Sonora DFS nearing completion

In this morning’s progress update on its Sonora soft-rock lithium development in Mexico, Bacanora reported that cost estimation work is nearing completion, reiterating that opex is likely be below the level typical of hard-rock deposits that are the focus of the majority of its project-developer peers. The company also revealed that the definitive feasibility study (DFS) is now focusing on a sodium-sulphate roasting route in the processing circuit, in preference to the more expensive gypsum-roast route that had been contemplated previously. We believe this should help limit cost inflation over the estimates published in last year’s prefeasibility study (though some inflation is in our view inevitable), but it is presumably one of the reasons for the DFS overrunning – Bacanora is now targeting completion “by the end of the year”, versus previous guidance of Summer 2017 (and original guidance of Q1 2017). But the delay does not appear to be holding up financing arrangements – discussions are underway with long-term debt providers, including in Japan where they are being facilitated by the company’s strategic offtake partner Hanwa Co Ltd. We therefore continue to believe Sonora will be one of the first new lithium operations off the rank, capitalizing on market tightness which continues to push lithium prices higher.