Share Name Share Symbol Market Type Share ISIN Share Description
Bacanora Lithi. LSE:BCN London Ordinary Share GB00BD20C246 ORDS 10P
  Price Change % Change Share Price Shares Traded Last Trade
  -2.00p -2.35% 83.00p 77,577 16:07:00
Bid Price Offer Price High Price Low Price Open Price
82.00p 84.00p 84.50p 83.00p 84.50p
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Mining 0.1 -14.5 -10.8 - 111.36

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21/6/201813:05Bacanora Minerals to head back to 60p27
14/6/201807:59Bacanora Minerals3,803
24/10/201711:24BCN 70p to 33p?213

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Bacanora Lithi. Daily Update: Bacanora Lithi. is listed in the Mining sector of the London Stock Exchange with ticker BCN. The last closing price for Bacanora Lithi. was 85p.
Bacanora Lithi. has a 4 week average price of 83p and a 12 week average price of 83p.
The 1 year high share price is 157p while the 1 year low share price is currently 74.50p.
There are currently 134,164,872 shares in issue and the average daily traded volume is 76,998 shares. The market capitalisation of Bacanora Lithi. is £111,356,843.76.
compnews1: Wood Mackenzie is a well known company whom I have dealt with for many years. They are very good at their work. We can't ignore lithium but at what share price?. I am happy to wait for the outcome of getting financing for the project. Recap - they evaluated the project based 100% equity finance and NPV post tax at 8% discount rate, $11000 lithium price is US$802 million. I have just found a Feasibility Study done by Ausenco for the Sonora Lithium project and on page 10 of the actual report(link below)it said price is the most sensitive variable (as I have previously said on this forum) and that 30% change in price would change the NPV by aprroximately $600 million. In light with this new information done by Wmac, it makes me more vigilant on the share price As they said in the report that NPV is based on 100 equity finance, it seems to me that they fail to get financing at 8% hence their recent decision to go for debt & equity financing. I am no expert on this corporate financing but putting the information gather from various source, I would stay away until their success in getting financing. Ok, share price may go up 5%-10% but it is a safe bet then loosing 30%. Food for thought hxxp://
steeplejack: FT article in 17/18th weekend issue Contains article headed Lithium faces 5bn dollar test as supplier stake sale electrifies buyer interest. References the fact that the Canadian company PotashCorp which acquired a 32 percent stake in Chiles SQM some 20 years ago will now be forced to sell the stake as a condition of its merger with rival Agrium.’While only a handful of companies are likely to compete for the stake,the eventual price will be an important measure of how seriously the hype around electric cars is being taken’The stake is currently valued at around 4.7bn dollars. The price of lithium carbonate has more than doubled over the past two years to hit 14,500 dollars a tonne.However,according to consultancy Wood Mackenzie,if electric vehicles reach 5 percent of car and light truck globally by 2025 from their current level of 2 percent,lithium prices will fall to 6900 dollars a tonne by 2025.However,if that share,including plugin hybrids,climbs to 12 percent by 2025,lithium prices will remain at current levels and move towards a long term price of 13600 dollars a tonne,the consultancy forecasts. Wherever bidders end up sitting on the spectrum of forecasts,they will also be competing against a backdrop in which lithium prices have unleashed a surge in supply.Companies are hunting for the metal,including in Cornwall,Nevada,Mali and Australia,where there has been a rapid build up of production.As a result,some analysts who follow the industry forecast a surplus for the next few years,’Why would you buy a 5bn dollar stake in a resource that is geologically abundant’,asks one investor.Ben Isaacson,an analyst at Scoia bank in Toronto,says SQMs share price reflects lithium prices well above the marginal costs of production which isnt realistic.The lithium price will fall to a long term average of between 8000-10000 dollars per tonne he forecasts.’Theres a clock ticking on this deal ‘he says ,’this should be bought at a discount ,this should not be bought at a premium.’ ‘Lithium is experiencing a far bigger demand shock’,says says Howard Klein,a New York based partner at RK Equity which advise companies in the sector.The sale of the SQM stake will reveal just how valuable the world thinks that shock is.
waccybaccy: At least TW likes this.... If you want to invest in lithium, don't ignore Bacanora By Gary Newman | Sunday 11 February 2018 If you like this, please share this article using the buttons below Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article. Lithium has been all the rage amongst AIM investors over the past few years, but the reality is that many of the projects which people have been getting excited about will fail to ever actually produce anything. Some of these small outfits have seen crazy increases to their market caps as private investors were driven into a buying frenzy by very early stage exploration results, and then have fallen just as fast when people have woken up to the fact that actually extracting any lithium is many years down the line, if ever. However, there seems to be no doubt that lithium has an important part to play in the future and its use will become even more widespread in batteries, with the potential for high levels of growth in demand – assuming of course that the price stays at a level which makes it viable for people to switch (such as in the case of electric/hybrid cars). I personally don’t see prices for the commodity reaching the highs that some have talked about, as few would be willing to, or could afford to, buy products containing lithium if that became the case. What has surprised me with the ‘lithium rush’ on AIM is that many seem to have ignored the one company which is already at a fairly advanced stage and which is actually likely to reach full-scale production any time soon, that being Bacanora Minerals (BCN). Fair enough, at a share price of 106p to buy and a market cap of £136 million odd it isn’t going to see the potentially huge overnight fluctuations in share price of the tiny outfits (nor can it be as easily manipulated by some of the characters who’ve been involved with pumping other companies). But at the same time a fair bit of risk has already been removed, and if the project turns out to be as good, and valuable, as it looks on paper, then there is still plenty of potential to make a large return by investing longer term and seeing it through to fruition. Bacanora has already proven up the Sonora lithium project in Mexico, where it holds 100% of La Ventana, and 70% interests in Mexilit and Megalit, which all come under this area. A feasibility study has already been carried out which gives the project a net present value (8% discount factor) of in excess of $1.2 billion, and with life of mine operating costs of $3,910/t it is well insulated against fluctuations in lithium carbonate prices – especially given that the study was carried out based upon a flat commodity price of $11,000/t over the life of the mine. At the end of 2017 typical prices in South America were around $14,000/t, significantly higher than the level the study was carried out at, and although I am far less bullish than some on where prices are going, I still certainly see them higher during the life of this mine. There is also potential for further upside to its reserves, which currently stand at nearly 3.7 million tonnes on a proven and probable basis net to Bacanora, via the conversion of lithium still classed in the resources category. Like any major mining project, actually getting it to the production stage won’t be cheap, and a staged development is going to see 17,500tpa produced for the first four years, at a cost of $420 million. Then stage two will see that increased to 35,000tpa, at a cost of a further $380 million. Given that Japanese company Hanwa has already agreed to take between 70% and 100% of stage one production, and has acquired 10% of Bacanora, I would expect that some form of debt funding will be secured for the project. As part of this the company is looking to re-domicile from Canada to the UK, where access to funding is easier to secure, subject to shareholder and regulatory approvals. Additionally, the company is also in the process of taking on another major investor, NextView Capital, which agreed in December to purchase 33 million shares at 94.53p to raise over £31 million, and to take this holding as a long term investment. That is yet to be completed, but the date for doing so has now been extended and it is on track. Bacanora is making a loss – although it does generate some revenue from its Sonora pilot processing plant which has been operating for over two years – and burns through quite a bit of cash, but that is to be expected from a company at this stage. In addition to Sonora, it does also have the Magdalena borate project, also in Mexico, but for the time being the company has decided not to invest any further capital into this project. It also has a 50% interest in Zinnwald in Germany, and although at an earlier stage and with further drilling required, it does already have measured and indicated resources, and Bacanora do have the option to acquire the remaining 50% following the completion of a feasibility study over the next 18 months or so. There is still plenty of risk here, but I think that the upside potential is worth that, especially given that the shares have dropped back recently, having hit highs of 157p in early January, and I would be surprised to see them drop as low as the 94p placing price. This is one to buy and hold for the long term, as it has the potential to be big.
compnews1: Becareful with the valuation of $1.2billion as Investor Chronicle made mistake in their writing - see below which I cut and paste from the subscribed website. The link is posted below if you are subcribed and go in to read it directly otherwise see below. "Bacanora Minerals - Valuation clarification by IC please Thanks for replying to my post and the link. I had a look at the link you replied to my comment. The $1.25 Bn is actually the PRE-TAX at 8% discount, the POST-TAX is $802.4 MM, ie 2/3 worth. Based on these post tax $802MM, IC please give us your view as to the share price is still worth that much? Thanks 11:57 AM on 3/1/2018 Yes, sorry, and thanks for the correction. Our view is as above in the article, that 106p is about fair value given the upcoming financing. Thanks." "Bacano Economics - Here is my take on the project economics 1) the discounting rate of 8% nominal for an AIM company is light - I would expect 10%, based on their economics, the interpolated NPv@10% post tax as a guess is ~ $600MM (vs US$800) 2) Their presentation Dec 2017 is very lack of key impact on NPV for changes in capital expenditures (hyperinflation over the last 10 years in mining & oil industries) and volume is key too as technical risks are high in this kind of project 3)Mexico has a greater political and fiscal risks 4) ok they have low operating costs but these could go up like in the oil industry when oil price was in their high. They did provide some sensitivities but not good enough when compare to the like of Sirius Minerals! . The CAPEX hyperinflation can knock off a hundred million off NPV. and 20% lower volume could easily wipe of a couple of hundred million. Note their CAPEX estimate contingency is lless 10% - boys this is low! Everyone is racing for Lithium extraction so expect costs go up. On the positive sign lithium is on demand over the next 20-30 yrs but there may be alternative! So I think IC is very optimistic on the share price. Financing is important but many banks have lost their shirts for carelessly ignoring all of this costs, volume .ect.. risks. I would NOT rush into this share price - have a look at Sirius Minerals to see how transparent and wide cover their evaluations. Good luck to those who is comfortatable with this level of risks"
simonsaid1: Shares are often sold at negotiated rates, that doesn't mean the market has to follow for some weird unwritten magic reason! Rather it suggests that Cadence needed cash and the buyer had some power in the negotiation. It's possible that they'll instantly dump the shares on the market and harm the BCN share price, but seems unlikely that a 'strategic investor' would go to all this trouble to accumulate for an immediate sale. Easier ways to make a living!
mr j ahmed: only easy monies like the rem shareholders monies is have any interest to buying,if bcn share price is drop is mean the rem price is drop and the wheels is start to falling off.
mr j ahmed: no responsible director is force up a share price with hypes and her shareholders monies for no good reason,this the really question,why did lenis force up the bcn share price with biggest hypes and rem shareholders monies?
mr j ahmed: i find very strange that lenis doesnt have any bcn shares and few days before she move to the bcn board she force the bcn price up with rem shareholders monies. something is feel wrong with this junks and maybe is warning sign that she pumped the bcn share price before she move to the bcn board for certain reasons.
12bn12bn: Summary Bacanora Minerals has several very interesting projects regarding lithium and borate. The Sonora project, located in Mexico, is quite special as its mineralization is clay hosted instead of the usual brine or hard rock, without their disadvantages. Next to being one of the biggest lithium deposits in the world, it is also one of the highest graded, with very good PEA economics (IRR of 84%, NPV8 of To achieve these amazing numbers, the company is developing a new roasting method, in order to extract the lithium from the hectorite clay material. I expect a rerating when a PFS comes out on both borate and lithium projects in 2015. The rest of the article has been taken from the source code and it would take me ages to remove it and the links but it does make interesting reading. Make of it what you will. 1. Introduction When researching the Nemaska Lithium article, I stumbled upon a company that is at least as interesting, as it has a unique and very profitable lithium clay hosted project among others. This company is called Bacanora Minerals (OTC:BCRMF), and its Sonora lithium project which is located in Mexico (listed 48 out of 112 jurisdictions on the 2013 Global Mining Survey by the Fraser Institute, Sonora state isn't that bad compared to for example Guerrero but still no picnic) must have one of the best project economics on anything outside precious metals that I have seen. Bacanora Minerals; project locations The Sonora project consists out of several deposits, and the Ventana deposit boasts astounding after tax PEA economics, as the IRR is 84%, and the NPV8 is $848M with an initial capex of just $114M. I will compare these figures with the only, further advanced peer clay project available (Kings Valley of Western Lithium), have a close look at the other projects and the company, and will try to motivate why I think this stock is poised to go up next year, when 2 PFSs are scheduled to be completed. This company trades in larger daily volumes on its listing in Canada as BCN.V, and much larger on its main board listing in London as BCN.LON, so I would recommend trading by its Canadian or London listing. All presented tables are own material, unless stated otherwise. All prices are in USD, unless stated otherwise. 2. Company Bacanora Minerals is a Mexican exploration and development company, listed in Canada and London on its main boards, and has two lithium projects in the Sonora State, two borate projects, and a large pilot plant in that same state as well. The company is dividing its attention between all projects, so I will analyze them all later on. The company has experienced management: some well-known names on resumes are Rio Tinto, Cameco and Canaccord, but also Forte Energy, Westcore Energy and Vatukoula Gold. An interesting detail is the large amount of financing experiences among various members of management and directors, this is something that always opens a few more doors when you need it most. For sure it helped when the company got its second listing on the AIM stock exchange (London listing) on July 25 this year, and collected $7.7M through a brokered financing. The current cash position of the company is estimated at $13.1M by management, and the company has $0.4M in current liabilities as per September 30, 2014. Management has considerable skin in the game and holds about 12% of outstanding shares, 12% by Rare Earth Minerals and 30% by institutions. Bacanora Minerals has a current share price of $0.70 and a market cap of $59M, based on 84.37M shares outstanding (88.38M FD): Share price over 2 year period (chart for Canada listing, in C$) The share price started to run up in May this year, when the 70%/30% JV with Rare Earth Minerals (REM.AIM) on one of the Sonora lithium projects was announced, and this company also bought over 10% (and some more later on) of Bacanora Minerals soon after. At the end of June this year, after the announcement of the $7.7M financing, the share price really took off, supported by more good news, peaked in August and cooled down afterwards as there were no important developments announced later on. Very recently, the share price went up again as a bullish piece on the company was showcased on a British investment website, and REM published positive results of a surprising scoping study, undertaken without knowledge of majority JV partner (and operating company) Bacanora on the El Sauz/ Fleur lithium clay project. Since the end of October the TSX-Venture exchange has come down because of soft oil, dragging along everything with it, but also the London listing came down although the AIM didn't drop that much, and London volumes for the company are much larger. This could have been some arbitrage, but I would have expected the larger volumes to be setting the pace here. The price of lithium carbonate hasn't come down lately by any means, and is projected to rise further due to increasing demand, and supply isn't controlled by one country like China, so from a fundamental point of view, Bacanora seems to be in a favorable position regarding resources. 3. Lithium & Borate A. Lithium Lithium (chemical symbol: Li) is the lightest of all metals. It does not occur as a pure element in nature, but is contained within stable minerals in a range of hard rock types or in solution in brine bodies within salt lakes, in sea water or geothermal brines. A third source, hectorite clays, has been identified by Bacanora Minerals and Western Lithium in the Americas. However, production methods have not been proven commercially yet, although Western Lithium has completed a PFS on its Kings Valley clay project in May this year, and is very close to demonstrate commercial production levels on its demonstration plant, so it seems a third economically viable source can be expected soon. The contained concentration of lithium is generally low and there are only a limited number of known resources where lithium can be economically extracted. Lithium can be processed to form a variety of different chemicals depending on its end use. According to Roskill Information Services, lithium carbonate represents approximately 48% of the total global consumption of lithium chemicals (25% technical-grade lithium carbonate and 23% battery-grade lithium carbonate). The next most common chemical is lithium hydroxide which represents 16% of total global consumption. Other forms of lithium consumed include lithium bromide, lithium chloride and lithium minerals. Lithium and its chemical compounds exhibit a broad range of beneficial properties, including: the highest electrochemical potential of all metals, an extremely high co-efficient of thermal expansion, fluxing and catalytic characteristics, and acting as a viscosity modifier in melts. As a result of these properties, lithium is used in numerous applications including ceramics and glass, batteries, greases, aluminum, air treatment and others. Future demand is projected by Roskill to grow at an annual base rate of 9.7% until 2017 with optimistic forecast at 15.7% annual consumption growth. Consumption of lithium in volume terms with be largely driven by the rechargeable battery market which is predicted to grow 21.5% annually. Lithium-ion batteries have become the most important storage technology in the areas of portable and mobile applications (e.g. laptops, cell phones, smartphones, tablets, power tools, medical devices electric bicycles, electric cars) since around 2000. Lithium's high electrochemical potential - it has the highest electric output per unit weight of any battery material - makes it the standard material for lithium-ion (high energy-density rechargeable) batteries. While portable consumer goods alone continue to provide impressive growth in demand for lithium batteries, the start of mass production of hybrid, plug-in hybrid and electric vehicles presents the most significant upside growth potential for lithium demand. Lithium supply/demand scenarios according to Credit Suisse There is no exchange traded market for lithium chemicals, as prices are set by negotiation between producers and customers often based on customer-specific formulations. Prices for lithium concentrates used for conversion into chemicals are correlated to, and tend to follow the same trend as, lithium carbonate prices. Although prices vary by product and contract, SignumBox estimates the average Lithium prices from January 2012 until December 2013 as below: The company is focused on lithium carbonate production, and most of the new lithium production coming online is focused on carbonate as well (brine production). Lithium supply and demand had been forecasted for years as being extremely unhealthy with a lot of new supply coming online, presumably destroying prices for many years as demand would stall at the same time. Although this story was still anticipated more or less in 2013 by research firms like SignumBox, having carbonate oversupply exerting downward pressure on prices, the opposite happened, and the current price for lithium carbonate sits at $6200/tonne. Further upside potential for demand could result in much higher future prices according to Signumbox: SignumBOX forecasts 2013 Demand increased over the last few years because of general battery demand (not just cars), and a lot of new supply appears to be delayed, causing shortages and rising lithium prices. Ventana's projected PEA costs for lithium carbonate are $1958/t, which would make Bacanora one of the lowest cost producers globally: Costs of production of lithium carbonate equivalent (LCE) per tonne vs amounts Note that RB Energy (former Canada Lithium) recently filed for bankruptcy. When comparing various average costs in the industry for the different types of producers, this table is generated: B. Borates Borates are a group of boron-bearing minerals containing boric oxide or B2O3. The common commercially valuable varieties are the minerals called Colemanite, Ulexite, Kernite and Tincal (or Borax). Borates are the primary source and feed stock for commercial boron compounds. Boron compounds have a number of unique, highly technical, energy saving uses for which substitution with other compounds is difficult. Some of the applications for borates are: Glasses, heat-resistant (including fiberglass insulation & textile) Boron also reduces the energy used to produce glass. Detergents, soaps & personal care products; Ceramics, glazes; Agricultural micronutrients; Other uses (e.g. in control rod alloys in nuclear reactors to bleed off excess energy). The primary boron compounds that are marketed to commercial consumers are colemanite and boric acid. Boric acid is produced from colemanite and it is the principal feedstock used to produce other boron compounds. Pricing for colemanite and boric acid is typically on a contract basis between producers and consumers. There is price information available from various sources (US Bureau of Mines, Roskill) that relates to current contract pricing. Most recent price information places chemical grade boric acid at around $700/tonne. Colemanite prices vary from $200/tonne for "lump" colemanite from Turkey (this country dominates world production) to $350 for 80% colemanite concentrates. Bacanora's strategy will be to initially produce a marketable colemanite concentrate, then if conditions permit, upgrade its facilities to produce a chemical grade boric acid derived from its colemanite. 4. Projects Bacanora Minerals has five projects as briefly mentioned: - Its flagship La Ventana lithium clay project - the early stage El Sauz/ Fleur lithium clay project - the El Cajon borate project - the Tubutama borate project - the Hermosillo pilot plant (boric acid, sourced from El Cajon) Its flagship La Ventana lithium clay project is in PEA stage (completed January last year), the nearby, more early stage El Sauz/Fleur project has a NI43-101 resource estimate, and the much smaller El Cajon borate project is also in PEA stage (also completed in January 2013). The Tubutama borate project is an early stage exploration project and is shelved for now. The Hermosillo pilot plant is actually part of the El Cajon project, and is used to gain in-house knowledge of further product grade enhancement, and provide further test work. The object of this test work will be to produce colemanite samples for potential consumers, in order to establish a market and pricing for El Cajon colemanite, as well as data needed to move the project forward to the feasibility stage for larger borate mining and production facilities. As the company is focused on flagship project Ventana and El Cajon for early cash flows, and El Sauz/Fleur could provide a nice expansion opportunity for Ventana, I will concentrate on those three projects. A. El Cajon borate project Situated in the state of Sonora, Northern Mexico, the Magdalena Borate Project consists of two concession blocks covering a total of 15,508 hectares. The concessions are 100% owned by Bacanora, subject to a 3% royalty to a Rio Tinto subsidiary and a 3% royalty to CEO Colin Orr-Ewing. The property is road accessible located 17 kilometers east of the town of Magdalena de Kino and has excellent rail or truck access from that centre both to local markets for borate or to overseas markets from the port at Guaymas. Bacanora Minerals; borate concessions The primary boron mineral of interest is colemanite (Ca2B6O11.5H2O), which contains up to 50.8% borate (B2O3). El Cajon NI43-101; resource estimate 3 zones The average grade isn't spectacular, for example competitor Orocobre with its Argentinean projects has an average grade (partly historic resource estimate, is currently updated to industry standards) of 19.5% (and almost triple the tonnage of B2O3). Nevertheless, Bacanora completed a decent PEA on a 4500tpd open pit operation on January 4, 2013 with the following after tax results for a $500/t base case: The very limited capex ($1611/tpd) was a surprise for me although I knew nothing about borate operations before. The real cash is made by concentrating the colemanite, although the processing plant costs only $2.75M (could be expanded some more by additional recovery enhancing units). The company aims at completing a Pre Feasibility Study (PFS) for El Cajon in Q1, 2015. B. Ventana lithium project The flagship Ventana lithium project is part of the Sonora lithium project, and is also located in Sonora State, Northern Mexico, situated 180 km northeast of Hermosillo. The Sonora project area consists of five concession blocks; Buena Vista, San Gabriel, Ventana, Fleur and El Sauz. The most southern four concessions compose a total of 5,786 contiguous hectares, and there is road access to the concessions. Sonora concessions The Ventana concession boasts a large indicated lithium resource: The average lithium grade is low compared to hard rock (mineral) lithium deposits, and stands at 0.3% (see 3,000ppm in the table, the multiplying factor for lithium to lithium carbonate equivalent is 5.329 times) but this seems to be more or less average for clay deposits, as Western Lithium, the only other American clay hosted lithium explorer, has an average grade of 0.395%. Whereas Western Lithium uses conventional recovery methods in its Pre Feasibility Study of May 2014 and records an after tax IRR of only 20%, Bacanora completed a PEA in January 2013 with a staggering pre tax IRR of 138%: As the NPV8 figure is after tax, one would assume the IRR is also after tax, but this figure is before tax. After tax it comes in around 84%. This difference in IRR between the two companies is achieved by using a new roasting method for extracting the lithium from the clays. This method has only been tested in a laboratory environment and not on a commercial scale, so metallurgy seems the big question mark here until proven otherwise. But the first results are very encouraging. Western Lithium has developed another, more conventional method, requiring more initial capex ($248M, in 4 years another $161M funded from internal cash flow), starting at a lower production capacity of 13,000 tpa LCE and taking a lot of byproducts into account (potassium and sodium), resulting in a much smaller NPV8 of $373M. Notwithstanding the very low cash cost of $968/t LCE net of by products. Before by products, costs stand at $3500/t LCE, which is nothing special compared to the majority of current world production by brines (on average about $2300/t LCE). Western Lithium is much more advanced regarding pilot plant testing its recovery method, so although less profitable it is far more derisked, as Bacanora still has a long way to go here. Ventana deposit; clay units C. El Sauz/Fleur lithium project In addition of the Ventana project, Bacanora has entered into a 70%/30% joint venture agreement with Rare Earth Minerals to explore and develop the adjacent El Sauz/Fleur concessions. A 10 hole diamond drilling program on El Sauz/Fleur was initiated in May. Completion of the first three drill holes have confirmed that the clay units on the Ventana lithium deposit continue onto the El Sauz/Fleur concessions and extend the strike length of the sedimentary basin that hosts the lithium-bearing clay units to 6.7 kilometers: El Sauz concession El Sauz could prove to be a nice extension of Ventana, and capable of considerably increasing the resources of Ventana, creating a synergistic lithium district altogether. The current resource estimate already indicates a resource at least as large and a slightly higher grade compared to Ventana: To me it should be fairly obvious that management would be looking for expansion options, although at a later stage, in an attempt to keep initial capex low in this harsh economic environment. Metallurgy and recovery by Bacanora's new roasting method hasn't been proved on an economic scale yet as well, so I assume that the company will continue development on Ventana alone for now. To my and management's surprise, REM announced impressive results of a El Sauz/Fleur scoping study on December 22, 2014, completely out of the blue. The after tax NPV8 came in at $1124M, IRR at 22.6%, and capex was projected to be a rather high $485M. This is probably an attempt to indicate future value of this project to REM shareholders, but the style and fashion is unknown to me. You don't see JV partners releasing economic studies separately from each other every day, the operating partner not having a clue what's going on. This is very unusual. Besides this, as Bacanora is fully engaged in discovering metallurgy and recovery methods for the hectorite clay material, which has never been produced commercially before, every assumption or claim made by outside parties must be questioned on validity in this area. Especially when REM didn't co-operate with Bacanora on their study and assumptions. Furthermore, Bacanora is doing whatever it can to keep capex and costs as low as possible on Ventana, so a study combining higher costs and much higher capex on an adjacent property isn't particularly useful to the company I'm afraid. Besides this, the forecasted annual production of 75,600t LCE is so large (45% of current world production) that it could cause an undesired equilibrium shift in LCE pricing. Fortunately El Sauz/Fleur isn't the flagship for Bacanora Minerals, as I can't really appreciate these loose cannon actions. 5. Adding El Sauz/Fleur to Ventana In a more normal chain of events, it seems more appropriate for Bacanora to add El Sauz/Fleur to the Ventana production later on, when market conditions favor an expansion. This could also result in an estimated doubled LOM production, based on an added 0.7Mt LCE attributable to Bacanora at an average grade of 2.15%, at a cut-off grade of 0.3%. I combined royalties and corporate taxes to 37%. This in turn would generate the following DCF analysis table for an LOM of 40 years: The NPV8 increases to $1104M, the corresponding after tax IRR comes in at 85.4%: The staged scenario with the expansion funded by internal cash flow generates the following table: The NPV8 increases considerably to $1559M, while the after tax IRR goes down a bit to 83.3%. Generating an after tax cash flow of over $200M when finally in full phase 2 production as a standalone company doesn't make it hard to envision a corresponding market cap by then of at least $1B. Of course the lithium market would have to allow such juggernauts, without lowering lithium prices because of the sudden increase of production. To be slightly more conservative, I would like to stick with the 40 year scenario. 6. Peer comparison/valuation In order to value Bacanora Minerals, the NAV/marketcap multiplier seems to be the most appropriate metric. For this a peer comparison had to be done based on lithium projects: (click to enlarge) Bacanora appears to be multiplied like Nemaska, although this last company is more advanced and can be compared better with peers in the same stage. This is very difficult for Bacanora, as the only company with the same type of clay hosted deposits is Western Lithium, which is more advanced and uses another recovery method. As Western Lithium is more advanced, especially with its proprietary recovery method which is very close to commercial production demonstration, it is much more derisked. In case of the Ventana base case (NPV8 of $848M), this could mean an estimated NAV/MC multiplier of 10 after the PFS is completed (due in 2015), for an estimated target share price of $1.15, for a profit of 64%. For a 40 year development scenario (NPV8 of $1103M), this would result in an estimated market cap of $111M, for an estimated target share price of $1.32, for a profit of 88%. Needless to say that this junior could become a multibagger when it succeeds in commencing commercial production, as usual NAV/MC multipliers are at least 1. 7. Catalysts/risks The first catalyst coming up is the PFS on the El Cajon borate project, to be expected in Q1, 2015. Somewhere in 2015 the company aims at completing the Ventana lithium project PFS, but can't point towards a quarter yet. A lot of testing needs to be done on a new pilot plant (as the Hermosillo pilot plant is too limited in size for this) in order to prove the possibility of commercial production on this new roasting method, which I consider the biggest risk of Bacanora at the moment. If successful it could provide one of the biggest returns of the industry, if not the lithium projects of Bacanora have no chance of becoming economically viable, and the company has only El Cajon left. After about another two years of successful production and testing by possible off take candidates, and signing off take agreements, the company aims at financing the El Cajon and Ventana projects. Lithium carbonate prices have a lot of upside, strengthened but not entirely depending on EV developments, as more and more devices around us need high performance batteries. However, companies coming online with new and considerable production like Orocobre could neutralize this upside for some years to come. As the Ventana project has very global targets of commencing production in 2018/2019, there should be time enough for demand to absorb this added production, and provide increased pricing levels for Bacanora in my view. 8. Conclusion Bacanora Minerals could be another one of very interesting lithium plays besides Nemaska Lithium, because of its stunning economics for the Ventana project. In my opinion everything depends on the new recovery method which has produced solid results in the laboratorium, but has never been tested on a commercial scale. The company is fully financed through PFS for both El Cajon and Ventana, but Ventana will need a larger pilot plant and this requires another round of financing. The upcoming PFS of Ventana will be an important milestone, and I expect a rerating by then, as the company has some very interesting and profitable projects, advancing them quietly towards production. I hope you will find this article interesting and useful, and will have further interest in my upcoming articles on mining. To never miss a thing, please click on the bold link labeled "Follow" above the title at the top of this article to get an email notice of my new articles soon after they are published.
gilbly: Good evening from Boston. Here for 4 days then move to New York, Philadelphia, then Washington and home. Posted this on REM as Seanywauny requested it. I meant to add a piece on the Magdelena Borate Project but have only managed to do a summary comment re the share price. I have updated the post 11717 but left the REM interest at 12.19% after the 25 July placing rather than make the small change to 11.90% without much impact. DL will no doubt be adding to this in the future. BCN shares also need updating to the latest figure but this is a small change also. These comments are not intended as investment advice; they are only my opinion and take on the potential value of the Sonora Lithium Project. Briefly the RNS news was not that bad, the indications are that the 4 holes south of the El Sauz and the single hole to the East are trending towards the end of the basin of the lithium bearing clay. However it is encouraging that mineralisation is still in evidence. Also there are great indications from the Buenavista surface sampling, with up to 1700ppm lithium values being found. So as we move forward they are planning a larger drilling program to determine the detailed open pit design information and to expand the lithium resource base into the Megalit. No word of whether they are hoping to progress to complete any PFS or a PEA and on to a BFS, but there now appears to be more urgency to increase the resource base which is encouraging and money is available for this. DL has stepped down from two posts and presumably this is to allow more focus on his main interests, so perhaps things may start to motor from now. SONORA LITHIUM PROJECT VENTURE OF BCN AND REM - CURRENT & POTENTIAL RESOURCES, NET PRESENT VALUE (NPV) AND SHARE PRICE ESTIMATE This estimate and guesstimate attempt is based on post 11717 on the REM b/board which was drafted from a REM viewpoint The size of this concession still continues to creep into my thoughts as I still cannot believe the massive potential of the Sonora Lithium Project. REM (19/8/2014) have now exercised their ‘earn in’ option by accelerating the settling of the $1 million exploration costs and have increased their interest to 30% in the JV#2 and have a first refusal to increase this to 49.9% on both JVs. (respective deadline dates are 30th September for JV1 and December 2015 for JV2). This is likely to cost more than the previously agreed arrangement with BCN. However I am unsure if the Canadian rules will apply re any negotiations on this and therefore the timescales involved. With the new funding available to BCN and REM we should be able to advance the required drilling to put the size of the concessions on the map. No doubt that REM will continue to increase their strategic holding in BCN. The estimate reflects the fact we now have battery grade which increases the price from $6,000 / t to $6,500 / t. Also a further increase for LCE to $7,000 / t may be likely in the future and any price increase adds leverage to the mine valuation and eventual share price. Additional leverage to the mine value may also be possible as CO-E has suggested that operational costs may reduced to about $900 / tonne, which would give the net resource value a great boost, however the more conservative costing of $2000 / tone has been used here, which is close to the $1958 / tonne used in the BCN’s documented PEA. The respective resources for LV and JV#1 have been upgraded from 2.413mt to 3.283mt with JV#1 now also in the ‘indicated' category (4/6/2014). Regarding these current resources on LV and JV#1 (3.283mt) we have enough to supply 3 Tesla factories for 20 years and it is likely this resource is going to increase in the future. This just needs the future relevant studies to confirm and fully define and declare the grades and no doubt the FS and BFS will deliver. BCN have their Borate projects and REM have their Austrailian (Yangibana) and Greenland projects. The post covers the following sections: 1. Simple calculations on the CURRENT resource valuation (La Ventana and JV#1) 2. The POTENTIAL resource valuation of the Megalit concession (JV#2) and is based on GUESSWORK and yes it is a big guess which will only be determined with drilling. 3. An estimate at the Net Present Value (NPV) and Share Prices over the concessions based on the current and potential resources for each of: a) La Ventana ('Indicated' resource) b) JV#1 - Fleur / El Sauz ('Indicated' resource) c) JV#2 - Megalit, Buenavista and San Gabriel. NPV calculation is for only one of the 4 parallel trending structures and is based on a GUESS of the resources 4. Estimate of the Neodymium Oxide at Yangibana and a rough estimate of the TREO resource valuation (from a previous exploration). 5. Summary of the calculations 1. CURRENT RESOURCE VALUATION (considering La Ventana and JV#1) mt - is a million tonnes bn - is a billon - JV#1 (Fleur/ El Sauz) - REM own 30% and BCN own 70%. - La Ventana (LV) - BCN own 100%. - REM has now increased their interest in BCN from 11.85% to 12.19%. - (Need to update to 11.9%) - LV had 930K tonnes of LCE or 0.93mt indicated resource, which has now increased to 1.273 mt. - JV#1 had a 1.48mt LCE inferred resource, which is now an INDICATED resource of 2.01mt. - Battery grade confirmed, so rather than $6,000/tonne for LCE it is now $6,500/tonne. - Operating costs of $2,000/tonne as per BCN giving a resource value of $4,500 / tonne. - Possibility of adding leverage to the mine value with a potential increase in LCE price to $7,000 / t or higher and a possible reduction in Op. Costs to $900 / t. - REM shares in issue 5,453,375,717 on 12/6/14. - BCN new shares in issue after placing is 78,174,752 - (Need to update to 78,690,661). - Assume exchange rate USD to £ is 0.595. a) BCN's La Ventana resource is worth 1.273mt x $6,500 /t = $8.2745bn Op. cost is $2,000/t x 1.273mt = $2.546bn. So allowing for Op. Costs, the La Ventana resource worth = $5.7285bn b) JV#1 resource is worth 2.01mt x $6500/t = $13.065bn Op. cost is $2,000/t x 2.01mt = $4.02bn So allowing for Op. Costs the JV#1 resource worth = $9.045bn c) Thus the combined current resource gross value for La Ventana and JV#1 is $21.34bn. with Op cost of $6.57 gives a combined current net resource value for La Ventana and JV#1 of $14.7735bn. d) Current resource values for REM and BCN from LV and JV#1 above are: BCN is worth (0.7 x $9.045bn) + $5.7285bn = $12.060bn = £7.176bn (GBP). REM is worth (0.3 x $9.045bn) + (0.1219 x $12.060) = $4.1836bn = £2.4892bn (GBP) allowing for REM interest in BCN. So BCN is worth about 3 times REM’s resource value for LV and JV#1. e) So REM current resource value per share is £2.4892 bn / 5.454bn = £0.4564 = 45.64 pence. (Resource value per share, not share price) BCN current resource value per share is (£7.176 bn) / 78,174,752 = £91.79. (Excludes the warrents) So that is the estimate of the current resource values based on the resources which are presently defined at the ‘indicatedR17; stage of grading for the LV and JV#1 concessions. However there is significantly more resource potential in the ground if you check out all the news and we are obviously not finished exploring. However this is still very speculative as the drilling has just started and the results are just coming through. COST NOTES / COMMENTS Regarding any additional costs I assume that all costs are attributed to the mining operational cost of approx $2,000 / tonne. The actual operating costs of $1,958 / tonne stated by BCN in their PEA include all costs attributed to the mining process in the table 13 of Key Operating Cost Assumptions. So in fact no additional costs need to be considered. Further these cost may reduce, as the cost of the Metallurgical process in the PEA was for Pugging with acid, whilst the confirmed Roast Leaching process, which gave battery grade, is thought to cost slightly less, so in fact the cost may come down. In their April 2014 presentation notes REM refer to possible lower costs of about $1,500 / tonne for Fleur and El Sauz, if I read this correctly it was because of the higher grades, so the metallurgy is important. This means any reduction in costs will add leverage to the mine resource value. In a recent interview Colin Orr-Ewing suggests $900 / tonne is possible but it does seem on the low side. However he should know as BCN have built and commissioned a workable pilot plant and have already proved that ‘battery grade’ is possible and has also been independently verified. Therefore if this is the case it will increase the resource value after op costs by 23% and this would be another boost to the company’s potential as we can be more competitive and supply cheaper Lithium thus helping to reduce the price of batteries and cars. The pilot plant has also been utilised to produce Li samples for potential buyers to assess and we await news on this front as presumably the companies are in discussions with potential customers. In the recent interview CO-E also stated they had 40 years supply and it was scalable, however I think the current ‘indicatedR17; resources as defined for the LV and JV#2 concessions and last upgraded to 1.273 + 2.01 = 3.238mt is more than enough to keep battery producers supplied for many years. The JV#2 is just starting to be explored but we have a few subtle hints that it will be large and Section 2 guesstimates the resource potential. As the lithium is at the surface the mining will be open cast and easy and inexpensive to mine. There will be local labour available as we are close to a town and this is likely to be fairly cheap The operating costs in BCN report (PEA) include the following: mining at $2.50 / tonne, mechanisation, trucking, supplying water from the river, natural gas, buildings, electricity, transportation, staff and labour and presumably other overhead costs. Roads were not listed and capital, which is listed, would have to be raised to build the mine and the processing. INVESTMENT NOTES So what investment options are open to BCN and REM? On the question of the concessions, REM have stated they are an investment company and their original intention was not to mine the site but to fully explore the ventures and prove and declare the extent of the resource value, then sell it on. This appears to be different to the BCN approach where it looks as if they are in it for the long haul. However REM may have second thoughts given the massive potential of the Sonora project. More recently DL has in fact tweeted he has a ‘mine to start’ and maybe REM will stay invested up to the start stage then sell once in production when the potential is then immediately apparent to one and all. BCN and REM may receive an attractive contract offers for the ore and stay invested for the duration, which may be for many years to come. In this regard they may negotiate a contract with a financial arrangement to allow implementation of the design and manufacturing to facilitate production and at the same time enable them to extend the Megalit exploration work. In the future they may decide to sell part of the Sonora ventures if the price is attractive enough, retaining a part investment for the future, as it is sure to be a big earner in the years to come. This will help to develop other alternative opportunities and investments etc. It may depend on the level of enticement which may lead to a straight purchase of REM or BCN or a part purchase. If BCN are proceeding to production REM may sell to them or sell to another miner or Tesla, Ford or a Mexican Co. Again it may depend on the enticement to strike a deal. Despite the fact REM are an investment Co, I would like to see the REM and BCN venture go ahead and come to production and realise the full potential of this claim. Although REM may not be a miner they may well retain their investment strategy and add stability to the partnership in the medium term. There is nothing wrong staying invested, when and if, BCN eventually start production, as they have worked together and can possibly reach a further agreement on progressing the mine etc. Sonora after all is a large and valuable resource that does not come along every day. Based on the potential resource value the companies should certainly have no problem raising finance to progress the mining or for REM to make purchases or fund a merger deal with BCN. REM must know where they are going with this and probably BCN too, I'm sure, as DL doesn't positively tweet for nothing or invest in a 12% interest in BCN for nothing. Moneyweek ‘s Bengt thinks nobody has spotted this opportunity and some, excluding myself, have been invested in this for well over a year. It just shows how long it takes to be identified as a potential opportunity and highlights the massive difference between being an explorer and a producer. It all takes time and relatively speaking the JV has come a long way in a short space of time, now all we need is a little patience for the Sonora to be developed. As REM are funded for the Greenland exploration and now have $10 million available (YAGM) and have made an immediate draw down of $3 m, further REM buying into BCN may be on the cards, in particular the increase in JV interest from 30% to 49.9%. Also with the BCN placing and listing on AIM there will be adequate monies available for the joint partners to advance their common exploration and take it forward to a definable and feasible project in order to declare real value / worth in the ground. Albeit they define a small area at a time and slowly but surely continue to add shareholder value. It depends on how fast the current resource requires to be declared and proven through PFS, FS and BFS, or perhaps put another way how quick they will need to extract the ore out of the ground. At least the existing indicated grade is valid for use in a FS or PEA. Although the concessions are large it is not just about the Lithium resource value, as there will be other rare metals discovered on the concessions and some of these have already been documented. Continuation of post 2. POTENTIAL RESOURCE VALUE OF JV#2 BASED ON GUESSWORK (not yet drilled but has commenced with drill results due for the first holes) The following is an attempt to value the resources from what we know; however essentially it still remains GUESSWORK until it is adequately drilled and assayed etc. It has not passed unnoticed that there have been a fair number of indications from the REM board on the potential size of these concessions, particularly JV#2. So I think we have been getting plenty hints re the size of the Sonora Lithium claims. As Sonora has 10 concessions what are they actually worth? On 4 June the respective ‘indicated' resources for LV and JV#1 were upgraded from (0.93 + 1.483) = 2.413mt to (1.273 + 2.01) = 3.283mt. The recent upgrade gave no indication of length covered by the new drilling at La Ventana and Fleur / El Sauz, so the potential resource value will be based on the previous post 4514, i.e. over 10Km of drilling a resource of 2.413mt was achieved with a resource value of $10.66bn. BCN / REM have indicated that the Megalit (JV#2) concession has 4 parallel trending structures extending for a 40Km length with Lithium clay identified on the surface. This amounts to an overall length of 160Km compared to the current drill length of 10Km. (It covers 234,291 acres with 247,451 acres covering JV#1 and JV#2 ). It is hard to comprehend that a resource can extend for 160km or about 100 miles. i.e.approx from Newcastle to Edinburgh. So if these parallel trending sequences of the Megalit concessions are consistent and contiguous fields in line with what has been drilled and with similar Lithium concentrations, is it conceivable that we may be looking at a 16 fold increase on the previously calculated resources of 2.413 mt for the 10Km drilled length. Assuming this is the case and we allow for $2000 operating costs, we have: a) A resource tonnage of 16 x 2.41 = 38.56mt. b) A resource value of 38.56mt x $4,500 / t = $173.5bn or £103.23bn. (GBP). Potentially a very large resource value, but still only guesswork until drilled. Currently Megalit ownership (JV#2) is: BCN own 70% and REM now own 30% and ignoring REM's current 12.19% interest in BCN, the potential resource valuations becomes: c) BCN resource is worth (0.7 x $173.5bn) = $121.5bn (USD) or £72.292bn (GBP). A resource value per share of £72.292bn / 78,174,752 = £924.75 (GBP.) i.e. over 20 years, £46.24 /year. d) REM resource is worth (0.3 x $173.5bn) = $52bn (USD) or £31bn (GBP). A resource value per share of £31bn / 5.4534bn = £5.68 (GBP). i.e over 20 years, 28.4p / year. Allowing for REM interest of 12.19% in BCN ($14.81bn), we have: e) REM resource value increasing from $52bn to $66.8108bn or £39.73bn Combining the LV and JV#1 resource values with the JV#2 guesstimate gives: f) A total resource = 40.973mt and a resource value of £14.773bn + $173.5bn = $188.273bn. g) REM total resource value = $4.1836 + $ 66.8108bn = $70.994bn. h) BCN total resource value = $12.06 + $121.5 = $133.56bn It is obvious that the BCN resource value is almost twice REM and with significantly less shares in issue than REM this will lead to a higher resource value per share. So that's an update on a guesstimate as to the resource value of the JV#2 / Megalit concessions. Remember the JV#2 resource at this stage is just a guess for the time being and purely speculative and only my viewpoint at the moment; however a large drilling program is now being targeted for the Megalit exploration. Note all other REM and BCN projects have been neglected but there may be some news re these resources shortly as progress is being made. A SIMPLIER APPROACH TO ESTIMATE THE POTENTIAL RESOURCE VALUE OF JV#2 (Still uses $10.66bn and not the $14.77bn with the upgrade as unsure of the LV and JV#1 drilled length) A much simpler approach is to consider that we completed drilling over a 10Km length across La Ventana and JV#1 and now have an indicated resource worth of $10.66bn which is equivalent to just over $1bn per 1Km of length. Therefore with the Megalit structures of (4 x 40Km) = 160Km, we have a potential resource value of roughly $160 bn. Nice and easy to remember a Megalit valuation of roughly $1bn per 1Km, but still only guesswork at this stage. The foregoing valuations are only my opinion and may be well wide of the mark with the conjecture / speculation. NOTES ON SPECULATION AND INVESTMENT etc The potential of the Megalit is based on guesswork, yes it is a big guess, but how wide of the mark is the guess? Originally I thought this was pretty ambitious however listening to Kiran Morzaria's presentation at the Investor Show where he talks about the consistency across the parallel structures, he said they could be looking at a 10mt resource, he then followed this up indicating it could possibly be the largest lithium find in the world, so it must be significant. Re the recent LV and JV#1 upgrade to 3.283 mt, if this was over 10km and we have 160km structure, in other words a 16 fold increase, this would be up beside the top Bolivia mines which have a LC resource of about 47mt. So perhaps the 16 fold increase in the LCE resource is not actually that far off the mark. Food for thought and no wonder REM’s DL said he had been waiting 30 years for this and they keep saying it is going to be big. Anyway there is no question that the value of the Sonora concessions are worth significantly more than the current resource value and perhaps it will not be long before a big name / miner snaps up a fantastic and profitable resource at a very cheap price. Hope not just yet. Most probably if it happens, it will happen before REM / BCN completely define the size and value of the large Megalit concession; otherwise the miner / buyer will have to pay us a heck lot more. In the meantime on with progress and further exploration. The only problem I envisage with the exploration is the timescales involved in drilling to prove the extent of the resource. Of course there is nothing to stop them increasing the number of drill rigs deployed. Also once the requisite studies have been undertaken they may decide to commence mining as early as they can, if that was the chosen path, so they can commence production whilst continuing to delineate the concessions. Logically, it is most probable that a contract will be signed with a big name and with an upfront payment that will permit production to commence simultaneously with the huge Megalit exploration continuing for a number of years to come. In due course the on going mapping, trenching and sampling may reveal other lithium bearing finds. They can obviously select their business strategy to maximize the returns on the path they pursue. Regarding pre production, BCN have already commenced engineering design work to scope and design a lithium carbonate plant with the capacity for 35,000 tonnes to 50,000 tones per year of lithium carbonate. Retaining the 12.19% interest in BCN, or increasing this, along with the 2.2% share in WLC will certainly provide useful returns in the future and these are currently worth about $9.17m and $1.26m, a total of $10.43m, handy if REM need the cash. Again repeating myself, the foregoing is purely speculation on the future resource value and is an attempt at valuating what the concessions are potentially worth at this point in time until it is drilled. This is a biggie but the question is how big? If it is not wide of the mark and we can assess with some degree of accuracy all associated future costs involved and we proceeded to mine it, what would the BCN and REM share prices actually be worth in the market place in the future? Section 3 takes a stab at estimating the share price from the NAV / NPV. Needless to say the foregoing highlights the massive potential of BCN as an investment opportunity and it is not surprising that REM have increased their interest in BCN. It is understandable though that REM have sensibly chosen to buy shares whilst they are cheap, now they have exercised the ‘Earn In' option to increase to 30% of JV#2 the likelihood is that this will be REM’s last option to purchase a cheap interest in BCN. It is also interesting to note that whilst the REM and BCN are on the up the WLC share price remained pretty flat until Tesla announced their interest. So why are REM buying an interest in BCN? to get the increased revenue benefit once producing? to achieve a leverage strategy and go for a merger or takeover? to get a seat on the BCN board? to attain an eventual controlling interest in the JV's or even BCN.? REM and BCN must have a strategy in place, but then we are not party to the undisclosed information and negotiations which must have been taken place now they have battery grade samples that can be assessed / tested by potential customers. So given that the current resource value has the potential to increase by a significant multiple and we have a huge and potentially valuable project, the question is; does the partnership mine or not. It’s looking like a yes vote to me unless one or other, or both companies receive a massive offer and REM must surely be thinking about staying invested and opting for the 49.9% interest in the concessions and if they do they may be in for the long term then. We should know by 30 September. Funding is currently available however any thoughts of raising funding through placing etc should not be seen as negative, but a necessity, in order to continue the exploration, assuming that it is warranted. BCN have now raised £4.75 million or (£4.038m) after commission expenses and REM have arranged a $10 million facility through YAGM without any real strings attached. The clear message here is that they apparently arranged funding with relative ease, whereas other exploration companies have not found this route to finance as pain free. The fact that finance can be obtained from independent financiers should prove invaluable when negotiating any pre production contracts and financial packages with potential customers. The funding should be forthcoming given the size and the potential of the resources and additionally the load will be shared 70/30 between BCN and REM. With a contract and money upfront we could bring LV and JV#1 to production, prove up part of the Megalit site and then sell parts off and realise the investment value early. Only one of a number of options open to the partnership. UPDATE –The update on the 4 holes drilled south of El Sauz indicates they are at the edge of the Lithium bearing basin as does the single hole to the east of La Ventana. They now propose a more extensive drilling program on Sonora to provide detailed open pit design information and also to expand the lithium resources into the Megalit. So it looks like the next round of drilling will be very interesting on the Megalit. The Buenavista surface sampling has returned Lithium values up to at 1700ppm in the clay sediments and this is essentially over an area 6km by 1.25km and it is part of the Megalit concession. Putting things into perspective, remember we currently have a resource of 3.283 million tones and without any more exploration this is enough LCE to supply 50,000 tonnes / year to three Tesla type or other factories for 20 years and we currently have a cheaper processing procedure which is a distinct advantage in negotiations. An estimate of the share price for the current resource on LV and JV#1 and also for the potential guesstimated resource on the Megalit is considered below. Just think of the current worth obtained from the drilling results and consider the potential worth we may have in the future given the size of the concessions and the potential value once it is drilled. Yes it is in the future as JV#2 is a huge site which will take a fair amount of time and money to define. Remember there are other projects to also consider for REM and BCN which will further enhance their value. Still trying to appreciate how large these concessions are, no wonder I never sleep. Food for thought and a little patience. Continuation of post 3. ESTIMATE OF NET PRESENT VALUE (NPV) AND SHARE PRICE. The Net Present Value (NPV) and Enterprise Value (which looks at the market cap, the debt and liabilities and cash) are economic measures reflecting the market value of a whole business. Price to earnings ratios P/E are appropriate for many companies, but as mining companies have shorter lives another way to look at the valuation is to examine the NPV. I'm no expert at this but the NPV tries to take into account all of the money flows in and out over a period, say the mine life, and work back to see what the present day value is. If this is worked out and a negative figure is achieved for the NPV, then the project is not worth doing. So let's look at the Net Present Value (NPV) which attempts to value all of the projects future earnings by discounting it back to present day value. Regarding the concept of present value, what would you rather have £100 now or £100 in a years time; of course you would rather have it now as it will be worth £110 in a years time at an interest rate of 10% say. So the discount rate takes account of the value of the potential investment opportunity. A project study works out what the future project value is, now, at the present day value and discounts the figures over a period, the mine life, to allow for the potential investment which would give a return at a realistic % interest rate over the period. This discount rate includes an allowance for the degree of risk associated with the project and the discount is often set at 5% interest + 3% for risk, i.e. 8%. For the La Ventana concession BCN’ issued PEA based their NPV calculations on a LCE resource value of $6000 / t and $1958 /t operating costs over 20 years and at 35K tonnes per year (a 700k tonnes resource) and they calculated a NPV of $848m at a discount rate of 8%. The NPV was calculated for other discount rates also. They also considered a capital cost of $114million for plant, royalties of 3% and 34% tax and these are considered in the NPV estimates given below. (It is unclear if the Mexican government charges a 7.5% royalty, but BCN makes reference to this possibility and also to a 3% royalty to both CO-E and a Rio Tinto Co., and in future this would need to be incorporated in any evaluation). The indicated resource for La Ventana was 930K tonne and as at June it has increased to 1.273 mt. So with the calc based on 700Kt, a fairly large portion of the resource is unaccounted for in terms of value. If the indicated resource is accurate there is 573k tonnes remaining which is effectively another mine with 16 years at 35Kt/year. BCN are already looking at a scoping study for plant to produce a capacity between 35k to 50k tonnes per year. Uncertain of whether there is a limit to the capacity of the plant or what is practical or possible in this situation. I did some initial calculations to compare with the BCN figures. Basing the calculations on the BCN information, for La Ventana, at a discount rate of 8%, I estimated a NPV = $761 million (using what I thought they should be using for the royalty and tax figures) and with the figures they appeared to have used for the NPV, it gave a NPV of $801 million, which is still less than their £848 million value. So maybe these are conservative values for all of the NPVs estimated and referred to below. SHARE PRICE ESTIMATE BASED ON THE NPV CALCULATED BY BCN, AND BASED ON NPV ESTIMATES FOR LV, JV#1 & JV’#2. I don't think I have seen any attempts to value the project in terms of a share price estimate. I have worked out the resource value per share previously but not the share price. Anyway this is my effort as I see it and it is the end result of working out a fair number of NPV for different resource scenarios. Re the Net Asset Value (NAV) and NPV see comments at end of the section. (Essentially this assumes that the working capital, investments, and liabilities etc are small, and so the NPV is equivalent to the NAV which is used to estimate the share price). a) La Ventana - Based on BCN's calculated NPV value of $848 million for 35Kt over 20 years, gives: REM share price of 1.128p (allowing for REM's 12.19% interest in BCN) BCN share price (100% of LV) is £6.45 assuming 78,174,752 new shares. b) La Ventana - A calculation on the NPV for 36 years at 35Kt / year for a 1.26mt resource, discounted at 8%, gave a NPV = $930.3 million and results in: REM share price of 1.237p, (allowing for REM's 12.19% interest). BCN share price (100% of LV) is £7.08 assuming the new shares (78,174,752). . c) La Ventana - Using different figures on LV for a resource of 1.25mt, over 25 years at 50Kt / year, this yields an NPV = $1,264 million and gives: REM share price of 1.681p. (use for Final total as the calc. is based on top end of plant capacity of 50Kt / year). BCN share price (100% of LV) is £9.621 assuming the new shares. So if the REM share price reaches 1.68p this reflects only the La Ventana resources, or REM's share of it. Similarly for BCN if it reaches a share price of £9.62 this is only what LV is worth. d) JV#1 - With an updated resource of 2.01mt, and for a mine life of 40 years at 50Kt / year, (resource of 2mt), the calculated NPV = $1,404 million and is equivalent to: REM share price of 5.904p, including 12.19% interest in BCN. BCN share price is £7.48 assuming the new shares. So from above, based on the La Ventana (c) and JV#1 (d), both 'indicated' resources then: REM projected share price = 1.681 + 5.904 = 7.585p. BCN projected share price = £9.62 + £7.48 = £17.10 To sum these up the Share Price estimate is based on the current resource value of LV and JV#1 only and may apply in the future once the resource is fully proven and declared through the appropriate studies. But the more speculative share price for JV#2 which is based on a guesstimate is now estimated below. So not bad with still the "the biggie" to evaluate, JV#2 made up of the Megalit, Buena Vista and San Gabriel concessions. This is approx. a quarter of a million acres and has 4 trending sequences extending for a length of 40km (a strike length extending for 160Km). e) JV#2 - The drilling on the Megalit concessions has commenced and further drilling is planned. It is assumed that the 4 trending sequences are consistent and contiguous in line with what has been drilled, and they have similar Lithium concentrations, as indicated by REM. As these total 160km in length compared to the 10km already drilled on LV and JV#1, this is a 16 fold increase, so assume that the Megalit structures have a resource potential of 16 x 2.41 = 38.56mt.. But it is only guesswork at the moment. (NB drilling has updated to 3.283mt but unsure of the drilled length, so use 2.413mt (0.93 + 1.483). To estimate a NPV I have considered only one of the 4 parallel sequences / structures or in effect a mine that is one quarter of the potential resources and is equivalent to a 9.6mt resource. For a mine life of 48 years with a resource of 200K t / year, at an 8% discount, this produces a NPV = $5,751 million. This assumes, rightly or wrongly, we have processing plant with 4 x the current planned 50K t / year max capability. (This could be treated as 4 plants / mines on the sequence involving the same capital cost for each). Not sure about the practicalities on the mining plant here, other than it gets the ore out of the ground quicker and therefore helps the share price. This NPV, assuming working cap, invests. and liabilities are small, is the NAV and gives: REM a share price of 24.182p and is an estimate for only one quarter of the JV#2 concession. As indicated previously this is obviously guesswork at the resources until actually drilled, albeit we are getting a few hints at the size of the resources involved. BCN share price for one quarter of the JV’2 concession is £30.64. So if we are confident in the future that we do indeed have 4 proven parallel structures we can apply a multiplication factor of 4 to this, if not, then we can apply the appropriate factor depending on the existence of 1, 2 or 3 lithium bearing clay sequences. Therefore the REM share price assuming we have ALL 4 of the trending sequences on JV#2, would be 4 x 24.182p = 96.728p (assuming this multiple approach is reasonable, given the size of the concession). Also for all 4 sequences, the BCN share price would be 4 x £30.64 = £122.56. So summing up the REM share prices for the 3 ventures (LV, JV#1 and JV#2) we have: Total REM future share price estimate = 1.681 + 5.904 + 96.728 = 104.313 pence. For BCN a total future share price estimate = £9.62 + £7.48 + £122.56 = £ 139.66 (So 78,174,852 x £139.66 = £10917.8998 million or £10.92bn m/cap.) This is very speculative and probably a very long way in the future. For interest, if we just multiply the JV#1 estimated shares price for REM (5.904p) and BCN (£7.48) by a factor of 16 we get for the JV#2 resource: A REM share price = 94.46p and BCN share price = £119.68. I am not an expert but assuming that the methodology is ok that is my attempt to estimate the potential resource values of the concessions and valuate the share price potential. Regarding the Megalit, it of course may not be practicable to mine in the manner assumed. Also how appropriate is to try and assign a value based on scant info, but at least the guesswork approach is documented and is by no means set in clay. Everyone needs to do their own research on this, but on the face of it, it is sure to be a real biggie when the resources are fully defined. A point of interest, mining stocks have a certain amount of leverage and the stocks are often valued at 1.5 to 2.5 times their NAV. One factor is the price of the commodity and any potential increase in the LCE price would add leverage to the value of the mining. For example assuming the operating costs stay the same ($2,000), an increase from $6000 to $7,000 / t which is an increase of 16.7% would increase the resource value and corresponding profit margins from $4K / t to $5K / t or by 25%. Therefore in the future a £1 share would be likely to re rate to £1.25 with the ore price increase. Of course any future valuation depends entirely on the strategy that BCN and REN adopt with regards to further exploration now they have access to a substantial amount of funding. Will they have a short, medium or long term viewpoint? DL said it would possibly be sold in 2 years, but will it and will REM remain in the venture until at least they start to mine. Any guesses? Remember and do your own research, as this is only my take on the current value, the potential value and where the share price is potentially going. However remember the price of a resource in the ground will always be a lot less that any prediction or estimation. BACKGROUND NOTES ON THE VALUATION. (Info) It is hard to take a company which is not producing and look at it objectively with a view to assessing if it is currently a good investment for others. It is easier when it is only for your own use, but nevertheless the exploration process still has to be done. In the first instance it is hard to evaluate an exploration company when they are not producing, but by their very nature miners tend to be speculative buys, that is until the ground drilling and later feasibility and bankable studies are undertaken that indicate otherwise. Until this happens the Miners are often valued at levels well below the in ground value as they have no real resource identification. But rather than adopt the attitude that, as they are not producing, they are therefore not worth anything, perhaps it is worthy to at least attempt to assign a value on the share price, even if it is speculative due to the lack of exploration results. It may at least indicate that the company is progressing reasonably well with what has been explored and as the resources are slowly defined, or otherwise, a valuation update can be adjusted or re-estimated according to each set of assay results returned. So if they define across different areas we can add them all up to obtain a current valuation for the project based on their NPVs. So this was all about attempting to attach some sort of potential value to the share price for BCN and REM. In the Current Valuation section the LV and JV#1 exploration are advancing and are at an 'indicated' resource stage with just over 10km drilled. However remember we are not as far advanced in JV#2 and it was only my take on a guesstimate on the resource until it is drilled and defined and only when we achieve ‘measured' and ‘reserve' grade categories are we heading towards real value. The more we define the resources, the more we increase our valuation and potential price /worth to any possible buyers. Note also in the Potential Value section it refers to the resource value per share and not the share price. My effort to value the share price was covered above in this NPV section. Notes / comments on the NPV and NAV with regards to the above estimates: The NAV = aggregated NPVs + Working Capital + Investments + Hedgebook value - Liabilities. For example, assume REM is fully costed for 2014 and that as they have working capital of £5m, there are no liabilities. Also any increase in cash due to draw down from the $10m YAGM facility they have available e.g. $3m, is cancelled by an increase in the corresponding liabilities. Assume BCN investment is included in NPV and estimate REM's 2.2% investment in WL is approx $1.3m (£0.775m). Value of Hedge book is zero. (as unknown). Then NAV = aggregate of NPV + £5.0m + £0.775m + 0 - 0 = NPV's + £5.775m So a valuation of £100m for the NPV will only increase the NAV by 5.77%. Therefore as the working capital and investments are low (as far as I know) compared to the NPV, the share price will only be slightly higher based on the NAV, hence the share price calculations above have been estimated using the NPV only. Continuation of post. 4. ESTIMATE ON THE VALUE OF NEODYMIUM OXIDE RESOURCE AT YANGIBANA AND A ROUGH ESTMATE OF THE VALUATION OF THE TREOs (from a previous exploration) This is based on the RNS issued on 5th August, and calcs. the value of the Yangibana Neodymium oxide resource, however as the total TREO list was not supplied an attempt was made to value the TREOs based on the ppm as listed in the previously explored information on the Hastings’s website. Yangibana - Neodymium value from the 5th August JORC. There are 1.86 mt ‘indicatedR17; TREOs at 1.38% and 1.5 mt ‘inferred̵7; at 1.29% which is equivalent to 45.018 million Kg. For the Neodymium we have: Total in tonnes = 3.36 million tonnes Total in Kg = 3360 million kg Neodymium oxide = 2700 ppm or 0.27% of Nd(2)O(3) Neodymium amount = 9.072 million Kg Price is $68/Kg = $616.896 million USD REM share is 30% = $185.0688 million USD REM share in £ = £110.115936 million GBP Shares (million) = 5453.375717 Resource value/sh = 2.019 pence So in terms of the resource value per share the Neodymium alone is worth 2p. If the rest of the TREOs are priced the same we have about 5 times this resource value, but overall they are possibly less in price. A list of the elements is not given in the recent update; however a check can be made on the previous exploration information on the Hastings website which lists the TREOs and ppm. So just for interest and an attempt to value all of the TREOs, I will use the info as given in Hastings Previous Exploration albeit it is old data. This lists the TREOs and their ppm and has a resource tonnage of 3.5 million tonnes. Based on this table and TREO prices at 14/8/2014 from ‘’ the calculation yields the following resource valuation: Yangibana TREOs are worth a total of $2,258.039 million and REM’s 30% share is worth $677.4117 million or £403.06 million giving a total resource value per share of 7.39 pence. (but based on previous exploration data). So from this, it is not just the Neodymium, (which is used for magnets and electronic components), that will add value to the Yangibana project . Other highlights indicated that the upgraded resource covers only 825 metres of strike length to a maximum 400 metres down-dip to a maximum vertical depth of 100 metres below surface. The resource remains open in all directions with mineralisation cropping out to the east and west. The work is to continue in September with additional reverse circulation and diamond drilling to commence in Q4 on neighbouring targets within the 550 Sq km tenements at Yangibana. Also note that Metallurgical work will commence in the near future to determine the potential to recover the target mineralization within the deposit but preliminary studies suggest there is a potential to produce saleable products. I notice that they have also completed a scoping study to confirm the economics of the project. So on top of the previously calculated resource values for Sonora, we have an additional resource value per share of 7.4 pence for the TREOs. The likelihood is the resources and resource values of both projects will increase with time as exploration advances and the resources are defined. 5. SUMMARY OF CALCULATIONS A. Current Resources for LV and JV#1 i) We have a resource for LV of 1.273mt, after costs worth $5.728bn. ii) We also have a resource for JV#1 of 2.01mt after costs worth $9.045bn. iii) A total resource for LV & JV#1 concessions of 3.283mt, worth $14.773bn. iv) From these REM resource worth is $4.183bn and BCN is worth $12.06bn. v) From this REM has a resource value per share of 45.64p and BCN resource value per share is £91.79. B. Potential resource for JV#2 (the Megalit, Buena Vista and San Gabriel) i) Potential resource is approx 16 times the 2.41mt (LV and JV#1 resource) which is 38.5mt (based on guesswork and in the future). ii) At $6500-$2000 = $ 4500/tonne, this is worth £173.5bn. iii) BCN 70% resource is worth $121.5bn or £72.293bn GBP. iv) REM 30% resource is worth $52bn or £31bn. v) REM resource including 12.19% interest in BCN is worth $66.81bn or £39.73bn. C. Combined current and potential resources i) For LV, JV#1 and JV#2, the resource is 41.8433mt and worth $173.5 + $14.773 = $188.273bn. ii) REM is worth $4.183 + $66.811 = $70.994bn. iii) BCN is worth $12.06bn + $121.5bn = $133.56bn. i.e. almost twice REM and REM have 5453.4 million shares whilst BCN have 78.175 milllion (New) shares. D. Future share price estimate from NPV. (w/cap, invest. and liabilities etc, low cf NPV, so assumes NPV = NAV) i) LV - For REM interest in BCN, using BCN's NPV of $848m, the share price is 1.128p. BCN share price is £6.45. ii) LV - For REM interest in BCN using NPV of $1264m, the share price is 1.681p. BCN share price is £9.62. iii) JV#1 - For REM interest (38.533%) using $1404m, the share price is 5.904p. BCN share price is £7.48. iv) LV and JV#1 for REM the combined share price is 1.681 + 5.904 = 7.585p. BCN combined share price is £9.62 + $7.48 = £ 17.10. v) JV#2 - For REM the share price is 96.728p but guesswork and needs to be drilled fully. BCN share price is £122.56. vi) From the total for the 3 concessions, the REM share price is 1.681 + 5.904 + 96.728 = 104.313 pence. For BCN the combined share price is £9.62 + £7.48 + £122.56 = £139.66. E. Yangibana - Estimate of the Neodymium Oxide and TREO valuation (Previous exploration results) i) Neodymium resource 3.36mt at 2700ppm is worth $616.9m USD and REM’s share is £110m GBP with a resource value of 2.02p per share. ii) TREOs total resources are valued at $2.2258bn and REM’s share is worth £403m GBP with a resource value per share of 7.4p. F. BCN’s Magdalena Borate Resource i) BCN calculated a NPV of $113m USD, which on the same basis as the previous NPV/NAV calcs, would roughly equate to a share price in the region of 86p. Remember the potential resources on the Megalit (JV#2) are based on guesswork and need to be fully defined in the future. Also the current indicated resources for LV and JV#1 require upgrading through the relevant studies to declare an ore reserve. LV has had a PEA. Food for thought and just think we have not considered the mud byproduct from the clay for drilling purposes, or any of the other mineral elements that are in the Sonora ground; not to mention the possible resources at Yangibana and Greenland, all still to come and these too are likely to expand in size. Please DYOR. GLA Gil
Bacanora Lithi. share price data is direct from the London Stock Exchange
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