Bacanora completes drilling at its lithium project in Mexico

Lithium exploration and development company Bacanora Minerals (LON, CVE:BCN) said Thursday it has completed its 4,000 metre infill drilling program at its Mexico-based Sonora project, one of the world’s largest reserves of the so-called white petroleum.

The drilling plan was designed to enable a portion of the current resource to be upgraded from the indicated category to the higher confidence measured category.

Based on a pre-feasibility study, the project could produce 17,500 tonnes per year of battery-grade lithium for the first two years, rising to 35,000 tonnes annually. That gives Sonora a net present value of $776 million.

Independent consultant SRK Exploration has already begun updating the resource model, said Bacanora, adding that the new version should be published before the end of the year.

The Canada and London-listed firm, which rejected last week a merger proposal from its fellow lithium explorer and shareholder Rare Earths Minerals, achieved a major milestone in May, after pulling heavyweight investor Blackrock as a major shareholder.

Last year, an even bigger landmark put Bacanora in the spotlight as it signed a conditional agreement with Tesla Motors (NASDAQ: TSLA) to supply the electric sports car and energy storage products company with lithium hydroxide from Sonora.

Based on a pre-feasibility study, the project could produce 17,500 tonnes per year of battery-grade lithium for the first two years, rising to 35,000 tonnes per year. That gives Sonora a net present value of $776 million.

A more detailed bankable study is expected to be finished in the first quarter of 2017.

Lithium prices are expected to jump 20% by 2017 as a result of a widespread adoption of electric cars, which use lithium-ion batteries, Citi analysts say.

They are confident on the new vehicles success, forecasting production of pure electric models (not hybrids) like the Nissan Leaf or the Tesla Model S to rise from about 150,000 in 2015 to about 290,000 in 2016.

By 2020, Citi expects 1.04 million electric cars to be in production, implying sevenfold growth over five years.

Currently, electric vehicles account for about 6% of global demand for lithium carbonate.

Chile, Bolivia and Argentina currently dominate the lithium market, holding together more than 70% of the world’s known reserves.

Bacanora completes drilling at its lithium project in Mexico

Over the past three years, Bacanora has built a lithium carbonate pilot plant in Hermosillo, to upgrade and process ores from the nearby Sonora Lithium Project. (Image courtesy of Bacanora Minerals )