Bank of China provides buyer's credit loan for Phase 1 of Sonora Lithium Clay Production Plant Construction Project

Bank of China provides buyer's credit loan for Phase 1 of Sonora Lithium Clay Production Plant Construction Project On June 28, 2019, Bacanora Lithium Plc — the owner of Sonora Lithium Ltd (a project company responsible for the Sonora Lithium Clay Production Plant Construction Project in Mexico) — announced that it and Ganfeng International Trading (Shanghai) Limited had entered into an investment agreement and a joint venture agreement.

On the same day, Jiangxi Ganfeng Lithium Co., Ltd. entered into a long-term offtake agreement with Bacanora Lithium Plc.

Under the investment agreement, Ganfeng International Trading (Shanghai) Limited subscribed for a 29.99 percent equity interest in Bacanora Lithium Plc for a cash consideration of £14,400,091.

Under the joint venture agreement, Ganfeng International Trading (Shanghai) Limited acquired an initial 22.5 percent interest in Sonora Lithium Ltd for a cash payment of £7,563,649.

Ganfeng International Trading (Shanghai) Limited was also granted an option to increase its equity interest in Sonora Lithium Ltd to up to 50 percent within 24 months of the completion of this investment.

Ganfeng International Trading (Shanghai) Limited subsequently exercised its option and the joint venture agreement was amended on February 1, 2021, such that, conditional on Ganfeng International Trading (Shanghai) Limited subscribing a cash consideration of £21,883,485 to increase the shareholding of Ganfeng International Trading (Shanghai) Limited to 50 percent of the enlarged issued share capital of Sonora Lithium Ltd.

Under the terms of the offtake agreement, Jiangxi Ganfeng Lithium Co., Ltd. was granted exclusive offtake rights to purchase 50 percent of all lithium products produced at the Sonora Lithium Project for the life of the mine during Phase (Stage) 1 planned production.

Jiangxi Ganfeng Lithium Co., Ltd. also has the option to increase its offtake to 75 percent of all lithium products during Phase (Stage) 2 of production.

Jiangxi Ganfeng Lithium Co., Ltd. is responsible for paying market-based prices for every ton of lithium product sold under the offtake agreement.

In early 2023, Sonora Lithium Ltd — a joint venture of Ganfeng International Trading (Shanghai) Limited (50% equity stake) and Bacanora Lithium Plc (50% equity stake) — secured a Sinosure-backed buyer’s credit loan from Bank of China for Phase 1 of the Sonora Lithium Clay Production Plant Construction Project.

However, it is known that the borrower was expected to use the proceeds of the loan to replace the undrawn amount (worth $125 million) under a $150 million conditional debt facility that it had previously contracted with RK Mine Finance.

It is also known that the loan was collateralized against the assets of Sonora Lithium Ltd and the equity stakes that Ganfeng International Trading (Shanghai) Limited and Bacanora Lithium Plc hold in Sonora Lithium Ltd. The Sonora Lithium Project is located in north-west Mexico, in the state of Sonora.

The Project is located 170 km south of the USA – Mexico border and three hours’ drive north east of the state capital of Hermosillo, a city of approximately 700,000 people. Access to the site is by road from either Hermosillo or the US border town of Agua Prieta.

The project has access to significant support infrastructure including paved roads, process water and high voltage power. The project consists of an open-pit mine and lithium carbonate processing facility with a design life of over 20-years.

The nominal yearly output for the project will commence at 17,500 tonnes per year (“t/y”) of battery-grade Li2CO3 (Stage 1), for the first two years of the project, followed by a proposed expansion, by duplicating the plant, to produce a total of 35,000 t/y (Stage 2).

In addition, the Sonora Lithium Project has been designed to produce up to 50,000 t/y of Potassium Sulfate (“K2SO4”), for sale to the fertilizer industry. The project consists of seven exploration and mining concessions (the “concessions”).

The project is situated within the Sonoran Desert in the western portion of the Sierra Madre Occidental physiographic province, within the Basin and Range subprovince. It lies between “Mesa de Enmedio,” “Rincon del Sauz,” and “El Capulin” mountain ranges. Average elevation at the project area is 900 m above mean sea level (“amsl”).

The concessions are surrounded by mountain peaks with elevations ranging up to 1,440 m amsl.

The Sonora State and therefore the project area has well-developed infrastructure with an extensive network of roads, including a four-lane highway (Highway 15) that crosses the state from south to north. Rail, road, and natural gas networks join Hermosillo to the United States of America and Mexico.

The project area specifically is accessed by way of Federal Highway 14, a two-lane highway extending 225 km east of Hermosillo, to the intersection known as “El Coyote,” then south from the intersection for 20 km on a recently paved, two-lane highway to the town of Bacadéhuachi. B.

Access to the concessions from Bacadéhuachi is on secondary, dry-weather roads, crossing various privately owned ranches for approximately 11 km. On August 4, 2023 the government of Mexico cancelled Ganfeng Lithium's rights to the Sonora Lithium project.

Mexico’s General Directorate of Mines informed Ganfeng that its nine concessions for the Sonora Lithium project had been cancelled as a result of Ganfeng not meeting minimum investment requirements between 2017 and 2021.

On August 25, 2023, administrative review recourses were filed to the Mexican Secretary of Economy challenging the cancellations, but the Secretary of Economy maintained the cancellations in a decision issued on November 24, 2023.

Then, in June 2024, Ganfeng, Sonora Lithium, and Bacanora Lithium filed arbitration against the Mexican government in the International Centre for Settlement of Investment Disputes, alleging the cancellations violated Mexico’s obligations under treaties with the UK and China.

The special purpose vehicles that hold the mining concessions directly also challenged the cancellations under Mexican law in the Federal Tribunal of Administrative Justice in Mexico.