The Chinese lithium-ion battery producer has taken significant stakes in two U.K. entities associated with a mine which could hold up to 8.8 million tons of the raw material in clay deposits.
Jiangxi-based lithium battery manufacturer Ganfeng Lithium has splashed almost £22 million ($27.8 million) on a stake in the Sonora lithium clay mine in Mexico.
As concerns mount about the socio-economic cost of extracting limited lithium resources around the world – the EU is touting a strategy to launch a manufacturing industry for ‘sustainable’ energy storage batteries – Hong Kong listed Ganfeng has taken a stake in the British company with rights to the Mexican mine.
An update to investors published on Saturday touted the lithium clay deposits at the Sonora mine as offering speed of lithium extraction similar to that of working ore allied with the low cost of producing the material from salt lake brine
Ganfeng, which is based in Xinyu City and claims to have been the world’s largest lithium metals producer in 2017, will pay £14.4 million for a 29.99% holding in loss making London-based company Bacanora. The Chinese company will pay a further £7.5 million for a 22.5% stake in Bacanora lithium clay subsidiary Sonora, with an option to raise its holding to 50% in future.
Estimated lithium deposits
A report on the Mexican mine by SRK Consulting (UK) Ltd has estimated a total lithium carbonate equivalent of 8.8 million tons.
The mine is yet to start full operations but a company spokesperson told pv magazine it “has been producing 99.5% and higher battery grade lithium carbonate for over four years in a pilot plant in Heromosilo, Mexico. This [lithium] has been shipped to potential customers in Asia and has been rated as some of the best they have received for testing.”
Bacanora lost $12.8 million in the 12 months to June 2018 plus a further a $4.3 million loss to the end of last year.
The company expects to extract 17,500 tons of lithium in the first phase of operations at Sonora and Ganfeng’s share purchase will secure it offtaker rights to half of that output. The Chinese company would then have the right to raise its entitlement to 75% of the as yet unspecified capacity produced in the second phase of mining operations.
Investors are betting on the relatively small number of nations with extensive lithium deposits ensuring the commodity will offer a high return as the transition to electric vehicles – powered by lithium-ion batteries – gathers pace. However, extensive research is being conducted around the world into the development of battery chemistries with a potentially less harmful ecological footprint.
This story was amended on 02/07/19 to include Bacanora’s comments and remove references to the Sonora mine being untested.