Ganfeng Lithium chases Bacanora in US$265m deal

Shares in lithium explorer and developer Bacanora Minerals (LSE: BCN) jumped as much as 38% on May 6 after China’s Ganfeng Lithium, one of the world’s top lithium producers, offered the company to buy the shares it does not already own for up to £190 million (US$264.5 million).

The deal, which values Bacanora at up to around £267 million (US$371 million), comes as prices for lithium surge due to booming demand for electric vehicles, where the chemical is used in rechargeable batteries.

Ganfeng, which in February announced a plan to raise its stake in Bacanora to 28.88% from 17.41%, will acquire the remaining shares in the company at 67.5 pence each, a joint statement said. The increase in Ganfeng’s stake to 28.88% is expected to complete shortly, it said. The unofficial offer represents a nearly 50% premium to Bacanora’s closing share price on May 5.

Bacanora’s independent directors said the offer was attractive, and said they plan to recommend it once it becomes a formal proposal, which requires approval from the Chinese authorities.

Prices for lithium in China have jumped more than 100% so far this year, according to Benchmark Mineral Intelligence on the back of an expected demand increase from the EV sector.

Ganfeng, which already has a 50% stake in Bacanor’s Sonora project in Mexico, holds interests in mines in  Australia, Argentina and Canada. In addition, it has around 70,000  tonnes of lithium carbonate equivalent of annual conversion capacity in China.

The Sonora mine, forecast to begin production in 2023, will produce 35,000 tonnes of lithium per year once in full production.

A report published by the International Energy Agency (IEA) on May 5, recommended that governments start stockpiling battery metals, and noted that demand for lithium could increase forty-fold in the next 20 years.

Fatih Birol, IEA’s executive director, said this would become an “energy security” issue. China dominates lithium processing. Global supply comes largest from Australia and Chile.

Ganfeng, incorporated in Shanghai, is a wholly owned subsidiary of Ganfeng Holdco, and describes itself as the “world’s third-largest, and China’s largest, lithium compounds producer and the world’s largest lithium metals producer in terms of production capacity.” Gangfeng Holdco’s operations, include “upstream lithium extraction, midstream lithium compounds and metals processing, as well as downstream lithium battery production and recycling.”