VSA Morning Miner, 25/11/19
Bacanora Lithium (LON:BCN)
Bacanora Lithium (BCN LN) has announced that it has raised GBP7.7m (US$10m) at a price of 25p/sh. through the issuance of 30.92m shares. The placing made at the request of one of the company’s key institutional shareholders underpins the support for the project beyond that of Ganfeng. M&G will, as a result of the placing, increase their position to 19.9% which we view as a significant endorsement of the company’s strategy in particularly in relation to successfully bringing on board Ganfeng Lithium. Our valuation is calculated on a fully diluted basis and therefore our target price is only marginally impacted by the placing and we reduce it by 1.8% to 112p/sh.
Ganfeng recently completed their investment of 29.9% into the topco and 22.5% at the project level highlighting the validity of the key parameters of the project; the genuine capability to produce battery grade lithium at low cost and with a significant resource into which the project can be expanded to meet the rising demand for lithium.
With the additional funds BCN will commence site earthworks in H1 2020 with an upgrade to the primary access road. Furthermore, BCN will be able to place orders for long lead items which is also due to commence in H1 2020 post the Ganfeng review of the plant design and processes. This may result in cost savings through Ganfeng’s ability to leverage its own relationships with equipment suppliers in China.
The successful completion of the project financing is the major upcoming milestone for the company and today’s announcement which strengthens the positions of the company’s strategic shareholders highlights to us that the company is making strong progress towards executing the full package.
We reiterate our Buy recommendation although reduce our target price to 112p/sh.