Bacanora Announces Sonora Lithium Project Signing Lithium Supply Contract

CALGARY, ALBERTA--(Marketwired - Aug. 27, 2015) - BACANORA MINERALS LTD. ("Bacanora" or the "Company") (TSX VENTURE:BCN)(AIM:BCN) and Rare Earth Minerals plc ("REM") (AIM:REM), the owners of the Sonora Lithium Project(1) in Northern Mexico (Bacanora and REM are collectively referred to as the "Sonora Lithium Project Partners"), have finalised a conditional long-term lithium hydroxide supply agreement with Tesla Motors, Inc. ("Tesla"), the maker of electric vehicles and energy storage solutions (the "Supply Agreement").

The Sonora Lithium Project Partners are working to develop a mineral-rich, lithium-bearing clay deposit into a planned low-cost, sustainable and environmentally conscious mining operation. It is estimated that the mine and processing facility will have an initial production capacity of approximately 35,000 tonnes of lithium compounds, with the scaling potential of up to 50,000 tonnes per annum. To achieve this, the Sonora Lithium Project Partners will need to raise finances to design and construct a mine and processing facility. It is currently anticipated that lithium hydroxide and lithium carbonate would be among the materials produced by the mine. Lithium hydroxide is a key feedstock material in the manufacture of certain kinds of lithium-ion battery cells.

On the condition that, over the next two years, the Sonora Lithium Project reaches certain performance milestones and successfully passes product specification qualifications, Tesla - or its authorized purchasers - will buy lithium hydroxide to feed the manufacturing of batteries at Tesla's Gigafactory in Nevada. One of the key milestones will be the confirmation that the Sonora Lithium Project will be able to supply lithium hydroxide in accordance with volumes and timeframes to be established by Tesla. The Supply Agreement has an initial five year term commencing from the date of the first order by Tesla, with an option to extend for a further five years.

During the initial five years, and subject to certain terms and conditions in relation to project execution, product quality, pricing and timing of delivery, Tesla will purchase agreed minimum tonnages, with estimated forecasted maximum deliveries to be determined following delivery of future production orders from Tesla. Tesla will purchase minimum quantities in accordance with an agreed upon pricing formula, below current market pricing, with actual prices and volumes that can only be finalized during the development phase in due course. The forecast tonnages and delivery dates are structured to coincide with Tesla's forecasted Gigafactory production. This agreement will form a portion of Tesla's anticipated lithium-based feedstock needs; the remainder of which is expected to come from other lithium peers.

To meet both Tesla's minimum and forecasted tonnages and timelines and any other potential market demands, the Sonora Lithium Project Partners will need to design and construct a suitable mining and processing operation. This will require the Sonora Lithium Project Partners to secure significant financing through debt and/or equity. Tesla has the right to participate in any such financing or other capital transactions. Bacanora and REM will be pursuing next steps to raise finances in order to achieve this goal. There can be no assurance that the conditions to supply product under the Supply Agreement will be met or that the agreement will prove to be economic.

Development work to be used for the pre-feasibility study ("PFS") for the Sonora Lithium Project is currently being carried out. The PFS, alongside additional studies, will establish a revised estimate of capital and operating costs, taking into account the new product mix that will be required to service Tesla's anticipated demands plus those of any additional potential customers.

Colin Orr-Ewing, Chairman of Bacanora, commented: "This Supply Agreement with Tesla represents a vital and monumental step forwards in the commercialization of the large lithium resources that the Company holds, together with its partner REM, in Northern Mexico. We anticipate this contract to rapidly accelerate the development of the Sonora Lithium Project, which we expect will prove to be invaluable in an increasingly lithium hungry world."

ABOUT BACANORA:

Bacanora is a Canadian and London listed minerals explorer (TSX VENTURE:BCN)(AIM:BCN). The Company explores and develops industrial mineral projects, with a primary focus on lithium and borates. The Company's operations are based in Hermosillo in northern Mexico and it currently has two significant projects under development in the state of Sonora. The two main assets of Bacanora are:

• The Sonora Lithium Project, which consists of ten mining concession areas covering approximately 100 thousand hectares in the northeast of Sonora State. The Company, through drilling and exploration work to date, has established an Indicated Mineral Resource (in accordance with National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101")) of 1.12 Mt LCE contained in 95 Mt of clay at a Li grade of 2,200 ppm and an Inferred Mineral Resource of 6.3 Mt LCE contained in 500 Mt of clay at a Li grade of 2,300 ppm.
  
  
• The Magdalena Borate Project, covering 16,503 hectares in Sonora state, Mexico, where the Company's main borate zone, El Cajon, has an Indicated Resource (in accordance with NI 43-101) of 1.17 Mt of B₂O₃, at an eight per cent. cut-off grade. The Company has completed a number of measures to determine the geological and commercial potential of the project and is undertaking a prefeasibility exercise to determine the economic benefit of developing the mine and constructing a processing plant on site in order to become a supplier of boric acid.
  
  

Reader Advisory

Given the conditionality of the Supply Agreement there can be no assurance that the conditions to supply product under the Supply Agreement will be met or that the agreement will prove to be economic. Except for statements of historical fact, this news release contains certain "forward-looking information" within the meaning of applicable securities law. Forward-looking information is frequently characterized by words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate" and other similar words, or statements that certain events or conditions "may" or "will" occur. In particular, forward-looking information in this press release includes, but is not limited to estimations regarding potential mine capacity, potential future production of lithium hydroxide and lithium carbonate, design and construction of a mining and processing operation, completion of necessary financing, satisfaction of conditions and milestones under the Supply Agreement, receipt of future purchase orders from Tesla, determination of actual pricing and completion of a pre-feasibility study and updated estimates of resources and capital and operating costs. Although we believe that the expectations reflected in the forward-looking information are reasonable, there can be no assurance that such expectations will prove to be correct. We cannot guarantee future results, performance or achievements. Consequently, there is no representation that the actual results achieved will be the same, in whole or in part, as those set out in the forward-looking information.

Forward-looking information is based on the opinions and estimates of management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those anticipated in the forward-looking information. Some of the risks and other factors that could cause the results to differ materially from those expressed in the forward-looking information include, but are not limited to: commodity price volatility; general economic conditions in Canada, the United States, Mexico and globally; industry conditions, governmental regulation, including environmental regulation; unanticipated operating events or performance; failure to obtain industry partner and other third party consents and approvals, if and when required; the availability of capital on acceptable terms; the need to obtain required approvals from regulatory authorities; stock market volatility; competition for, among other things, capital, skilled personnel and supplies; changes in tax laws; and the other risk factors disclosed under our profile on SEDAR at www.sedar.com. Readers are cautioned that this list of risk factors should not be construed as exhaustive.

The forward-looking information contained in this news release is expressly qualified by this cautionary statement. We undertake no duty to update any of the forward-looking information to conform such information to actual results or to changes in our expectations except as otherwise required by applicable securities legislation. Readers are cautioned not to place undue reliance on forward-looking information.

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(1) The Sonora Lithium Project is comprised of the following lithium properties: La Ventana lithium concession, which is 100 percent owned by Bacanora; El Sauz and Fleur concessions, which are held by Mexilit S.A. de C.V. ("Mexilit"); and the Megalit concession, which is held by Megalit S.A de C.V ("Megalit"). Mexilit and Megalit are owned 70 percent by Bacanora and 30 percent by REM.