VSA Capital Market Movers – Bacanora Lithium

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VSA Morning Miner, 10/02/21

Bacanora Lithium (LON:BCN)

Bacanora Lithium (LON:BCN) has announced the start of initial site works following the funding to secure the equity component of the project financing last week which in combination with the existing debt facility satisfies BCN’s requirement to fund its share of the 50/50 JV for Sonora. This is a key moment for the company as it moves into the next phase of development. With funding now derisked the stock becomes a more attractive play on lithium prices and sentiment in the sector, in our view, now that the focus until 2023 will be on construction.

The initial works begin the construction process and the first activity includes preparing the ground and removal of vegetation in the plateau area to the south of the ore body where the processing plant is to be built. BCN has hired additional local staff including ecologists and a biologist to oversee this work as it is performed in line with the agreed environmental approvals. Work will also commence on upgrading the main access road to site to allow access for heavy machinery needed for the bulk earthworks later in the year. In Q2 2021 work will commence on site accommodation and ancillary facilities. Ganfeng will deliver final engineering packages to BCN in Q2 2021 while long lead items are being arranged for delivery in 2022.

We note BCN’s keenness to hire local individuals at this early stage of construction, a reminder that Sonora is an industrial region with skilled labour available as well as the importance to BCN of maximising local involvement in the project. This has become even more important given the impact of COVID-19 on the local economy and BCN has adopted working practices to minimise the risk of infection.

We reiterate our Buy recommendation and 120p target price.


Oliver O’Donnell, CFA, Head of Research & Natural Resources Analyst | T: +44 (0)20 3617 5180 | E: [email protected]
Paul Renken, Senior Geologist | T: +44 (0)20 3005 5011 | E: [email protected]

VSA Capital Research | T: +44 (0)20 3005 5000 | E: [email protected]

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