Cadence Minerals (KDNC) – Bacanora Minerals Board Changes and Project Update

Cadence (AIM/NEX: KDNC; OTC: KDNCY) is pleased to announce that Bacanora Minerals Plc (BCN) has announced changes to its board as well as providing an update on its flagship Sonora Project in Mexico where a Feasibility Study for a 35,000 tonnes per annum lithium carbonate operation is now on course for completion in late 2017. The Company has also recently commenced a FS for the Zinnwald Project located near Dresden, Germany.  

 The full Bacanora release is available at: http://www.investegate.co.uk/bacanora-minerals-ld–bcn-/rns/board-changes-and-operations-update/201705150700100678F/ .

Project Updates

Sonora, Mexico

FS activities continue on the Sonora Project, which is one of the world’s larger lithium resources.  Metallurgical test work continues at the SGS laboratories in Perth and Ausenco Limited is currently completing the flow sheet design and mass balance to finalise operating and capital cost estimates.  IMC Mining Consultants in Tucson has commenced mine planning and equipment selection for the open pit mining operation. Within Sonora, local infrastructure, energy and natural gas supplies and consumable chemicals for the project continue to be a focus as a result of the previously reported increases in costs for natural gas and chemical reagents. The FS report will also include an updated Mineral Resource Estimate and geological model by SRK Consulting (UK) Limited based on the infill drilling programme which was completed in Q3 2016. 

The pricing environment for lithium carbonate has strengthened to close to US$12,000/t from an average of around US$6,000/t in 2015 (source: http://trugroup.com/lithium-market-conference.shtml).   The pricing of lithium carbonate shipments to China and Japan remained strong in January 2017, with reported sales by major producers in the region of $12,000/t and spot sales in Japan and China around $15,000/t (source: (https://seekingalpha.com/article/4040100-lithium-miner-news-month-january-2017).  With this in mind, the Company will update the pricing assumptions in its FS and expects to announce the updated long term pricing forecast for lithium carbonate for the FS prior to the FS being released.

Reflecting its commitment to working with Bacanora to deliver a 35,000 tonne per annum lithium carbonate operation which can supply the fast-growing Asian battery market, cornerstone investor Hanwa continues to facilitate discussions with regards to securing long-term project debt funding to contribute to the construction capex.

Zinnwald, Germany

The Company has commenced the FS at the Zinnwald Lithium Project in Germany, in which it has a 50% interest.  Zinnwald benefits from its proximity to Dresden, a major centre of the German chemical industry. The ability to source downstream chemicals and skilled professional labour is considered a significant advantage in Bacanora’s strategy to develop a downstream, high value lithium product suite. In addition, close proximity to the rapidly growing German automotive and renewable industries provide a very significant potential local market for Zinnwald lithium products.

Baconora’s 50% partner in Zinnwald, SolarWorld AG (‘SolarWorld’), recently announced its intention to file for bankruptcy protection in Germany due to ongoing pricing pressures in its core solar markets.  Under the terms of the agreement signed with SolarWorld in February 2017, Bacanora acquired a 50% interest in, and joint operational control of Zinnwald in exchange for a cash consideration of EUR5 million and an undertaking to spend EUR5 million towards the cost of completing the FS.  The agreement also included an option for Bacanora to acquire the outstanding 50% held by SolarWorld within a 24 month period for EUR30 million.  The Company is confident that the SolarWorld insolvency process will have no material impact on the Company’s interest, nor its agreement with SolarWorld.

As part of the FS, bulk ore sampling work will be carried out during the summer to provide samples for metallurgical testwork for inclusion in the flowsheet.  Additionally, an infill drilling programme is planned for late 2017 to upgrade the existing resource model in accordance with National Instrument 43-101 – Standards of Disclosure for Mineral Projects.  The drilling will test for a number of potential by-products including tin, tungsten and SOP.  The 2014 resource estimate was reported in accordance with the Pan European Code for Reporting of Exploration Results, Mineral Resources and Reserves, and is outlined below:

 *       Li cut-off 2,500pm and >2 metres vertical thickness.

**     LCE is the industry standard terminology for, and is equivalent to, Li2CO3.  1 ppm Li metal is equivalent to 5.32 ppm LCE / Li2CO3.  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.

Changes to Board of Directors

The Company announces the appointment of Dr Andres Antonius, who is based in Mexico City, and Mr. Junichi Tomono, head of the Speciality Metals and Alloys department of leading Japan-based global trading company Hanwa Co., LTD. (‘Hanwa’), as Non-executive Directors of the Company.  Such appointments have been approved by the Board of Bacanora and will take full effect upon completion of standard regulatory reviews, which are underway.

The two appointments replace Mr. James Leahy, who has stepped down from the Board to pursue other business interests, and Mr. Kiran Morzaria who resigned from his position as Non-executive Director of the Company earlier this year (see announcement of 26 January 2017 for further details).  Mr. Tomono’s appointment to the Board follows the signing of a strategic partnership and offtake agreement for Sonora which has seen Hanwa acquire an initial 10% interest in Bacanora following a private placement (see announcement of 2 May 2017 for further details).  

Dr. Andres Constantin Antonius Gonzalez (aged 47) is a Mexican national who has held positions in the Government of Mexico as well as in the private sector and academia.  Dr. Antonius previously served as Undersecretary for Energy Policy and prior to that was a staff member at the Agriculture Secretariat.  Dr. Antonius also held the role of coordinator for strategy of then President Elect Peña Nieto’s transition team in 2012.  Dr. Antonius is currently CEO of Plan B, a provider of strategic advice to a range of clients.  Prior to founding Plan B, he was the President of the Consulting Services Group at Kroll, a world leader in risk management, business intelligence, and investigations.  Dr. Antonius has also held the position of Director of Strategic Planning at the Instituto Tecnológico Autónomo de México (‘ITAM’) and has taught economic theory, game theory, and crisis management at both the ITAM and the Universidad Iberoamericana.  He received a B.A., Masters and PhD degree in Economics from Harvard University. As part of his package, Dr. Antonius will be granted 500,000 options to acquire new ordinary shares in the Company at an exercise price of 86.5 pence. Such options vest as to 1/3 on the date of grant and an additional 1/3 on each of the first and second anniversaries of the date of grant and are exercisable for a period of three (3) years. All of these options (and the common shares issuable upon exercise) will be subject to applicable securities law hold periods.

Junichi Tomono (aged 43) has over 22 years’ experience with Hanwa, during which time he has worked in the Metals, Chemicals, Alloys, Scrap metals and Mining divisions.  Mr. Tomono has a special focus on the battery chemicals sector including lithium.  As head of the Speciality Metals and Alloys department and as a Director of three of Hanwa’s subsidiaries, Mr. Tomono has played a key role in Hanwa adopting a more global focus in response to the rapid growth in the lithium battery sector.

The Sonora Lithium Project and Details of Cadence’s ownership:

Cadence owns a direct interest of 17.18% of Bacanora. The Sonora Lithium Project is comprised of the following lithium properties:

– La Ventana, La Ventana 1, and Megalit concessions, which are 100 percent owned by Minera Sonora Borax S.A. de C.V.(“MSB”), a wholly-owned subsidiary of Bacanora; Cadence, through its direct interest of 17.18% of Bacanora, has an indirect interest in these concessions of 17.18%.

– El Sauz, El Sauz 1, El Sauz 2, Fleur and Fleur 1 concessions, which are held by Mexilit S.A. de C.V. (“Mexilit”). Cadence has a 43% direct interest in Mexalit through its Joint Venture with Bacanora, and when combined with Cadence’s direct interest of 17.18% in Bacanora, has a total economic interest in Mexalit of 43%.

– The Buenavista, and San Gabriel concessions, which are held by Megalit S.A de C.V (“Megalit”). Cadence has a 30% direct interest in Megalit through its Joint Venture with Bacanora, and when combined with Cadence’s direct interest of 17.18% in Bacanora, has a total economic interest in Megalit of 43%.

Qualified Person:

Kiran Morzaria B.Eng. (ACSM), MBA, has reviewed and approved the information contained in this announcement. Kiran holds a Bachelor of Engineering (Industrial Geology) from the Camborne School of Mines and an MBA (Finance).