London-listed Bacanora Lithium said on Wednesday that a feasibility study had confirmed the economic potential of its Zinnwald lithium project, assigning the project in south-eastern Germany, near Dresden, a value of €428-million.
The study estimated that Zinnwald would have an internal rate of return (IRR) of 27.4%, favourable life-of-mine (LoM) operating costs of €13 058/t and a 46% earnings before interest, taxes, depreciation and amortisation operating profit margin.
For a €159-million capital investment, Zinnwald would produce 5 112 t/y of battery grade lithium fluoride – a high value, downstream product used in the manufacture of lithium battery electrolytes for the European electric vehicle (EV) industry.
The study also includes the sale of 32 000 t/y of by-product potassium sulphate to the European fertiliser industry.
“The €58.5-million in annual earnings that the €159-million capital investment is forecast to generate in each of the 30 years of mine life, the strong position on the global industry cost curve, the conventional processing route, and the exposure to fast-growing end markets such as EVs all add to the compelling investment case that Zinnwald represents,” said CEO Peter Secker.
The company noted that the 30-year feasibility mine plan equated to less than 50% of the current identified mineral resources of 35.51-million tonnes at a lithium grade of 3 519 parts per million, containing 125 000 t of lithium.
The detailed design engineering phase of the project would start in the first half of next year.
Bacanora stated that it continued to look for strategic partners for the project and reiterated its intention to list Deutsche Lithium – the subsidiary that holds Zinnwald – on a stock exchange.
The company currently owns 50% of Zinnwald and has an option to acquire the balance of the project. It has reached an agreement with the administrators of SolarWorld, which holds the remaining interest, to extend the option period from August 2019 to February 2020.
Meanwhile, Secker said that Bacanora now had two high-value lithium projects where feasibility studies had confirmed the credentials of each. In Sonora, Mexico, Bacanora is busy finalising financing to build a 17 500 t/y lithium carbonate operation. The Mexican project has a net present value (NPV) of $1.25-billion, an IRR of 26% and LoM operating costs of $4 000 t/y, which placed it among the lowest cost producers in the world.
“Our two projects have a combined, independently estimated NPV of more than $1.7-billion, a level that far outstrips our current £36-million market capitalisation as of June 4, 2019. We are confident this valuation gap will soon close,” he said.
Bacanora gained nearly 13% to £28.50 a share on Wednesday morning following the release of the feasibility study results. By the afternoon, the stock traded at £27.10 a share.