Lithium Miner Says Market Fears Waning as Funding Hunt Resumes

After hitting heavy resistance last year in its search to raise capital, junior miner Bacanora Lithium Plc believes the time is right to resume its hunt.

In July, the London-based company pulled a $100 million share sale designed to finance construction of Mexico’s first lithium mine. Now Bacanora’s chief executive officer says investor appetite is back following months of uncertainty over prices as well as fears of oversupply for the mineral essential to power electric vehicle batteries.

“This massive oversupply hasn’t occurred -- people have got over that fear,” Peter Secker said Tuesday by phone. “We think it’s a good time to go back to equity markets and raise the rest of the money we need to build the project.”

The market seems to have renewed confidence. Though Bacanora’s shares are down 73 percent since they started trading about a year ago when lithium prices were about to reach historic levels, Bacanora Lithium jumped 47 percent last week as the company announced it was in discussions with potential investors.

Tight Balance

The sharp reaction came as established miners have struggled to meet booming demand for lithium and newcomers suffered setbacks to raise funding and start producing. The market is in tight balance, with no significant volumes expected to come online in the short term and demand set to rise more than 10 percent per year, said Daniela Desormeaux, CEO of consultancy firm SignumBOX. The decline in prices has more to do with normalization in the market than with fundamentals worsening, she said.

“Lithium prices are stabilizing now and this is certainly a better time to raise funding than six months ago,” said Christopher Perrella, an analyst at Bloomberg Intelligence. “A good chunk of the easily accessible, most economic lithium has already been extracted, so there’s going to be a need for small-scale greenfield projects going forward.”

Major Projects

Ambitious expansions by industry leaders Albemarle Corp. and Soc. Quimica y Minera de Chile SA in Chile, as well as by several miners in Argentina, haven’t brought new production to the market as fast as expected, Secker said. That creates an opportunity for greenfield mines such as Bacanora Lithium’s Sonora project. The $460 million mine could start producing as early as July 2021 if it can close funding during the second quarter and begin construction in July, he said.

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