China’s Ganfeng Lithium has signed a non-binding agreement to acquire close to one-third of Lond-based Bacanora Lithium andĀ its Sonora Lithium project in Mexico.

The investment would be part of the companyā€™s finance package for the construction of an initial 17,500tpa lithium carbonate operation at the Sonora project.

As part of the investment, Ganfeng would acquire a 29.99% equity interest in Bacanora for a cash consideration of Ā£14,400,091, representing 57,600,364 new ordinary shares in the company private placement at a price of 25 pence per share.

After the completion of the deal, Ganfeng will have the right to nominate one director to the main board of Bacanora and also pre-emption rights in relation to new share issues proportionate to its interest in Bacanora.

In addition, Ganfeng will have the right to acquire an initial 22.5% interest in a subsidiary of Bacanora which holds the Sonora project, for a cash payment of Ā£7,563,649, equivalent to a price of 25 pence per share, after which the Chinese company would have the right to nominate one director to the board of the subsidiary.

Ganfeng will also have the option to increase its interest in the subsidiary to up to 50% from 22.5%, within 24 months of the completion of the investment.

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The capital raised would be used for the development and commercialisation of the Sonora project.

Within six months of the strategic investment, Ganfeng would complete a review of the EPC engineering design focusing on reducing the capital cost of the Sonora project from the current figure of $420m and accelerating the construction.

“Ganfeng will have the right to nominate one director to the main board of Bacanora and also pre-emption rights in relation to new shares.”

Based on the outcome of the review, the firm would help finalise an EPC engineering contract for the mine and plant construction and work with Bacanora during the construction, commissioning and early operations phases of the Sonora project.

After the completion of the strategic investment, the company will have exclusive off-take rights to purchase 50% of all lithium products produced at Sonora for the life of the mine during Stage 1 production.

Ganfeng would also have the option to increase its off-take to 75% of all lithium products during Stage 2 of production.

A strategy would be formed to ensure first production at the project in 2021.