Bacanora Minerals : Investments by SGRF of Oman & Hanwa

RNS Number : 7685U Bacanora Lithium PLC 16 July 2018

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Bacanora Lithium plc / Index: AIM / Epic: BCN / Sector: Natural Resources

Bacanora Lithium Plc ("Bacanora" or the "Company")

Investments by State General Reserve Fund of Oman ("SGRF") and Hanwa

Bacanora Lithium plc,the London listed lithium company, is pleased to announce it has agreed condi!onal strategic investments from the State General Reserve Fund of Oman, the sovereign wealth fund of the Sultanate of Oman and from Bacanora's off-take partner, Hanwa Co., LTD ("Hanwa"), for a combined total of US$90m ('the Investments').

The Investments comprise US$65m from SGRF and US$25m from Hanwa and are part of the proposed funding package for the development of an ini!al 17,500 tpa lithium carbonate ("Li2CO3") opera!on at the Sonora Lithium Project in Mexico ("Sonora" or the "Project") and are condi!onal on the full US$460m construc!on funding required for the Project ("Construc!on Funding") being in place. These investments follow on from the US$150m senior debt facility previously secured with RK Mine Finance, one of the leading specialist mining lenders.

Concurrently to this announcement, the Company has launched a placing for US$100m (the "Placing"), the gross proceeds of which will be used to commence the construction phase of the Project.

Highlights

• · SGRF's commitment to condi!onally invest US$65mupon comple!on will further validate Sonora's poten!al to become a leading supplier of high value lithium products to fast-growing industries, such as electric vehicles and energy storage, and once completed will significantly strengthen Bacanora's funding plaCorm for the construction of a 17,500tpa Li2CO3 operation

• · Hanwa's stated inten!on to condi!onally invest US$25m upon comple!on will further validate the quality of baDery grade (+99.5%) Li2CO3 produced at Sonora and upon comple!on will secure access to the Japanese market

• · The Investments follow the US$150m senior debt facility secured with RK Mine Finance, one of the leading specialist mining lenders - see announcement of 4 July 2018

• · Upon comple!on the Investments will bring the combined equity and debt funding commitments secured to date to US$240m - 52% of the US$460m required for Stage 1 produc!on of 17,500 tpa of Li2CO3 at Sonora, comprising US$420m capital costs and US$40m for working capital

• · SGRF's commitment is alongside an off-take agreement which, upon comple!on of the investment will provide SGRF with the op!on to buy 10,000 tpa of Li2CO3 once capacity at Sonora is expanded to 35,000 tpa of Li2CO3 as part of Stage 2 of the Project

• · The Condi!onal Strategic Investments follow the favourable Feasibility Study which assigned a pre-tax US$1.253 billion NPV8 to a 35,000 tpa baDery grade Li2CO3 opera!on at Sonora; a pre-tax Internal Rate of Return of 26.2%; and Life of Mine operating costs of US$3,910/t of Li2CO3

Bacanora CEO Peter Secker said:"The proposed US$90 million investments from blue chip investors of the calibre of SGRF and our exis!ng strategic partner, global trading company Hanwa, is a clear endorsement of Sonora's creden!als to become a low-cost producer of high value lithium carbonate. The US$150m debt facility already secured from RK along with the proceeds of the Placing will provide us with an excellent plaCorm with which to complete the funding package by early 2019. Importantly, by launching our Placing today we are aiming to be in a posi!on to embark on the construc!on phase at Sonora in Q3 2018, targe!ng first produc!on in Q1 2020. Bacanora remains on track to become a significant major supplier of baDery grade lithium carbonate and I look forward to providing further updates on our progress."

SGRF strategic investment

SGRF has entered into a Strategic Investment Agreement ("SIA") with the Company whereby it has agreed to make a US$65m equity investment at the !me of, and condi!onal on the Company securing the Construc!on Funding. The agreement is also condi!onal, amongst other things, on the par!es agreeing the subscrip!on price, no material adverse change to the Bacanora group, and renewed shareholder authori!es if required for the issue of the subscrip!on shares. At the !me of its investment, SGRF would be granted certain shareholder rights, including the right to appoint a non-execu!ve director to the Board (subject to the approval of the Company's Nominated Adviser), and certain commiDees, the right to veto candidates for certain execu!ve posi!ons (subject to the opinion of its Nominated Adviser) and a pre-emp!ve right in rela!on to further fundraisings. SGRF has also agreed not to sell any of the shares issued to it on comple!on in the following year. In addi!on, the Company has agreed that in the event at any !me prior to comple!on of SGRF's investment there is a takeover of the Company, they will reimburse SGRF all third party costs, charges and expenses incurred in connec!on with the prepara!on for and implementa!on of the arrangements connected to its proposed investment, up to a maximum amount of US$2 million, less any costs previously paid.

In addi!on to the SIA, Bacanora and SGRF have also entered into an Off-take Agreement subject to the same condi!onality as the SIA. The key terms would be an off-take op!on to purchase up to 10,000 tpa of lithium carbonate produced (with a reasonable endeavours obliga!on to increase this by a further 3,000tpa) at the Sonora Project predominantly during Stage 2 for a period of 10 years from the date on which Stage 2 is achieved.

About SGRF

SGRF is a sovereign wealth fund of the Sultanate of Oman. It was established in 1980 by Royal Decree 1/80 with the objec!ve of achieving long term sustainable returns on revenues generated from oil and gas that are surplus to the Sultanate's budgetary requirements. On behalf of the Sultanate of Oman, SGRF manages the reserves placed in its care to achieve the best possible long term returns with acceptable risks, through inves!ng in a diversified porColio of asset classes in more than 25 countries worldwide.

Hanwa

In accordance with its exis!ng shareholding, Hanwa has stated its intent to make an investment in new ordinary shares in the Company for a total considera!on of US$25m at the !me of, and condi!onal on the Company securing the Construction Funding.

Hanwa is an exis!ng cornerstone investor in Bacanora and has a long-term take or pay lithium off-take agreement with the Company for the Stage 1 lithium carbonate produc!on from Sonora. In addi!on, Hanwa has agreed to extend the 17,500 tonne Stage 1 take or pay off-take for a further 5 years, to a total term of 10 years.

This announcement contains inside informa on as s pulated under the market abuse regula on (eu no. 596/2014). upon the publica on of this announcement via regulatory informa on service this inside informa on is now considered to be in the public domain.

**ENDS**

For further information please visitwww.bacanoralithium.com or contact:

Bacanora Lithium plc	Peter Secker, CEO	[e-mail]
Cairn Financial Advisers LLP, Nomad	Sandy Jamieson / Liam Murray	[phone]
Canaccord Genuity Broker	Martin Davison / James Asensio	[phone]
St Brides Partners Financial PR Adviser	Frank Buhagiar / Megan Dennison	[phone]

Notes to Editors

Bacanora Lithium is a London listed lithium explora!on and development company (AIM: BCN). The Company's a primary focus on the Sonora Lithium Project. The Company's opera!ons are based in Hermosillo in northern Mexico. The Company is led by a team with lithium expertise and a track record in mine development and production.

The Sonora Lithium Project , which consists of ten mining concession areas covering approximately 100 thousand hectares in the northeast of Sonora State. The Company, through drilling and explora!on work to date, has

[1]

established a Measured plus Indicated Mineral Resource es!mate of over 5 Mt (comprising 1.9 Mt of Measured Resources and 3.1Mt of Indicated Resources) of LCE2 and an addi!onal Inferred Mineral Resource of 3.7 Mt of LCE.

The Company's Feasibility Study (which was announced 12 December 2017) has established Proven Mineral Reserves (in accordance with NI 43-101) of 1.67 Mt and Probable Mineral Reserves of 2.85 Mt LCE and confirmed the economics associated with becoming a 35,000 tpa lithium carbonate and 30,000 tpa SOP producer in Mexico.

[1] The Sonora Lithium Project is comprised of the following lithium proper!es: La Ventana lithium concession, which is 100 percent owned by Bacanora and El Sauz and Fleur concessions, which are held by Mexilit S.A. de C.V. ('Mexilit') which is owned 70 percent by Bacanora and 30 percent by Cadence Minerals Plc.The Project also includes three other lithium concessions, Buenavista, San Gabriel and Megalit, which do not form part of the Feasibility Study, and are held by Megalit S.A. de C.V, which is owned 70 percent by Bacanora and 30 percent by Cadence Minerals Plc.

2 LCE = lithium carbonate (Li2CO3) equivalent; determined by mul!plying Li value in percent by 5.324 to get an equivalent Li2CO3 value in per cent. Use of LCE is to provide data comparable with industry reports and assumes complete conversion of lithium in clays with no recovery or process losses.

FORWARD LOOKING STATEMENTS:

Except for statements of historical fact, this news release contains certain "forward-looking informa on" within the meaning of applicable securi es law. Forward-looking informa on is frequently characterized by words such as "plan", "expect", "project", "intend", "believe", "an cipate", "es mate" and other similar words, or statements that certain events or condi ons "may" or "will" occur. In par cular, forward-looking informa on in this press release includes, but is not limited to the holding of an annual and special mee ng, the delivery of materials to shareholders in respect of such mee ng, the comple on of the Transac on and the delis ng of the Company's common shares from the TSX Venture Exchange. Although we believe that the expecta ons reflected in the forward-looking informa on are reasonable, there can be no assurance that such expecta ons will prove to be correct. We cannot guarantee future results, performance or achievements. Consequently, there is no representa on that the actual results achieved will be the same, in whole or in part, as those set out in the forward-looking information.

Forward-looking informa on is based on the opinions and es mates of management at the date the statements are made, and are subject to a variety of risks and uncertain es and other factors that could cause actual events or results to differ materially from those an cipated in the forward-looking informa on. Some of the risks and other factors that could cause the results to differ materially from those expressed in the forward-looking informa on include, but are not limited to: commodity price vola lity; general economic condi ons in Canada, the United States, Mexico and globally; industry condi ons, governmental regula on, including environmental regula on; unan cipated opera ng events or performance; failure to obtain industry partner and other third party consents and approvals, if and when required; the availability of capital on acceptable terms; the need to obtain required approvals from regulatory authori es; stock market vola lity; compe on for, among other things, capital, skilled personnel and supplies; changes in tax laws; and the other risk factors. Readers are cautioned that this list of risk factors should not be construed as exhaustive.

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