------- -------------- --------------
Cash Flow Analysis
The Project is currently estimated to have a payback period of
four years. Cash flows are based on a 100% equity funding basis and
the economic analysis indicates a pre-tax Net Present Value,
discounted at 8%, of approximately US$1.25 billion as shown below,
and IRR of approximately 26.1%. Post tax the NPV is approximately
US$803 million and the IRR 21.2%.
Table 7: Sensitivity Analysis (Discount Rate)
Discount Rate Base Case Pre Base Case Post
Tax NPV (US$ Tax NPV (US$ million)
million)
-------------- -------------- ----------------------
0% 3,425.1 2,371.4
2% 2,644.3 1,808.0
4% 2,054.0 1,381.7
6% 1,602.4 1,055.2
8% 1,253.0 802.5
-------------- -------------- ----------------------
Table 8: Sensitivity Analysis (Li(2) CO(3) Selling Price)
Selling Price Pre Tax NPV Pre Tax IRR
(US$ million)
------------------------ --------------- -----------
-20% 638.6 18.1%
-10% 945.8 22.2%
Base Case (US$11,000/t) 1,253.0 26.1%
+10% 1,560.2 29.8%
+20% 1,876.5 33.2%
------------------------ --------------- -----------
Base case LOM total revenue is estimated at US$6.9 billion, with
an EBITDA of approximately US$4.4 billion.
Market Review and Lithium Pricing
SignumBox (Chile) has provided the Company with their detailed
20 year analysis of the global lithium market, summarised as
follows:
-- By 2037, SignumBox anticipate global demand for lithium
chemicals to reach about 1,700,000 tonnes of LCE in their base
scenario, compared to the current 190,000 tonnes in 2017, equating
to an average annual growth rate of about 11.5% over the next 20
years.
-- SignumBox estimates that the battery segment of the market
will continue to grow strongly and by 2037 it would represent 84%
of total lithium demand, compared to the current 35% in 2017.
-- When considering various pricing scenarios, SignumBox
estimates that the lithium carbonate (battery grade) long term
price (2030) would range between US$13,700/t to US$20,600/t.
For the FS cashflow analysis, the Company has taken a more
conservative approach to pricing and is using a flat price of
US$11,000/t for battery grade lithium carbonate over the 20 year
LOM. The cashflow analysis was prepared by the Company's financial
consultants.
Lithium Off-take
The Company's lithium pilot plant in Hermosillo continues to
produce high quality battery grade lithium carbonate samples for
distribution to potential customers in Asia. In April 2017, the
Company signed a long term lithium off-take with the Hanwa Co.,
Ltd. of Japan up to 100% of the Stage 1 lithium carbonate
production from Sonora. In addition, Hanwa became a cornerstone 10%
shareholder in Bacanora via a private placement at the then current
share price of 82.5 pence per share on 2 May 2017.
Community and Environment
As part of the Company's Environmental Management Programs
('EMP'), the Manifestacion de Impacto Ambiental ('MIA'), was lodged
with the government authorities in May, 2017. Approval for the MIA
was received in October, 2017.
Land access agreements were signed in October 2017 securing
access and surface rights mainly relating to the land area covering
mineral resources contained within the La Ventana, Fleur and El
Sauz areas. Bacanora has entered into binding agreements to acquire
the freehold to two parcels of land which will provide the Company
with unrestricted access to develop the Project and operate it for
the initial life of mine.
In addition, the Company has commenced an active programme to
engage with the local communities within the Project area.
Project Timetable
Subject to Bacanora's Board of Directors ('Board') approvals,
project financing and general lithium market conditions, the
Company will continue to progress the Sonora Lithium Project
through the project development stages over the next 24 months.
Subsequent to a Board approval in Q1, 2018 to develop the project,
the detailed design engineering phase of the project is currently
scheduled for late Q1, 2018. During this stage a definitive
schedule for the project development will be completed and
presented to the Board for final approval. Regular updates on the
project progress will be provided throughout the Project
schedule.
Report Filing
A technical report on this Feasibility Study, prepared in
accordance with NI 43-101, will be filed on SEDAR at www.sedar.com
and at www.bacanoraminerals.com within forty-five (45) days of the
date of this news release.
Qualified Persons
Each of the qualified persons below has reviewed and approved
the technical information contained in this press release and are
independent of the Company. The qualified persons are:
Greg Lane, FAusIMM., of Ausenco, is the qualified person
responsible for the process engineering, infrastructure, capital
cost and operating cost estimates, and the overall preparation of
the report.
The Mineral Resource estimate was prepared by Mr. Martin Pittuck
of SRK, who is an independent Qualified Person as defined by NI
43-101.
The Ore Reserve estimate and mine plan was prepared by Mr. Herb
Welhener of Independent Mining Consultants Inc. who is an
independent Qualified Person as defined by NI 43-101.
The Mineral Resource and Ore Reserve estimates in this press
release were prepared in accordance with the CIM "Definition
Standards on Mineral Resources and Mineral Reserves" adopted by the
CIM Council on May 10, 2014, and the CIM "Estimation of Mineral
Resources and Mineral Reserves Best Practice Guidelines," adopted
by CIM Council on Nov. 23, 2003, in compliance with NI 43-101
guidelines.
Cautionary Statement Regarding Forward-Looking Information
Except for statements of historical fact, this news release
contains certain "forward-looking information" within the meaning
of applicable securities law. Forward-looking information is
frequently characterized by words such as "plan", "expect",
"project", "intend", "believe", "anticipate", "estimate" and other
similar words, or statements that certain events or conditions
"may" or "will" occur. In particular, forward-looking information
in this press release includes, but is not limited to: the
estimation of resources and reserves and the filing of a technical
report in connection therewith; estimated operating and capital
costs, estimated IRR and NPV (in addition to other financial
analysis and estimates), potential future production rates,
estimated commodity prices, commencement of detailed design
engineering and overall going forward project development. Although
we believe that the expectations reflected in the forward-looking
information are reasonable, there can be no assurance that such
expectations will prove to be correct. We cannot guarantee future
results, performance or achievements. Consequently, there is no
representation that the actual results achieved will be the same,
in whole or in part, as those set out in the forward-looking
information.
Forward-looking information is based on the opinions and
estimates of management at the date the statements are made, and
are subject to a variety of risks and uncertainties and other
factors that could cause actual events or results to differ
materially from those anticipated in the forward-looking
information. Some of the risks and other factors that could cause
the results to differ materially from those expressed in the
forward-looking information include, but are not limited to:
commodity price volatility; general economic conditions in Canada,
the United States, Mexico and globally; industry conditions,
governmental regulation, including environmental regulation;
unanticipated operating events or performance; failure to obtain
industry partner and other third party consents and approvals, if
and when required; the availability of capital on acceptable terms;
the need to obtain required approvals from regulatory authorities;
stock market volatility; competition for, among other things,
capital, skilled personnel and supplies; changes in tax laws; and
the other risk factors disclosed under our profile on SEDAR at
www.sedar.com. Readers are cautioned that this list of risk factors
should not be construed as exhaustive.
The forward-looking information contained in this news release
is expressly qualified by this cautionary statement. We undertake
no duty to update any of the forward-looking information to conform
such information to actual results or to changes in our
expectations except as otherwise required by applicable securities
legislation. Readers are cautioned not to place undue reliance on
forward-looking information.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
*ENDS**
For further information, please contact:
Bacanora Minerals Ltd. Peter Secker, CEO info@bacanoraminerals.com
-------------------------- -------------------------------- ---------------------------
Cairn Financial Advisers +44 (0) 20 7213
LLP, Nomad Sandy Jamieson / Liam Murray 0880
-------------------------- -------------------------------- ---------------------------
Canaccord Genuity, +44 (0) 20 7523
Broker Martin Davison / James Asensio 8000
-------------------------- -------------------------------- ---------------------------
St Brides Partners, +44 (0) 20 7236
Financial PR Adviser Hugo de Salis / Frank Buhagiar 1177
-------------------------- -------------------------------- ---------------------------
ABOUT BACANORA:
Bacanora is a Canadian and London listed lithium exploration and
development company (TSX-V: BCN and AIM: BCN). The Company is
exploring for, and developing a pipeline of international lithium
projects, with a primary focus on the Sonora Lithium Project. The
Company's operations are based in Hermosillo in northern Mexico.
The Company is led by a team with lithium expertise and proven mine
development, construction and operations experience.
The Sonora Lithium Project, which consists of ten mining
concession areas covering approximately 100 thousand hectares in
the northeast of Sonora State. The Company, through drilling and
exploration work to date, has established a Measured plus Indicated
Mineral Resource estimate of over 5 Mt (comprising 1.9Mt of
Measured Resources and 3.1Mt of Indicated Resources) of LCE and an
additional Inferred Mineral Resource of 3.7 Mt of LCE. The
Feasibility Study discussed herein has established Proven Mineral
Reserves (in accordance with NI 43-101) of 1.67 MT and Probable
Mineral Reserves of 2.85 Mt LCE and confirmed the economics
associated with becoming a 35,000 tpa lithium carbonate and 50,000
tpa SOP producer in Mexico.In addition to the Sonora Lithium
Project, the Company also has a 50% interest in the Zinnwald
Lithium Project in southern Saxony, Germany. The Zinnwald Lithium
Project is located in a granite hosted Sn/W/Li belt that has been
mined historically for tin, tungsten and lithium at different times
over the past 300 years. The strategic location of the Zinnwald
Lithium Project allows immediate access to the German automotive
and downstream lithium chemical industries.
1 The Sonora Lithium Project is comprised of the following
lithium properties: La Ventana lithium concession, which is 100
percent owned by Bacanora and El Sauz and Fleur concessions, which
are held by Mexilit S.A. de C.V. ('Mexilit') which is owned 70
percent by Bacanora and 30 percent by Cadence Minerals Plc.
2
https://seekingalpha.com/article/4109856-lithium-miners-news-month-september-2017
3 http://www.orocobre.com/investor-centre/quarterly-reports/
4 LCE = lithium carbonate (Li(2) CO(3) ) equivalent; determined
by multiplying Li value in percent by 5.324 to get an equivalent
Li(2) CO(3) value in per cent. Use of LCE is to provide data
comparable with industry reports and assumes complete conversion of
lithium in clays with no recovery or process losses.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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