Ganfeng signs new Joint Venture Agreement following the exercise of its option to increase investment in Sonora Lithium Ltd (“SLL”)

Bacanora Lithium plc (AIM: BCN), a lithium development company, is pleased to announce that its cornerstone investor and offtake partner, Ganfeng Lithium Co., Ltd (“Ganfeng”), has today signed a new joint venture agreement in connection with its investment in SLL (“JVA”) following the exercise of its option to increase its stake in SLL from 22.5% to 50% (the “Option”). Completion of the JVA remains conditional upon certain approvals and consents from authorities in the People’s Republic of China. The final approval outstanding is from the State Administration of Foreign Exchange (“SAFE”), which is expected in the coming weeks at which stage a further announcement will be made.

SLL is the operational holding company for the Sonora Lithium Project (the “Project”). Once Ganfeng has received its approval from the relevant authorities in China and SLL has received £21,883,485 of funds from Ganfeng, completion (“Completion”) will take place and SLL will immediately issue 73,955,680 new ordinary shares to Ganfeng, resulting in Ganfeng owning 50% of the enlarged issued share capital of SLL. The funds will be applied towards the development of the Project.

On Completion, the Board of SLL shall comprise two Bacanora appointed Directors and two Ganfeng appointed Directors, with the Chairman being one of the Bacanora Directors. Bacanora will remain as the operator of the Project, while Ganfeng will be responsible for leading the engineering, procurement and construction (“EPC”) activities associated with the Project. The JVA incorporates the updated provisions for the new 50:50 joint venture arrangement and this varies and replaces the joint venture agreement entered into by the Company and Ganfeng on 29 June 2019.

Ganfeng is continuing to integrate its flow sheet for the production of battery grade lithium into the final engineering design and remains on schedule to deliver its final engineering packages to Bacanora during H1 2021. Ganfeng continues to work with its equipment suppliers to determine equipment delivery times to align with a target of first production in 2023. Bacanora therefore remains on schedule to commence initial site works at Sonora in 2021, subject to completion of financing, which would enable commencement of production at the plant in 2023.

The entering into the JVA between Bacanora and Ganfeng is deemed to be a related party transaction pursuant to AIM Rule 13, as Ganfeng has a 25.7% interest in the Company’s issued share capital. The directors of the Company who are considered to be independent for the purposes of the JVA (being the whole Board other than Mr Wang Xiaoshen, who is the Vice President of Ganfeng), having consulted with the Company’s nominated adviser, Cairn Financial Advisers LLP, consider that the terms of the JVA are fair and reasonable insofar as the Company’s shareholders are concerned.

Peter Secker, CEO of Bacanora said:

“We are pleased that Ganfeng and Bacanora have agreed terms on the updated joint venture agreements and look forward to completion of Ganfeng’s investment to own 50% of the Sonora Lithium Project. As already noted, their investment further de-risks the Project and reduces the equity demands on Bacanora’s own shareholders to fund Phase 1 of the Project. The Sonora Lithium Project is now well placed to be in production in 2023 and delivering battery-grade lithium products into the fast-growing energy storage market.”

In the TV Clip below, CEO Peter Secker provides an overview of the Bacanora and their development plans for Sonora