China's Ganfeng, one of the world's largest lithium producers, is buying a 30% stake in UK-based Bacanora, which is hoping to produce 17,500 mt/year of the metal used in making batteries for electric vehicles when it completes its flagship mine in Mexico.
AIM-listed Bacanora, which owns around 100,000 hectares in the Mexican state of Sonora where it plans to build a mine producing lithium carbonate from clay, said in a statement the deal was a big step forward in realizing production which it is targeting for 2021. The deal could see Ganfeng fund up to half of the estimated $420 million required to develop the project, Bacanora said.
With the development of EV battery technologies, demand from battery manufacturers for lithium is on the rise. Chinese companies like Tianqi and Ganfeng have become a major force in the lithium industry, while over 100 junior mining companies have started to explore for and develop lithium projects, largely in Australia.
At the inaugural S&P Global Platts Global Metals Outlook Summit last week delegates expressed concerns that China was becoming an increasingly dominant force in the battery supply chain, leaving the US and Europe behind in terms of investment.
Anthony Milewski, CEO of Canadian battery metals miner Cobalt 27, said it was almost inevitable that in years to come consumers in Europe and the US will be driving EVs produced by Chinese companies. There remained a distinct lack of investment in the entire battery supply chain, including mining, from Europe and the US, he added.
Another leading Chinese lithium company, Tianqi, owns 51% of Talison Lithium, Australia's largest producer, where increases in production have helped the country to be the world's largest producer of the metal.
Ganfeng, meanwhile, has signed an agreement to supply South Korea's battery manufacturer LG Chem with 47,600 mt of lithium hydroxide from 2019-22.
China has the second largest reported lithium reserves in the world after Chile. Despite this, China?s actual production is very modest compared to major producers like Chile, Argentina and Australia.
Under the deal with Bacanora, Ganfeng Lithium will be granted exclusive offtake rights to purchase 50% of all lithium products produced at Sonora for the life of the mine during Stage 1 planned production. GFL would also have the option to increase its off-take to 75% of all lithium products during Stage 2 of production. Ganfeng is paying ?14 million ($17.8 million) for 58,000 Baconora shares and will nominate a director to the UK company's board.
"It is not just Sonora?s finance package that would be substantially de-risked, we would also gain access to Ganfeng?s proven expertise in developing lithium projects, thereby significantly de-risking the construction phase at Sonora...We now have a clear line of sight towards commencing construction at the $1.25 billion Sonora Project," Peter Secker, CEO of Bacanora Lithium said.
Lithium hydroxide prices in the Chinese domestic market fell this week to their lowest level since S&P Global Platts started the assessment last September, due to increased supply and waning demand.
Platts assessed lithium carbonate flat at Yuan 76,000/mt, while the hydroxide assessment dropped Yuan 500/mt to Yuan 93,500/mt. Both assessments refer to battery-grade product on a delivered, duty-paid (DDP) China basis.
