Bacanora Minerals has secured $150m in debt funding from London’s Red Kite fund to develop its lithium project in Mexico.
The London-listed company said the facility with RK Mine Finance, a subsidiary of Michael Farmer’s Red Kite hedge fund, was at “competitive rates.”
“We believe that senior debt facilities of this size have been few and far between in the junior resource space in recent years,” Bacanora’s chief executive Peter Secker said. “Furthermore, we consider that the costs and terms of the Facility are highly competitive when compared to other debt packages that have recently been reported for greenfield lithium projects in Canada and Australia.”
The $150m facility is structured as two separate Eurobonds. A $136m bond will have an interest rate of 8 per cent above the three month Libor rate for six years, Bacanora said. A separate $56m bond will have a 20-year term and be repaid by reference to monthly production of lithium at a rate of $160 per tonne of lithium produced.
In addition Bacanora will grant 6m warrants exercisable over five years at a 20 per cent premium to the 20-day volume-weighted average price of the company’s shares.
Still, analysts at Numis said the cost of the debt was more expensive than they had anticipated.
“Whilst it is positive that Bacanora has secured debt the first bond is more expensive than we had previously envisaged with the second bond being more like a very expensive stream,” they said. “We remain cautious on the shares given both the significant amount of funding that the company still needs to secure and the uncertainties set out above.”
Bacanora still needs around $300m to develop initial operations at the Sonora lithium project producing 17,500 tonnes of lithium a year, according to analysts at Canaccord.
Bacanora is continuing financing discussions with Japanese trading house Hanwa, a shareholder in the company, as well as “other strategic, long term investors for the additional funding,” it said.
Source: FT.com
