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Bacanora Lithium releases acquisition, activities, and debt facility update

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Global Mining Review,

Bacanora Lithium plc has released an update acknowledging the recent announcement by Zinnwald Lithium Plc regarding its acquisition of the remaining 50% of Deutsche Lithium GmbH. The update also provides news relating to the company’s site activities at the Sonora Lithium Project, located in Mexico, and its debt facility agreement with RK Mine Finance.

Zinnwald Lithium Plc acquisition

Zinnwald has announced that it has entered into a binding agreement to acquire the 50% of Deutsche Lithium that it does not already own for a total consideration of €8.8 million. The transaction is to be settled with a cash payment of €1.5 million and the issue of approximately 50 million new shares.

Deutsche Lithium is developing the advanced Zinnwald Lithium Project in Germany. The acquisition gives Zinnwald full ownership and operational control of the Zinnwald Project and is in line with its corporate objective to become a key supplier to the European lithium market. On completion of the Acquisition, Bacanora’s shareholding in Zinnwald will decrease from 44.2% to 35.5%. Bacanora will maintain its right to appoint one Director to the Board of Zinnwald.

Sonora Project site activities

The company’s priority remains the health and well-being of its staff, partners, and its local communities. Bacanora continues to take all appropriate measures to protect them in accordance with the relevant governmental and regional requirements.

Bacanora continues to work with its joint venture partner, Ganfeng Lithium Co., Ltd., to mitigate the impact of COVID-19 safety protocols on project construction.

With early site work ongoing, site works for bulk earthworks, civil engineering, and pouring foundations have been rescheduled to 4Q21, in the light of current lockdown and travel restrictions. By extending these work rosters, the company hopes to provide more time for contractors to be on-site, whilst enabling camp accommodation optimisation to ensure room sizes and staffing levels meet the new COVID-19 distancing requirements.

Ganfeng is continuing to work with its suppliers and, along with the company, is maintaining its previously advised project delivery schedule with first lithium production in 2H23. The project delivery schedule includes the first equipment deliveries from China arriving in Mexico in 2Q22 and initial lithium plant dry commissioning scheduled for 3Q23.

Pleasingly, recent quotes for bulk steel deliveries and plate work in Mexico have confirmed that pricing is still within the budget.

Debt facility

As announced by the company on 2 February 2021, recognising the passage of time from the initial US$150 million debt facility agreement with RK Mine Finance, Bacanora and RK signed a non-binding indicative term sheet to amend certain terms.

The company and RK have been in discussions for a number of months with a view to agreeing legally binding terms and documentation. The first tranche of the RK debt facility, US$25 million, was drawn down in July 2018 and Bacanora will maintain this first tranche in accordance with the existing terms of the debt facility. However, due to extension fee considerations and the limited availability period for an extension post the expiry date of 18 June 2021, the company and RK have agreed that the remaining undrawn facility, amounting to US$125 million, will no longer be available for draw down. The company will continue to engage with RK as well as seek alternative terms with other debt providers in light of the current favourable debt market conditions.

With an aggregated cash balance of US$161 million as of 31 May 2021 (including cash of US$30 million in Sonora Lithium Ltd), the company has sufficient funds to support the short-term funding requirements and the ongoing construction program for the next 18 months. The existing cash balance will cover a significant portion of the capital cost requirements for the company’s 50% share of the project.

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