Blackrock backs Bacanora Minerals with $11 million investment

Blackrock backs Bacanora Minerals with $11 million investment

Soquimich (SQM) lithium mine on the Atacama salt flat, the world's second largest salt flat and the largest lithium deposit currently in production, with over a quarter of the world's known reserves, in northern Chile. (Image courtesy of SQM)

Canada and London-listed Bacanora Minerals (TSX-V:BCN) (LON:BCN), the company developing one of the world's largest lithium mines in northern Mexico, has pulled in heavyweight investor Blackrock as a major shareholder.

According to a regulatory filing, the world's largest asset manager has put up about US$11.2 million (£7.7 million) through a placing of 9.75 million units at $1.14 (79p) each. The units include warrants that if exercised would take the amount raised to about $15 million (£10m).

Bacanora shares rose as much as 10.4% in London to 89.4 p on the news. The stock has climbed 16% this year, as prices for lithium — used in batteries for electric cars — continue to jump.

This is the second major milestone achieved by Bacanora. In August last year, the firm and its joint-venture partner Rare Earth Minerals (LON:REM) signed a conditional agreement with Tesla Motors (NASDAQ: TSLA) to supply the electric sports car and energy storage products company with lithium hydroxide from the Sonora project.

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. But analysts have cautioned that extracting lithium from clay is an untested process.

Price, demand on the rise

Blackrock backs Bacanora Minerals with $11 million investment

Tesla Roadster 2.5 charging from a conventional outlet. (Image by Tesla Motors Inc. )

Lithium carbonate prices rose 47% in the first quarter of 2016 compared with the average price last year, according to the most recent available data from data provider Benchmark Mineral Intelligence. In 2015, when most other metals and commodities still were in the doldrums, lithium prices rose 28%, Benchmark Mineral Intelligence said.

And the future is even more promising fro the so-called “white petroleum” as prices are tipped to jump 20% by 2017 as a result of a widespread adoption of electric cars, Citi analysts said last week.

Outside of China, the experts expect prices to rise by 6% to 17% over the next two years.

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.

"I think 2020 is quite a magical year for the uptake of both electric vehicles and renewable energy. Anything that uses renewables, or electric vehicles, uses a lithium-based [energy] storage capacity," Peter Secker, chief executive of Bacanora, told City A.M. last week.

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.