Bacanora Lithium PLC (BCN.L) Proposed sale of holding in Zinnwald

Proposed sale of holding in Zinnwald Lithium Project to Erris Resources Plc

Bacanora Lithium plc (AIM: BCN), a lithium exploration and development company, is pleased to announce the proposed sale of its 50% shareholding in Deutsche Lithium GmbH (“DL”), to Erris Resources Plc (“Erris”) in exchange for new shares in Erris and a net profit royalty (the “Proposed Transaction”).

The main asset owned by DL is the Zinnwald Lithium Project (“Zinnwald” or the “Project”), located in Germany, which would become the sole focus of Erris and its management team going forward. The Proposed Transaction will allow Bacanora to focus wholly on bringing its world class Sonora Lithium Project (“Sonora”), located in Mexico into production, maximise shareholder return on the investment to date in Zinnwald; generate a clear see-through value for its shareholders; and lead in turn to Zinnwald being brought to production by a new, dedicated management team.

Completion of the Proposed Transaction is subject to certain matters including the completion of an appropriate sale and purchase agreement, the approval by Erris shareholders at a general meeting to be convened in due course (“GM”), the raising of an appropriate level of equity by Erris through a placing (“Placing”), the grant of a Rule 9 waiver by the Takeover Panel in respect of the proposed issue of new shares to Bacanora and the admission of the enlarged share capital of Erris to trading on AIM.

While negotiations are at an advanced stage, there is no guarantee that a final agreement will be reached.

Highlights

· Bacanora will be selling its 50% share in DL plus €1.35m cash in exchange for new shares in Erris, giving Bacanora a 70% ownership stake in Erris and a net profit royalty. This percentage ownership will reduce as Erris will be raising additional funds by means of the Placing as part of the process in order to accelerate the further development of Zinnwald.

· The €1.35m cash component of the Proposed Transaction primarily reflects the guaranteed investment in Zinnwald that Bacanora was already committed to, under the second amendment to the joint venture agreement (“JV”), signed with SolarWorld AG (“SolarWorld”) in February 2020 as well as to cover a portion of transaction costs.

· The remaining 50% of DL is owned by the administrators of SolarWorld which entered administration in August 2017.

· The transaction will be a Reverse Takeover (“RTO”) under AIM Rules, and will therefore be subject to the approval of Erris shareholders at a general meeting. Erris intends to publish an Admission Document shortly and will call a GM to seek the approval of the Proposed Transaction.

· In accordance with AIM Rule 7, Bacanora will be subject to a lock-in period during which it cannot dispose of its shareholding in Erris for one year from the date of admission of Erris shares to AIM following the GM.

· Bacanora will also enter into a relationship agreement with Erris whereby it will undertake that, for so long as it is interested in more than 25% of Erris’s voting share capital, it will not act to unduly influence Erris or the Erris board and will ensure that transactions entered into with Erris are on an arms’ length basis.

· Following the RTO, Bacanora will have two Board representatives out of a total of six at Erris.

· In connection with the Proposed Transaction, Deutsche Lithium has today published a re-dated NI 43-101 Technical Report to its Feasibility Study, and a copy will be posted on Bacanora’s website at https://www.bacanoralithium.com/investor-relations/technical-reports/.

Rationale for the Proposed Transaction

· Zinnwald’s ownership by a public vehicle will allow access to capital markets in order to support the development of this Project, separate to that of Sonora, and allow Erris to fast track the development of the Zinnwald project to meet the high demand for lithium batteries for the fast developing German electric vehicle industry.

· Erris comes with an experienced management team that will be solely focussed on Zinnwald going forward:

o Anton du Plessis, Chief Executive Officer (“CEO”) – more than 20 years’ banking experience with CIBC, Merrill Lynch and Morgan Stanley focussed on the mining sector. Prior to banking, he worked for Anglo American in corporate finance and business development.

o Cherif Rifaat, Chief Financial Officer (“CFO”) – experienced CFO with Mining, Technology and Property companies. He has been corporate adviser to Bacanora since its AIM IPO in 2014 and currently serves as its Company Secretary.

o Jeremy Martin, Chairman – one of the founders of Erris. He is CEO of AIM-listed Horizonte Minerals Plc, which is at post Feasibility stage on a large Nickel project in Brazil. He is a member of the Society of Economic Geologists and the Institute of Mining Analysts.

o Graham Brown, non-executive director – a 40-year mining industry veteran and former head of the Base Metals Exploration Division and Group Head of Geosciences for Anglo American. He is currently a senior adviser to Appian Capital.

· Erris has cash on its balance sheet and other exploration assets within its portfolio, alongside the proceeds of the Placing, which will be needed to advance the Zinnwald project to a development stage.

· Erris has a strong shareholder register, including Osisko Gold Royalties, which currently owns circa 16% of Erris.

Peter Secker, CEO of Bacanora said:

“The Proposed Transaction ensures that the development of Zinnwald, which is strategically located in Germany with immediate access to the German and wider European automotive and downstream lithium chemicals industries, can be accelerated and Zinnwald will get the full attention it deserves. Bacanora’s commitment has always been to realise shareholder value from Zinnwald, and spinning it out into a separately listed vehicle will allow us to achieve this.

The Erris management team are of an extremely high calibre and we are confident that this is the best outcome for Bacanora’s shareholders, who will in turn become indirect shareholders in Erris. Zinnwald is an excellent project and we look forward to seeing it come to production under Erris’ ownership.”

Notes to editors

Bacanora Lithium Plc is an AIM-listed (ticker ‘BCN’) lithium development and exploration company. The Company owns assets in Mexico and Germany. It is focused on building, in collaboration with its major shareholder and offtake partner, Ganfeng Lithium (the world’s largest lithium metals producer), a 35,000 tonne per annum open pit lithium carbonate operation at its flagship asset, the Sonora Lithium Project in Mexico. The Sonora Lithium Project has 8.8 million tonnes of lithium carbonate (Li2CO3) equivalent resources, with an approximate 250-year resource life, as detailed in its December 2017 Feasibility Study.

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