Sonora Lithium Project

Operator : Bacanora Minerals

Ownership (01/01/2021) : 30% Joint Venture

Location:

Sonora State, northern Mexico

Development Stage:

Project Financing for Construction

The Sonora Lithium Project and Details of Cadence Ownership

The Sonora Lithium Project is comprised of the following lithium properties:

  • La Ventana and La Ventana 1 concessions, which are 100 per cent. owned by Minera Sonora Borax S.A. de C.V.(“MSB”), a wholly-owned subsidiary of Bacanora; Cadence Minerals, Cadence has no interest in these concessions.
  • 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 30% direct interest in Mexalit through its Joint Venture with Bacanora.

Projects Outside the Sonora Lithium Project

Cadence also owns a 30% direct interest in The Megalit, Buenavista, and San Gabriel concessions, which are held by Megalit S.A de C.V (“Megalit”).

These areas are not part of the mining plans of the Sonora Lithium Project and have not been assessed in sufficient detail to provide a 43-101 compliant Mineral Resource Estimate.

Background

Strong economic potential of two stage open-pit operation at Sonora

  • Stage 1 – 17,500 tpa for 4 years; Stage 2 – 35,000 tpa
  • Estimated Project pre-tax IRR of 26.1%; NPV of US$1.253 billion (at 8% discount rate)
  • Revenues are based on a flat US$11,000/t for battery grade Li2CO3 over LOM, significantly below the current Li2CO3 price range of US$12,000 – 20,000/t2,3
  • Low estimated LOM operating costs of US$3,910/t of Li2CO3 – lower than the new lithium brine operations being reported in Argentina
  • Average LOM annual EBITDA estimated at US$229 million per annum

Sonora: a large lithium deposit

  • Measured plus Indicated Mineral Resource estimate of over 5 million tonnes (‘Mt’)  (‘LCE’)4 and an additional Inferred Mineral Resource of 3.7 Mt of Lithium Carbonate Equivalent
  • Low stripping ratio: open-pit mine design indicates a total of 37.1 Mt of ore to be mined over the planned 19-year mine life with an average stripping ratio of approximately 3.4:1 over LOM

Conventional flow sheet: uses established sulphate route processing technology

  • Integrated plant designed to initially process 1.1Mt of ore per year during Stage 1, subsequently increasing to 2.2 Mt per year for Stage 2
  • Stage 1 capital cost estimate of US$420 million includes – mining, processing plant, infrastructure, construction of Tailings Management Facility (‘TMF’), general administration costs as well as the requisite contingencies

Mineral Resource and Reserves

The Sonora Project holds one of the world’s larger lithium resources and benefits from being both high grade and scalable. The polylithionite mineralisation is hosted within shallow dipping sequences, outcropping on the surface.  A Mineral Resource estimate was prepared by SRK Consulting (UK) Limited (‘SRK’) in accordance with NI 43-101. The following tables present the summary of current lithium resources for the Project; these Mineral Resources are inclusive of Mineral Reserves:

The Mineral Reserves contained within Cadence’s joint venture with Bacanora is scheduled to mined (under the feasibility published in 2018) in years 9 to 19. Further details of the planned mining schedule can be found on pages 137-139 of the Feasibility Study

MINERAL RESERVES (Cut-off grade if 1,500 ppm Li)

Category Tonnes Ore (000t) Li (ppm) K (%) LCE (000t) LCE attributable to Cadence (000t)
Proven 80,146 3,905 1.64 1,666 116
Probable 163,662 3,271 1.36 2,849 723
Total 243,808 3,480 1.45 4,515 839

MEASURED AND INDICATED MINERAL RESOURCES

Category Cut–off
(Li ppm)
Tonnes (000t) Li (ppm) K (%) LCE (000t) LCE attributable to Cadence (000t)
Measured 1,000 103,000 3,480 1.5 1,910 134
Indicated 1,000 188,000 3,120 1.3 3,130 785
Total 1,000 291,000 3,250 1.4 5,038 919

INFERRED MINERAL RESOURCES

Category Cut–off
(Li ppm)
Tonnes (000t) Li (ppm) K (%) LCE (000t) LCE attributable to Cadence (000t)
Inferred 1,000 268,000 2,650 1.2 3,779 559

Summary of Cadence Joint Venture with Bacanora Lithium (Mexilit)

Participation and Unanimous Shareholders Agreement(the “First USA”)dated 22 May 2013 between Bacanora Canada, MSB, Mexilit, Cadence and REM Mexico as amended by an addendum dated 24 June 2010 relating to the Mexilit, the EL Sauz, El Sauz 1, El Sauz 2, Fleur and Fleur 1 concessions. Pursuant to the First USA, REM Mexico was given the option to participate and purchase shares in Mexilit through the completion of a series of staged investments: (i) stage 1 required an aggregate contribution of US$750,000 in return for 11,111 shares (or 10% total issued shares of Mexilit); (ii) stage 2 required the successful completion of stage 1 and an aggregate contribution of US$1,500,000 in return for a further 31,750 shares (or 20% total issued shares of Mexilit); and (iii) stage 3 which required the successful completion of stage 1 and 2 and, if elected, gave Cadence the option, expiring September 30, 2014, to purchase a further 56,741 shares in Mexilit, which would lead to a total ownership stake of 49.9%, at a negotiated price. The stage 3 option has therefore lapsed. In addition to the shares available to REM Mexic0, 100,000 shares of Mexilit were issued to MSB and 1 share to Martin Vidal. The First USA contains certain other provisions relating to shareholder rights, with respect to the disposition of shares including any right of first refusal as well as put and call options, and those relating to noncompetition, confidentiality and termination.

Summary of Cadence Joint Venture with Bacanora Lithium (Megalit)

Participation and Unanimous Shareholders Agreement (the “Second USA”) dated 12 March 2014 between the Company,MSB, Megalit, Cadence and REM Mexico in respect of Megalit and the Buena Vista, San Gabriel and Megalit concessions.Pursuant to the Second USA, REM Mexico was given the option to participate and purchase shares in Megalit through the completion of a series of staged investments: (i) stage 1 required an aggregate contribution of US$750,000 in return for 11,111 shares (or 10% total issued shares of Megalit); (ii) stage 2 required the successful completion of stage 1 and an aggregate contribution of US$1,500,000 in return for a further 31,750 shares (or 20% total issued shares of Megalit); and (iii) stage 3 which required the successful completion of stage 1 and 2 and, if elected, gave REM Mexico the option, expiring September 30, 2014, to purchase a further 56,741 shares in Megalit, which would lead to a total ownership stake of 49.9%, at a negotiated price. The stage 3 option has therefore lapsed. In addition to the shares available to Cadence Mexico, 100,000 shares of Megalit were issued to MS Band 1 share to Martin Vidal. The Second USA contains certain other provisions relating to shareholder rights, with respect to the disposition of shares including any right of first refusal as well as put and call options, as well as those relating to non-competition, confidentiality, termination and governing the concessions as an area of mutual interest