Beacon Minerals Limited Annual Report 2023

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FY2023 Annual Report · Beacon Minerals Limited

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Bacanora Lithium Limited

Annual Report and Financial Statements

31 December 2023

Company Directory

Board of Directors

Peter Secker
Junichi Tomono
Wang Xiaoshen

Company Secretary

Cherif Rifaat

Registered Office

Registered Number

4 More London
Riverside
London
SE1 2AU

11189628

Table of Contents

Strategic Report ........................................................................................................................ 1
Directors Report ....................................................................................................................... 12
Directors Statement of Responsibilities ........................................................................................... 14
Independent Auditor’s Report to the members of Bacanora Lithium Limited ............................................... 15
Statement of Financial Position .................................................................................................... 18
Statement of Comprehensive Income .............................................................................................. 19
Statement of Changes in Equity .................................................................................................... 20
Statement of Cash Flows ............................................................................................................. 21
Notes to the Financial Statements ................................................................................................. 22

Strategic Report

1 Business model

Bacanora Lithium Limited (the “Company” or “Bacanora”) is a 100% subsidiary of Ganfeng International Trade
(Shanghai) Co., Ltd. ("Ganfeng"). On 3 January 2023, the Company officially re-registered its name from Bacanora
Lithium Plc. The Company’s business model is to create value through the investment in the Sonora Lithium Project
("Sonora Project”) in Mexico via its 50% joint venture holding in Sonora Lithium Ltd (“SLL”) and by extension SLL’s
subsidiaries, collectively, “Sonora Group” or “Joint Venture”. The Company is the holding company for the Bacanora
Lithium group entities (the “Group”) which manage the development of the Sonora Project. Ganfeng holds the other
50% of SLL.

To capitalise on the fast-growing lithium market, the main focus is to monetise the resources and reserves held in
the Sonora Project, which benefits from a large, scalable and high-grade lithium resource with a global resource
(measured, indicated and inferred) of almost 9 million tonnes of lithium carbonate equivalent (“LCE”). This will be
achieved, initially, by developing the mine and processing plant in several phases. The Company aims to produce a
battery-grade lithium product for sale to downstream cathode and battery manufacturers through existing offtake
partners, Ganfeng and Hanwa Co., Ltd (“Hanwa”).

The Sonora Project comprises ten mining concession areas covering approximately 100,000 hectares in the northeast
of Sonora State in Mexico. Seven of these mining concessions were included in the feasibility study published in
January 2018. The feasibility study indicated a US$1.253 billion pre-tax Net Present Value for the Sonora Project
using an 8% discount rate and US$11,000 per tonne of LCE price, 26.1% of internal rate of return and US$4,000 per
tonne of LCE life of mine operating costs based on the prevailing price of lithium at the time, placing Sonora among
the world’s lowest cost producers.

The approach to delivering this core business model is predicated upon the following:

1. A world class lithium resource containing approximately 9 million tonnes of LCE.
2. An experienced Board and operational leadership team.
3. Access to strong technical skills from the Sonora Lithium team, the Company’s sole shareholder and joint

venture partner Ganfeng and global network of advisers.

4. Pilot plant operations in Mexico which has proven a pioneering lithium extraction process.
5. Emphasis on building strong local organisations and skill sets.
6. Commitment to excellence in Environment and Social matters.
7. Securing funding for the Sonora Project.
8. Long-term lithium offtake agreements with Ganfeng and Hanwa.
9. Disciplined capital management and careful handling of Company resources.

In 2021, the Company and Ganfeng entered into an agreement regarding the terms of a possible cash offer for the
entire issued and to be issued share capital of the Company that Ganfeng did not already own and the offer had been
unconditional. On 23 December 2021, Ganfeng had received acceptances in excess of 75 percent for the Company’s
issued ordinary share capital and made an application to the London Stock Exchange for the cancellation of the
admission of Bacanora shares to trading on AIM. The Company delisted from AIM on the London Stock Exchange on
26 January 2022. On 8 August 2022, Ganfeng had completed the offer to the Company and holds 100% equity interest
of the Company as at 31 December 2022. During the year ended 31 December 2023, there is no change of shareholding
after the acquisition.

2 Strategy

Bacanora’s vision is to become a Mexico-focussed lithium production company, producing high quality battery-grade
products.

The Board’s strategy to achieve this goal involves several stages:

Identify a world class project that can address the rapidly increasing demand for lithium for electric vehicles
and energy storage industries. Complete.

2. Complete the feasibility study to evaluate and quantify the economic potential of its Sonora Project.

Complete.

3. Validate the quality of its product by securing high quality offtake partners. Complete.
4. Finalise a detailed design of the mine and processing plant for stage 1 of the Sonora Project. Ongoing.
5. Secure all necessary permissions to construct and run the mine and processing plant. Ongoing.
6. Complete the funding required to construct the Sonora Project. Yet to commence.
7. Construction and commissioning of the Sonora Project’s plant. Yet to commence.
8. Hiring of a team with the expertise to deliver the Sonora Project into production. Ongoing.

3 Key Challenges

The Company is a wholly owned subsidiary of Ganfeng, a world-class shareholder and joint venture partner for the
Sonora Project. Ganfeng has a wealth of experience in creating and operating lithium producing plants. The Company
will face many challenges during the construction phase of the Sonora Project, principally, ensuring the safe operation
of the construction site. It is a key challenge to ensure that the construction can proceed unabated and deliver the
Sonora Project with expedience and within budget. The production of battery-grade lithium products from the Sonora
Project is dependent upon successfully recovering lithium from clay; mined via open pit excavation operations feeding
a three-part chemical processing plant comprising beneficiation, pyrometallurgical and hydrometallurgical sections.
The processing plant will require the supply of both gas and high voltage electricity infrastructure to be established
at the site. The long-term plan is for a third-party service provider to provide an energy supply via a cogeneration
plant using natural gas as the fuel from a pipeline that they will construct.

On 20 April 2022, the Mexican Government approved an amendment to its Mining law1 (the “2022 Amendment”).
The 2022 Amendment declared lithium a strategic mineral and property of the nation. It also noted that the economic
value chain of lithium would be administered and controlled by a public organ2. The 2022 Amendment also provided
that no concessions, licenses, contracts, permits, or authorizations would be granted for lithium related activities.
The 2022 Amendment was silent on its effects, if any, on pre-existing concessions, including those held by the three
Mexican entities that hold the nine concession titles on which the Sonora Project is based: Minera Sonora Borax S.A.
de C.V. (“MSB”), Mexilit S.A. de C.V. (“Mex”) and Minera Megalit S.A. de C.V. (“Meg”) (together, the “Mining
Entities”). The Company’s position is that the concessions held by the Mining Entities cannot be impacted by the 2022
Amendment because the concessions were granted prior to its enactment. However, the Mining Entities are
challenging the constitutionality of the 2022 Amendment under Mexican law via an amparo action before a Mexican
federal court.

In October 2022, the Directorate General of Mines (“DGM”) started proceedings against the Mexican Entities based
on the identification of alleged tax payments omissions. The DGM has not taken any further action after the Mining
Entities submitted the proof of tax payments.

Following the enactment of the 2022 Amendment, the President of Mexico announced that the Government of Mexico
needed to “review” existing lithium concessions, including those related to the Sonora Project. Shortly thereafter,
in February 2023, the Secretary of Economy, through the DGM, initiated an administrative procedure for the
cancellation of nine of the concessions held by the Mining Entities. According to the DGM, the basis for these
cancellation proceedings was that the Mining Entities had purportedly not complied with minimum investment
obligations for the development of such concessions in 2017-2021. In those proceedings, the Mining Entities submitted
extensive evidence of their compliance with such obligations in a timely manner. On 4 August 2023, however, the
DGM notified the Mining Entities of resolutions cancelling these nine concessions (the “Cancellation Resolutions”).

The Mining Entities are challenging the legality of the Cancellation Resolutions under Mexican law through annulment
claims before the Federal Tribunal of Administrative Justice in Mexico.

1 https://www.dof.gob.mx/nota_detalle.php?codigo=5649533&fecha=20/04/2022#gsc.tab=0
2 Mexico subsequently established a government entity named Litio para México (“LitioMex”) for this purpose
https://sidof.segob.gob.mx/notas/5662345

actions, it has strong arguments and evidence that protect the ownership of the concessions. Specifically, the
Company’s position is that Mexico has violated both Mexican and international law as its actions are arbitrary,
unsubstantiated in both fact and law, and infringe upon the Company’s and the Mexican Entities’ fundamental due
process rights. Please refer to note 19 to the financial statements for further information.

A key challenge is to negotiate a path and workable solution with the Mexican Government and reach a mutually
beneficial commercial agreement that allows the Sonora Project to move forward.

The production of battery-grade lithium products from the Sonora Project is dependent upon successfully recovering
lithium from clay; mined via open pit excavation operations feeding a three-part chemical processing plant comprising
beneficiation, pyrometallurgical and hydrometallurgical sections. The processing plant will require the supply of both
gas and high voltage electricity infrastructure to be established at the site. The long-term plan is for a third-party
service provider to provide an energy supply via a cogeneration plant using natural gas as the fuel from a pipeline
that they will construct. The Company is currently in discussion with a number of contract suppliers.

The planet is facing climate change related risks which may become increasingly challenging until such time that
influencing factors such as greenhouse gas emissions are significantly reduced and better controlled. The Company
is not immune to these risks, particularly extreme weather events which could impact the construction of the Sonora
Project or its operations in future. The Company is committed to minimising adverse environmental impacts of its
operations. By virtue of the Sonora Project’s prospective product, battery-grade lithium compounds, the Company
will be at the forefront of renewable energy and mobility transitions by contributing one of the key raw materials
required. Lithium batteries will enable grid and domestic scale energy storage and are a key component of zero
emission electric vehicles. In this way, the transitions will contribute to the reduction in greenhouse gas emissions.

4 Principal risks and uncertainties

The Board is responsible for putting in place a system to manage current, emerging and future risk types and
implementing internal controls thereof. Risks can manifest themselves as threats or can present as opportunities to
be exploited, both can affect business performance.

The Board recognises the need for an effective and well-defined risk management process and, whilst it oversees and
regularly reviews the current risk management and internal control mechanisms. The Board has considered
mechanisms by which the business and the financial risks facing the Company are managed and reported to the Board.
The Board acknowledges it has responsibility for reviewing the effectiveness of the systems that are in place to
manage risk. Such systems are designed to manage rather than eliminate the risk of failure to achieve business
objectives. Any system can only provide reasonable and not absolute assurance against loss.

All employees are responsible for identifying, evaluating and managing risks. Executive management support the
understanding and management of risks at all levels of the business. Executive management provide a framework for
managing and reporting material risks to the Management Risk Committee comprising senior corporate and
operational managers. The Management Risk Committee’s role is to consolidate, challenge and report risk
management information to Executive management, who may escalate in turn to the Board of Directors. Bacanora
has developed procedures for identifying, evaluating and managing significant risks faced by the Group and the Joint
Venture.

a) Financial controls

The Company has an established framework of internal financial controls, the effectiveness of which is regularly
reviewed by the senior management team and the Board and involves an ongoing assessment of significant risks facing
the Company and the Group.

• The Board is responsible for reviewing and approving overall Company and the Sonora Project strategy,
approving budgets and plans. Monthly results and variances from plans and forecasts are reported to the
Board.

• There are procedures for budgeting and planning, procurement to pay, financial close and reporting and
treasury. These are used for monitoring and reporting to the Board against those budgets and plans, and for
forecasting expected performance throughout the financial period. These cover income statements,
cashflows, capital expenditures and balance sheets.

Internal controls

The Board is responsible for ensuring that a “fit for purpose” system of internal control exists to safeguard the
shareholder’s interests and the Company’s assets. It is responsible for the regular review of the effectiveness of the
systems of internal control. Internal controls are designed to manage and where possible eliminate risk altogether.
However, even the most effective system cannot provide assurance that each and every risk, present and future, has
been addressed.

c) Principal Risks

The Company’s internal risk identification and management process is undertaken by the Executive management
team and Management Risk Committee who own, prepare and regularly review the risk register for the Company.
The risk register details specific known risks to the Company and its investments and with some mitigating actions to
manage these risks. A “traffic-light” management system is used for ongoing review and as a medium for categorising
the severity and likelihood for each risk.

The principal risks and uncertainties outlined in this section reflect the risks that could materially affect Bacanora,
or its ability to achieve its strategic objectives, either directly or by the triggering of events that become material
to the Company or Joint Venture companies. The principal risks and trends outlined in this report should be viewed
through the prism of forward-looking statements and are made with a varying degree of uncertainty.

The following risks are those that the Company considers could have the most serious adverse effect on its
performance and reputation.

Risk 1: Successful development of the Sonora Project

Development of mineral properties involves a high degree of risk. Large capital investments require multi-year
execution plans and are by nature highly complex. The commercial viability of a mineral deposit is dependent upon
a number of factors, including but not limited to the following:

•
•

geopolitical environment in host country (see Risk 2 below);
increasing capital costs due to supply chain delays, changes to process flow sheet, product suite
optimisations, price inflation and key equipment availability;

availability of infrastructure capacity (see Risk 4 below);
ability to attract sufficient numbers of suitably qualified personnel;

• obtaining sufficient financing for the development of the Sonora Project (see Risk 3 below);
• market price of lithium;
•
•
• environmental and regulatory compliance requirements;
• delays in permitting;
• delays in completion of front-end engineering design (“FEED”);
•
•
• breakdown or failure of equipment or processes;
•

increased operating costs due to changes in input costs, including plant, material, energy and labour costs;
lack of availability of mining and processing equipment;

construction, procurement and/or performance of the processing plant and ancillary operations falling below
expected levels of output or efficiency;

taxes and imposed royalties;

• non-performance by third party contractors, contractor or operator errors;
•
• disruption caused by external groups e.g., non governmental organisations and illegal demonstrators;
• unfavourable weather conditions; and
•

catastrophic events such as fires, earthquakes, storms or explosions and effects of global pandemics.

The Company is not immune to these risks, which are beyond its control, and its ability to deliver the Sonora Project
to plan, principally in terms of safety, cost and schedule depend on successfully managing each of the factors outlined
above. There are numerous activities that need to be completed in order to successfully commence production at
the Sonora Project including, most importantly, the successful resolution of ongoing litigations involving the Secretary
of Economy’s cancellation of the Mexican Entities’ concessions and changes to Mexico’s Mining Law, among other
remedies that the Group can pursue under Mexican or international law.

There is no certainty that the Company or the Joint Venture will be able to obtain favourable judgments or awards
on any or all of its legal proceedings and successfully complete the multiple other activities required to start or to
continue to operate the Sonora Project. There is no guarantee that certain funds will be available to finance
construction given that the Sonora Project is not fully financed by the Company. Most of these activities require
significant lead times, and the Company will be required to manage and advance these activities concurrently in
order to begin production. A failure or delay in the completion of any one of these activities may delay production,
possibly indefinitely, and having a material adverse effect on the Company’s business, prospects, financial position,
production volume and cash flows.

Mitigation:

The Sonora Feasibility Study was completed in January 2018. Since that date, the Company has worked to de-risk the
Sonora Project’s development by securing Ganfeng, the world’s largest lithium metals producer, as a JV partner in
the Sonora Project, and owner of the Company. Furthermore, the Company obtained material additional capital
injections from the equity placings and a retail offering, acquired additional land, secured water permits, made key
internal hires, concluded offtake contracts with Ganfeng and Hanwa, and is continuing its FEED work.

Trend:

There is a diverse set of sub-risks which could affect the development of the Sonora Project. Consequently, while
the Company worked diligently to continue to de-risk the Sonora Project following the completion of the Sonora
Feasibility Study in January 2018, some risks have increased over the past twelve months e.g. geopolitical risks,
delays in permitting and the availability of sufficiently skilled staff at a reasonable cost. These heightened risks and
delays mean that commencement of production is delayed relative to the original target date.

Risk 2: Geopolitical uncertainty

Geopolitical risks are challenging for companies as they are hard to predict, interconnected with other business risks
and can significantly impact business operations. Populism and protectionism, with collective backlashes against
globalization coupled with the threat of resource or asset expropriation are becoming increasingly prevalent globally.

Beyond contributing to financial uncertainty and volatility, Mexico’s recent change in political priorities and resource
nationalism with respect to lithium, as reflected by the Secretary of Economy’s recent decision to cancel the Mexican
Entities’ concessions (the legality of which the Group is disputing) may mean that Bacanora is prevented from being
able to develop and operate its Sonora Project, or if allowed could operate in a market that may be unreceptive to
the globalization which underpins supply chains, financing and capital. Bacanora and the wider mining industry, which
is heavily dependent on free trade and growth, will need to be resilient in this new phase of geopolitics.

Geopolitical events, such as the Russian invasion of Ukraine and the Gaza-Israel Conflict, can be unpredictable and
have a severe impact on the wider economy. Impacts of the war, which are relevant to Bacanora include significantly
increasing energy and raw material costs and the broader effect on inflation.

Mitigation:

Geopolitical events can manifest themselves in many ways and are not always predictable. Each event carries its own
risk and consequence, and therefore needs to be mitigated on a case by case basis. Large scale geopolitical climate
is difficult to impact directly, Bacanora focuses on the mitigations it can control such as having an intimate knowledge
of the diverse, complex and developing geopolitical dynamic. As such the Company monitors developments in the
jurisdictions in which it operates and performs due diligence ahead of entering a business partnership including
looking at geopolitical implications. The Company behaves as a responsible corporate citizen and adds value to the
communities in which it operates to maintain the Company’s social licence to minimise geopolitical risk. With respect
to the 2022 Amendment and the cancellation of the Mining Entities’ concessions, the Company, through the Mining
Entities, has taken available steps and legal procedures to challenge such actions under Mexican law.

Trend:

The increasing occurrences of asset and resource nationalism globally, including in Mexico, mean that geopolitical
risks remain key.

On 20 April 2022, the Mexican Government approved the 2022 Amendment, which declared lithium a strategic mineral
and property of the nation. It also noted that the economic value chain of lithium would be administered and
controlled by a public organ. The 2022 Amendment also provided that no concessions, licenses, contracts, permits,
or authorizations would be granted for lithium related activities. The 2022 Amendment was silent on its effects, if
any, on pre-existing concessions, including those held by the three Mining Entities. The Company’s position is that
the concessions held by the Mining Entities cannot be impacted by the 2022 Amendment because the concessions
were granted prior to its enactment. However, the Mining Entities are challenging the constitutionality of the 2022
Amendment under Mexican law via an amparo action before a Mexican federal court.

On 23 August 2022, the President of Mexico issued a decree titled “Decree that creates the decentralized public
organ of the Federal Public Administration called Litio para México”. This decree established a State-owned entity
named Litio para México or LitioMX to explore, exploit, benefit, and use lithium in Mexico and to be in charge of the
administration and control of the economic value chains of said mineral.

In October 2022, the DGM started proceedings against the Mexican Entities based on the identification of alleged tax
payments omissions. The DGM has not taken any further action after the Mining Entities submitted the proof of tax
payments.

Subsequently, on 18 February 2023, the President of Mexico issued a Presidential Decree titled “Decree that declares
a mining reservation zone of lithium called ‘Li-MX 1’ for public utility reasons.” Through this Presidential Decree,
Mexico established a “mining reservation zone” (which is a zone where only the State is authorized to conduct mining
operations directly or indirectly) named “Li-MX 1” in an area encompassing 234,855 hectares in the state of Sonora.
The Mining Entities are challenging this Decree, as well as the one issued on 23 August 2022 via an amparo action
before a Mexican federal court.

Another Presidential Decree also dated 18 February 2023 instructed the Secretary of Energy to take any necessary
actions to oversee the execution of the aforementioned Presidential Decree and to comply with the 2022 Amendment
regarding lithium, as well as the Decree creating Litio-MX.

In February 2023, the Secretary of Economy, through the DGM also initiated administrative procedures for the
cancellation of nine of the concessions held by the Mining Entities. According to the DGM, the basis for these
cancellation proceedings was that the Mining Entities had purportedly not complied with minimum investment
obligations for the development of such concessions in 2017-2021. In those proceedings, the Mining Entities submitted
extensive evidence of their compliance with such obligations in a timely manner. On 4 August 2023, however, the
DGM notified the Mining Entities of the Cancellation Resolutions.

On 25 August 2023, the Mining Entities filed administrative review recourses before the Secretary of Economy
challenging the legality of the Cancellation Resolutions under Mexican law for each of the nine concessions. Shortly
thereafter, on 24 November 2023, the Secretary of Economy issued decisions maintaining the Cancellation Resolutions
issued by the DGM. The Mining Entities are challenging the legality of the Cancellation Resolutions under Mexican law
through annulment claims before the Federal Tribunal of Administrative Justice in Mexico.

The Company has considered the impact of the 2022 Amendment and the actions taken by Secretary of Economy and
is analysing the legal options it may have under Mexican and international law. It has concluded that, despite Mexico’s
actions, it has strong arguments and evidence that protect the ownership of the concessions. Specifically, the
Company’s position is that Mexico has violated both Mexican and international law as its actions are arbitrary,
unsubstantiated in both fact and law, and infringe upon the Company’s and the Mexican Entities’ fundamental due
process rights.

As indicated, the Sonora Project’s geopolitical risk remains high.

Risk 3: Financing risk

Financing risk in the context of Bacanora’s principal risks is defined as having insufficient capital available to achieve
the Company’s strategic development targets. Other types of financing risk exist, such as foreign exchange risk,
however these are not considered to be principal risks for reporting purposes.

As the Sonora Project develops, there will be a requirement for significant additional finance at various intervals or
stages of development. It is anticipated that the Sonora Project will be financed by the Company’s excess cash and
supported by funding to be provided by its parent company Ganfeng. Ganfeng has also provided the Company with a
wider reach to the lending community and its reputation in the lithium industry provides a stronger platform of
finance negotiation.

Mitigation:

As at 31 December 2023, the Group had US$9.9 million cash on hand and excess cash of US$60.8 million had been
lent to related party and is repayable on demand. Sonora Group had US$3.9 million cash on hand and US$15.1 million
related party receivable which is repayable on demand. The Group and Sonora Group do not have any third party
debt. In addition to the existing cash reserves in the Group and Sonora Group, Ganfeng, being the sole shareholder
of Bacanora, would assist in providing funding for the continued development of the Sonora Project.

Trend:

The ongoing legal disputes with the Mexican government may adversely impact the ability for Bacanora, Ganfeng or
a project company to raise further debt or equity financing as required to finance the Project.

Risk 4: Infrastructure

The Sonora Project depends to a significant degree on adequate infrastructure. In the course of developing its
operations, the Company will be required to construct and support the construction of infrastructure, which includes
permanent gas pipelines, water supplies, power, transport and logistics services which affect capital and operating
costs. Unusual or infrequent weather phenomena, sabotage, governmental permissions or other interference in the
maintenance or provision of such infrastructure or any failure or unavailability in such infrastructure could adversely
affect the Sonora Group’s operations, financial condition and results of operations in a material fashion.

Mitigation:

The technical report on the feasibility study for the Sonora Project has laid the groundwork for the infrastructure
requirements and the Company is undertaking discussions with several third parties for the construction of required
infrastructure including the energy cogeneration facility and pipeline.

Trend:

No material change in the risk in comparison to previous periods.

Risk 5: Health and Safety

Protecting the safety and health of employees, contractors and local community and other stakeholders is a
fundamental issue facing the Group and the wider mining industry. Mining is inherently hazardous, with the potential
to cause harm.

Mitigation:

The Company complies with the applicable laws and regulations of the countries in which it operates. Where these
prove insufficient, standards are adopted based on best international industry practice. Safety is a paramount
consideration, and Bacanora is proud to provide a place of work that is safe for everyone. Policies and procedures
have been constituted with the aim of identifying the hazards associated with mining activities and that they are
effectively managed. All occupational health and safety incidents are recorded, categorized and investigated and
where required corrective and preventive actions are implemented.

Trend:

There is no intrinsic change in operations that would increase the risk inherent in the operating model since last
reporting period. However, looking forward to the start of construction of the Sonora Project, the potential for health
and safety incidences to occur may increase.

Key Performance Indicators

Key performance indicators (“KPIs”) help the Board and executive management assess performance against strategic
priorities and business plans. However, as a pre-operational business, the use of KPIs is limited, current KPIs relate
to cash management and safety. Currently, the Board receives update reports on a monthly basis for operational and
corporate elements of the business. The reports include measures of operational expenditure and capex spend against
the budget and the Group’s cash position. The reports also contain operational information, which includes, the
development on the legal cases, updates on permissions, safety performance using number of lost time injuries and
lost time injury frequency rate.

As the Company’s investments progresses toward construction and production, the KPIs will be reassessed accordingly
to drive and monitor business performance and will be aligned to the business strategy. It is likely that this will
include financial, operational and Environmental, Social and Governance (“ESG”) KPIs for the key investment, the
Sonora Group joint venture.

Key Performance
indicator
Lost
frequency
(LTIFR)

injury
rate

time

Cash balance and
related party loan
repayable
on
demand

Description

Analysis

A key safety metric, the number
of lost time injuries per 1 million
hours worked on a rolling 12-
month basis
Cash balance available to
continue with the activity of
the Group, including exploration,
development and maintenance on
going concern.

In 2023, there were no Lost time injuries (“LTIs”)
resulting in a LTIFR of nil. This follows on from Nil LTIs
in 2022, 2021 and 2020 in Bacanora Group and Sonora
Group combined.
At 31 December 2023, the Bacanora’s cash balance was
US$9.9 million, plus a related party loan receivable of
US$60.8 million plus SLL3 Group’s cash balance of
US$3.9 million, plus a related party loan receivable of
US$15.1 million, totals US$89.7 million on an
aggregated basis (31 December 2022: US$74.0 million
for the group and US$21.3 million for Sonora Group).
There is sufficient cash to continue working on its
development activities.

Directors’ section 172 statement

The following disclosure describes how the Directors have had regard to the matters set out in section 172(1)(a) to
(f) and forms the Directors’ statement required under section 414CZA of The Companies Act 2006.

The matters set out in section 172(1) (a) to (f) are that a Director must act in the way they consider, in good faith,
would be most likely to promote the success of the Company for the benefit of its members as a whole, and in doing
so have regard (amongst other matters) to:

(a) the likely consequences of any decision in the long term;

(b) the interests of the Company’s employees;

(d) the impact of the Company’s operations on the community and the environment;

(e) the desirability of the Company maintaining a reputation for high standards of business conduct; and

(f) the need to act fairly between members of the Company.

3 SLL group is a 50:50 Joint Venture with Ganfeng

The analysis is split into two distinct sections, the first to address stakeholder engagement, which provides
information on stakeholders, issues and methods of engagement, disclosed by stakeholder group. The second section
addresses principal decisions made by the Board. It focuses on how decision making was influenced with regard for
stakeholder interests.

Section 1. Stakeholder mapping and engagement activities within the reporting period.

The Company continuously interacts with a variety of stakeholders important to its success, particularly the
Company’s equity investor and joint venture partner, Ganfeng. Other important stakeholders include but are not
limited to; potential debt providers, the workforce, government bodies, local community, vendor partners and
offtake partners. The Company has seven corporate employees including its Directors at the reporting date. Both the
CEO and CFO are UK based. The Company strives to strike the right balance between engagement and communication.

Furthermore, the Company works within the limitations of what can be disclosed to the various stakeholders with
regards to maintaining confidentiality of market and/or commercially sensitive information.

Equity investor and customer - Ganfeng

The board promotes the success of the company for the benefit of its shareholders. The Company’s strategy is to
source the provision of finance for the Sonora Project. Consequently, access to capital is of vital importance to the
long-term success of the Company and the Sonora Group. As such, engagement with the shareholder and JV and off-
take partners is of paramount importance. The Company is in close communication with members of Ganfeng’s senior
leadership, charged with their international businesses, Mr. Wang Xiaoshen sits on the Company board, whilst he and
Mr. Zhang Tong sit on the SLL board as well. Monthly financial and operational updates are provided to the Board and
other members of the management team. One-on-one investor meetings and calls with the CEO and CFO are
commonplace.

Employees

On the reporting date the Company had seven corporate employees including its Directors. Both the CEO and CFO
are UK based. The Sonora Project’s workforce is based in Mexico. The Company and the Sonora Project works to
attract, develop and retain the highest quality talent, equipped with the right skills for the future of Bacanora and
the Sonora Project. The Company maintains an open line of communication between its employees, Senior Executive
Management and Board of Directors. The CEO and CFO report regularly to the Board, including the provision of board
information.

External Stakeholders - Government, community and suppliers

The Company and the Sonora Project have an effect on the community and governmental organisations in the UK and
Mexico respectively, conversely these stakeholders provide the Company with the social and operating licences to
execute its strategy. As such the Sonora Project is required to engage with the local communities and governmental
organisations to build trust. Having the community’s trust will mean it is more likely that any fears the community
and government have can be assuaged and the Company’s plans and strategies are more likely to gain acceptance.
Community and governmental engagement will inform better decision making. The local community in Bacadéhuachi
and wider Sonora area will provide employees and suppliers to the mine. A good relationship with community and
government organisations is not taken for granted and is highly coveted in the business, the value of which is
intangible but critically important.

After the enactment of the 2022 Amendment, Ganfeng, Bacanora, and SLL have been proactively seeking to engage
with the Mexican Government, including the Secretary of Economy, to discuss the terms of a potential collaboration
with respect to the Sonora Project, which takes into account the Company’s rights. The Company continues to be
open to discussing a mutually beneficial resolution with the Government. As of now, no agreement has been reached
between the Company and the Mexican Government concerning a potential collaboration.

During the construction phase, the Sonora Project will use key suppliers under commercial engineering contracts to
deliver the mine and plant, all of whom will be reputable international vendors. Fostering relationships with these
vendors will be crucial for delivering the Company’s strategies. At a local level, the Company also partners with a
variety of smaller companies, some of whom are independent or family run businesses. There will be a need to
balance the benefits of maintaining strong partnerships with key suppliers alongside the need to obtain value for
money for investors and excellent quality and service. Suppliers are engaged via procurement process and have a

number of preferred suppliers including engineering and banking partners with whom there are regular
communications and Sonora Project updates.

As the Sonora Project moves into a construction and production phase, it will in due course, have a larger social,
environmental and economic impact on the local community and surrounding area. It is an aim that companies
associated with the Sonora Project will be committed to ensuring sustainable growth and minimising adverse impacts
of the Sonora Project.

High standards of business conduct

The board recognises the importance of maintaining high standards of business conduct to protect the Company’s
reputation, which in turn benefits the Company in its relationships with its varied stakeholders. As such, the board
has implemented policies and processes to support the Company’s operating strategy and beneficial culture.

Section 2, Principal decisions by the Board during the reporting period.

Principal decisions are defined as both those that have long-term strategic impact and are material to the Company,
but also those that are significant to the Company’s key stakeholder groups.

Legal actions taken against the Mexican Government

During the year ended 31 December 2023, the Mexican Entities commenced domestic legal proceedings to challenge
the legality of the Cancellation Resolutions under Mexican law. The Mexican Entities also continued with their amparo
filings to challenge the amendments to the Mining law, as well as the Decrees establishing LitioMX and creating the
Li-MX 1 mining reservation zone in areas comprising the Mining Entities’ concessions.

The Mexican Entities have filed annulment claims to challenge the legality of the Secretary of Economy’s cancellation
of the concessions under Mexican law. The Company, moreover, is analysing the legal options it may have under
international law to challenge Mexico’s actions.

The board considered that Mexico’s actions and the Mining Entities’ legal proceedings may impact the ability of the
Company to continue its operations in Mexico but concluded that the proceedings are necessary to protect the
interests of the Company in the Sonora Project.

Provision of US$60m principal loan to Ganfeng

On 20 September 2022, the board resolved to provide GFL International Co. Limited (“GFL”), a 100% subsidiary of
Ganfeng, with a short term US$60 million related party loan, repayable on demand. The principal and outstanding
interest (2% per annum) were repaid by GFL on 15 September 2023 according to the terms of the loan. On 25
September 2023, a new short term US$60 million related party loan bearing interest at 4.75% per annum, repayable
on demand had been lent to GFL.

The board considered the loan would support the shareholder’s corporate activities whilst earning interest for the
Company on funds that could be more efficiently utilized by the Ganfeng treasury division. On balance, the loan was
aligned with corporate strategy, to utilize resources productively.

No other long-term strategic decisions have taken place that are material for the Company or its stakeholders.

6 Business Review

During the year ended 31 December 2023, the Company continued to be the holding company for the Sonora Project
via its Joint Venture, Sonora Lithium Ltd, and continued to provide financing for the Sonora Project, amounting to
US$2.6 million. The loss for the year was US$1.9 million comprised general and administrative expenses of US$3.3
million and share of loss in investment in joint venture of US$2.4 million but net-off by finance income of US$3.7
million.

On 3 January 2023, the Company officially re-registered as a Limited UK company and changed its name to Bacanora
Lithium Limited.

A short term related party loan of US$61.1m had been fully settled by GFL International Co. Limited on 15 September
2023. On 25 September 2023, the Company lent a new short term loan of US$60 million to the same related party,
GFL International Co. Limited, a 100% subsidiary of Ganfeng. The loan is repayable on demand, carries a 4.75% fixed
interest rate and expires on 24 September 2024. The loan was fully drawn at 31 December 2023.

On behalf of the Board of Directors

Peter Secker

7 April 2024

Directors Report
The Directors present their Annual Report and Financial Statements of the Company for the year ended 31 December
2023.

1 Results and dividends

The results for the year are set out in the Financial Statements. No ordinary dividends were paid and the Directors
do not recommend payment of a dividend.

2 Directors

The Directors who served during the year and as of the date of this report were:

• Peter Secker
•
• Wang Xiaoshen – Chairman

Junichi Tomono

No Directors have direct interests in the Company.

3 Shareholding

The Company has one shareholder:

Shareholder

Shareholding on
31 December 2023

Shareholding on
31 December 2022

Ganfeng International Trading
(Shanghai) Ltd (1)
(1)Ganfeng International Trading (Shanghai) Ltd is a 100% subsidiary of Ganfeng Lithium Group Co., Ltd.

100%

4 Directors’ and Officers’ insurance

The Company has made qualifying third-party indemnity provisions for the benefit of its Directors and Officers, which
were made during the period and remain in force at the reporting date.

5 Supplier payment policy

The Company’s current policy concerning the payment of trade creditors is to follow the Confederation of British
Industry’s Prompt Payers Code (copies are available from the CBI, Cannon Place, 78 Cannon Street, London EC4N
6HN).

6 Branches

The Company does not have any branches outside of the United Kingdom as defined in s1046(3) of the Companies Act
2006.

7 Political donations

The Company has not made any political donations during the financial year.

8 Financial risks

See the Principal risks and uncertainties section of the Strategic Report and note 11 to the financial statements for
the financial risks present to the Company.

9 Going Concern

See the Going Concern section in note 2c to the Financial Statements.

10 Bacanora Group accounts

Under Companies Act 2006, Section 401, the Company is exempt from the requirement to prepare group accounts.
The ultimate parent, Ganfeng Lithium Group Co., Ltd., produces financial statements in which the Company and its
subsidiaries are consolidated. These Financial Statements are available for public use and comply with IFRS. Ganfeng
is listed in Shenzhen Stock Exchange and Hong Kong Stock Exchange.

11 Post balance sheet events

See note 19 of the Financial Statements for a detailed discussion on events that occurred subsequent to 31 December
2023.

12 Future developments

The Company will continue to be a holding company and provide a financing role for the Sonora Project.

13 Auditor

Ernst and Young LLP were appointed as auditor to the Company and in accordance with section 485 of the Companies
Act 2006. A resolution proposing that they be re-appointed for 2024 will be put at a General Meeting.

14 Statement of disclosure to auditor

So far, as each person who was a Director at the date of approving this report is aware, there is no relevant audit
information of which the Company’s auditor is unaware. Additionally, the Directors individually have taken all the
necessary steps that they ought to have taken as Directors in order to make themselves aware of all relevant audit
information and to establish that the Company’s auditor is aware of that information.

15 Streamlined Energy and Carbon Reporting

Energy and carbon emissions are not disclosed as the Company is classed as a Low Energy User as defined in the
regulations.

16 Matters covered in the Strategic Report

Disclosures of the Company’s business review and principal risks and uncertainties are provided in the Strategic
Report.

On behalf of the Board of Directors

Peter Secker

7 April 2024

Directors Statement of Responsibilities
The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with
applicable law and regulations.

Company law requires the Directors to prepare Financial Statements for each financial year. Under that law the
Directors have elected to prepare the Financial Statements in accordance with UK adopted international accounting
standards. Under company law the Directors must not approve the Financial Statements unless they are satisfied
that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company
for that period.

In preparing these Financial Statements, the Directors are required to:

select suitable accounting policies and then apply them consistently;

•
• make judgements and accounting estimates that are reasonable and prudent;
•

state whether they have been prepared in accordance with UK adopted international accounting standards,
subject to any material departures disclosed and explained in the Financial Statements;

• prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the

Company will continue in business;

• prepare fairly the financial position and financial performance of the Company;
• present information including accounting policies in a manner that provides relevant, reliable, comparable

and understandable information; and

• provide additional disclosures when compliance with the specific requirements of IFRS is sufficient to
enable users to understand the impact of particular transactions, other events and conditions on the
company’s financial position and financial performance.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company
and enable them to ensure that the Financial Statements comply with the requirements of the Companies Act 2006.
They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.

The Board confirms that to the best of its knowledge:

(a) the Financial Statements, prepared in accordance with the applicable set of accounting standards, give a true
and fair view of the assets, liabilities, financial position and income statement of Bacanora Lithium Limited.

(b) the management report includes a fair review of the development and performance of the business and the
position of Bacanora Lithium Limited, together with a description of the principal risks and uncertainties that the
Company faces.

(c) the Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and
provide the information necessary for shareholders to assess the Company’s performance, business model and
strategy.

By order of the Board

Peter Secker

7 April 2024

Independent Auditor’s Report to the members of Bacanora Lithium Limited

Opinion

We have audited the financial statements of Bacanora Lithium Limited for the year ended 31 December 2023 which
comprise the Statement of Financial Position, the Statement of Comprehensive Income, the Statement of Changes in
Equity, the Statement of Cash Flows and the related notes 1 to 19, including material accounting policy information.
The financial reporting framework that has been applied in their preparation is applicable law and UK adopted
International Accounting Standards.

In our opinion, the financial statements:

•

give a true and fair view of the Company’s affairs as at 31 December 2023 and of its loss for the year then
ended;

have been properly prepared in accordance with UK adopted International Accounting Standards; and

have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the
financial statements section of our report. We are independent of the Company in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical
Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.

Emphasis of matter – Recoverability of investment in joint venture and non-current receivables from
related parties

We draw attention to note 4a of the financial statements, which describes the effects of the Mexican Government
decrees to amend the Mining law and the cancellation of the concessions held by the Mining Entities (Minera Sonora
Borax S.A. de C.V., Mexilit S.A. de C.V. and Minera Megalit S.A. de C.V.) on the investment in the Sonora Lithium Ltd
joint venture and the non-current receivables from related parties. Our opinion is not modified in respect of this
matter.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of
accounting in the preparation of the financial statements is appropriate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or
conditions that, individually or collectively, may cast significant doubt on the Company’s ability to continue as a
going concern for a period to 30 April 2025.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the
relevant sections of this report. However, because not all future events or conditions can be predicted, this
statement is not a guarantee as to the Company’s ability to continue as a going concern.

Other information

The other information comprises the information included in the annual report, other than the financial statements
and our auditor’s report thereon. The directors are responsible for the other information contained within the annual
report.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise
explicitly stated in this report, we do not express any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether the other information is
materially inconsistent with the financial statements or our knowledge obtained in the course of the audit or
otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether this gives rise to a material misstatement in the financial
statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement
of the other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

•

the information given in the strategic report and the directors’ report for the financial year for which the
financial statements are prepared is consistent with the financial statements; and

the strategic report and directors’ report have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the Company and its environment obtained in the course of the
audit, we have not identified material misstatements in the strategic report or directors’ report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires
us to report to you if, in our opinion:
• adequate accounting records have not been kept, or returns adequate for our audit have not been received from

branches not visited by us; or
•
the financial statements are not in agreement with the accounting records and returns; or
•
certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.

Responsibilities of directors

As explained more fully in the directors’ responsibilities statement as set out on page 14, the directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for
such internal control as the directors determine is necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Company’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic
alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.

Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in
line with our responsibilities, outlined above, to detect irregularities, including fraud. The risk of not detecting a
material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may
involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. The
extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. However,
16

the primary responsibility for the prevention and detection of fraud rests with both those charged with governance
of the entity and management.

• We obtained an understanding of the legal and regulatory frameworks that are applicable to the Company and
determined that the most significant are those that relate to the reporting framework (UK adopted International
Accounting Standards and the Companies Act 2006) and the and the relevant tax compliance regulations in the
jurisdiction in which the Company operates. In addition, we concluded that there are certain significant laws
and regulations which may have an effect on the determination of the amounts and disclosures in the financial
statements being laws and regulations relating to health and safety, mining concessions, employee matters,
environmental protection, data protection, anti-bribery, anti-money laundering and corruption.

• We understood how Bacanora Lithium Limited is complying with those frameworks by making enquiries of
management and those charged with governance. We corroborated our enquiries through our review of Board
minutes, the Company’s code of conduct, any relevant correspondence with local regulatory bodies and the
Company’s whistle-blower policy and noted that there was no contradictory evidence. We also enquired directly
with the Company’s internal and external lawyers.

• We assessed the susceptibility of the Company’s financial statements to material misstatement, including how
fraud might occur by meeting with management to understand where it considered there was susceptibility to
fraud. We considered the programmes and controls that the Company has established to address risks identified,
or that otherwise prevent, deter and detect fraud; and how senior management monitors those programmes and
controls. Where the risk was considered to be higher, we performed audit procedures to address each identified
fraud risk. These procedures included using data analytics for testing of journal entries that met our defined risk
criteria based on our understanding of the business and challenging the assumptions and judgements made by
management in areas where judgement is required, including those referred to in the Emphasis of Matter section
above.

•

Based on this understanding we designed our audit procedures to identify non-compliance with such laws and
regulations. Our procedures involved understanding management’s internal controls over compliance with laws
and regulations; enquiry to senior management; and reviewing whistleblowing logs.

A further description of our responsibilities for the audit of the financial statements is located on the
Financial Reporting Council’s website at https://www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditor’s report.

Use of our report

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those
matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s
members as a body, for our audit work, for this report, or for the opinions we have formed.

Jessy Maguhn
Senior statutory auditor
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
11 April 2024

Statement of Financial Position
As at 31 December 2023

In US$

Assets

Current assets

Receivables from related parties

Other receivables and prepayments

Cash and cash equivalents
Total current assets

Non-current assets

Investment in joint venture

Investment in subsidiaries
Receivables from related parties

Other receivables and prepayments
Total non-current assets

Total assets

Liabilities and shareholders’ equity

Current liabilities

Accounts payable and accrued liabilities
Total current liabilities

Non-current liabilities

Payable to related party
Total non-current liabilities

Total liabilities

Shareholders’ equity

Share capital
Share premium

Merger reserve

Retained earnings
Total shareholders’ equity

Note

31 December 2023

31 December 2022

60,775,834

271,940

9,943,874

70,991,648

60,271,667

264,448

13,969,133

74,505,248

45,900,412

48,295,448

12,245,311

497,993

58,643,719

7,974,456

666,099

56,936,006

129,635,367

131,441,254

307,169

124,375

307,170

124,376

53,014,057

813,170

40,708,662

34,792,308

53,014,057

813,170

40,708,662

36,780,989

129,328,197

131,316,878

Total liabilities and shareholders’ equity

129,635,367

131,441,254

The accompanying notes on pages 22 - 38 are an integral part of these Financial Statements.

The Financial Statements of Bacanora Lithium Limited, registered number 11189628, were approved and authorised
for issue by the Board of Directors on 7 April 2024 and were signed on its behalf by:

Peter Secker

7 April 2024

Statement of Comprehensive Income
For the year ended 31 December 2023

In US$

Expenses

General and administrative

Operating loss

Finance income

Finance costs

Share of loss in investment in joint venture

Other income

Loss before taxation

Tax charge

Note

Year ended

31 December 2023

31 December 2022

6(a)

(3,267,085)

3,673,440

–

(2,395,036)

–

(1,988,681)

–

(3,019,388)

1,870,754

(52,429)

(1,849,148)

87,018

(2,963,193)

–

Loss after taxation and total comprehensive loss

(1,988,681)

(2,963,193)

No other comprehensive income for the year ended 31 December 2023, so no Statement of Other Comprehensive
Income was prepared.

The accompanying notes on pages 22 - 38 are an integral part of these Financial Statements.

Statement of Changes in Equity
For the year ended 31 December 2023

Share capital

In US$

Note

Number of shares

Value

Share premium

Merger reserve

Retained earnings

Total equity

31 December 2021

387,136,502

53,014,057

813,170

40,708,662

39,744,182

134,280,071

Comprehensive loss for the year:

Loss for the year

Other comprehensive loss

Total comprehensive loss

31 December 2022

Comprehensive loss for the year:

Loss for the year

Other comprehensive loss

Total comprehensive loss

31 December 2023

–

(2,963,193)

–

(2,963,193)

387,136,502

53,014,057

813,170

40,708,662

36,780,989

131,316,878

–

(1,988,681)

–

(1,988,681)

387,136,502

53,014,057

813,170

40,708,662

34,792,308

129,328,197

The accompanying notes on pages 22 - 38 are an integral part of these Financial Statements.

Statement of Cash Flows
For the year ended 31 December 2023

In US$

Cash flows from operating activities
Loss for the year before tax
Adjustments for:
Foreign exchange (gain)/losses
Finance and other income
Finance costs
Share of loss on investment in joint venture

Changes in working capital items:
Other receivables and prepayments
Accounts payable and accrued liabilities

Net cash flows used in operating activities

Cash flows from investing activities:
Interest received
Advances to related parties
Repayment from related parties

Net cash flows used in investing activities

Cash flows from financing activities
Proceeds from share options receivables
Settlement of warrant liability
Net cash flows from financing activities

Change in cash during the year
Foreign exchange rate effects
Cash, beginning of year

Cash, end of year

Note

Year ended

31 December 2023

31 December 2022

14
14
6(a)

(1,988,681)

(2,963,193)

(7,586)
(3,673,440)
–
2,395,036

392,010
(1,870,754)
52,429
1,849,148

159,636
182,795

(2,932,240)

(134,034)
(3,725,309)

(6,399,703)

386,299
(62,649,001)
61,161,118

(1,101,584)

794,452
(63,637,666)
1,077,003

(61,766,211)

–
–
–

(4,033,824)
8,565
13,969,133

9,943,874

2,726,934
(1,750,000)
976,934

(67,188,980)
(398,495)
81,556,608

13,969,133

The accompanying notes on pages 22 - 38 are an integral part of these Financial Statements.

Notes to the Financial Statements

1 Corporate information

These Financial Statements represent the financial statements of the Company, Bacanora Lithium Limited.

The Company was incorporated under the Companies Act 2006 of England and Wales on 6 February 2018. The Company
was previously listed on the AIM of the London Stock Exchange, with its common shares trading under the symbol,
“BCN”. On 26 January 2022, the Company delisted from the AIM of the London Stock Exchange. The Company now is
a private company limited by shares. The registered address of the Company is 4 More London Riverside, London, SE1
2AU. The ultimate parent of the Company is Ganfeng Lithium Group Co., Ltd which is officially listed on Shenzhen
Stock Exchange and the Main Board of The Stock Exchange of Hong Kong Limited. Its registered office is located at
Longteng Road, Xinyu Economic Development Zone, Jiangxi Province. Its principal place of business is People’s
Republic of China. Ganfeng’s financial statements are available on their website. The smallest and largest group
where the Company’s financial statements had been consolidated are Ganfeng International Trading (Shanghai) Co.,
Ltd. and consolidation of Ganfeng Lithium Group Co., Ltd respectively.

The Company is a mining investment and development company, primarily engaged in the identification, acquisition,
exploration and development of mineral properties located in Mexico, through its joint venture holding in the Sonora
Project.

2 Basis of preparation

a) Statement of compliance

These Financial Statements have been prepared in accordance with UK adopted international accounting standards
and as applied in accordance with the provisions of the Companies Act 2006.

The Company Financial Statements were authorised for issue by the Board of Directors on 7 April 2024. The Board
of Directors has the power and authority to amend these Financial Statements after they have been issued.

Under Companies Act 2006, Section 401, the Company is exempt from the requirement to prepare group accounts.
The ultimate parent, Ganfeng Lithium Group Co., Ltd., produces financial statements in which the Company and its
subsidiaries are consolidated. Those financial statements are available for public use and comply with IFRS.
Ganfeng is listed in Shenzhen Stock Exchange and Hong Kong Stock Exchange.

b) Basis of measurement

These Financial Statements have been prepared on a historical cost basis.

The functional and presentational currency of these Financial Statements is United States dollars (“US$”).

c) Going concern

The Financial Statements have been prepared on a going concern basis.

The Directors have, at the time of approving the Financial Statements, a reasonable expectation that the Company
has adequate resources to continue in operational existence for the foreseeable future. The Company has prepared
a cash flow forecast for the going concern period (from the approval of the financial statements to 30 April 2025).
This forecast is a detailed analysis of the capital and operational expenditure for the Company encompassing the
going concern period. As at 31 December 2023, the Company has US$9.9 million (2022: US$14.0 million) of cash and
cash equivalents and a receivable due on demand from a related company of US$60.8 million (2022: US$60.3 million)
giving total liquidity of US$70.7 million (2022: US$74.3 million). As at 31 December 2023, the Company has no external
debt (2022: US$ Nil) and has not entered into any significant commitments. The Company does not have any plans to
consider raising external debt or equity in the going concern period. The Company remains a going concern, taking
into account all known quantifiable information surrounding the change to the Mining Law and the cancellation of
concessions.

The Board of Directors has considered the impact of climate change, the war in Ukraine and the Gaza-Israel conflict
and concluded that currently there is no direct impact on the Company.

On 20 April 2022, the Mexican Government approved an amendment to its Mining law (“2022 Amendment”), which
declared lithium a strategic mineral and property of the nation. It also noted that the economic value chain of lithium
would be administered and controlled by a public organ. The Company has considered the impact of the Mexican
Government’s 2022 Amendment and has concluded from the body of evidence and the mining rights in general under
the Constitution, that this does not impact the going concern assessment because the ownership of the Sonora
Project’s assets is protected by Mexican and international law.

In February 2023, the Secretary of Economy, through the Directorate General of Mines (“DGM”), initiated
administrative procedures for the cancellation of nine of the concessions held by Minera Sonora Borax S.A. de C.V.
(“MSB”), Mexilit S.A. de C.V. (“Mex”) and Minera Megalit S.A. de C.V. (“Meg”) (together, the “Mining Entities”).
According to the DGM, the basis for these cancellation proceedings was that the Mining Entities had purportedly not
complied with minimum investment obligations for the development of such concessions in 2017-2021. In those
proceedings, the Mining Entities submitted extensive evidence of their compliance with such obligations in a timely
manner. On 4 August 2023, however, the DGM notified the Mining Entities of resolutions cancelling these nine
concessions i.e., the Cancellation Resolutions.

The Mining Entities are challenging the legality of the Cancellation Resolutions under Mexican law through annulment
claims before the Federal Tribunal of Administrative Justice in Mexico. The Company is also exploring all possible
legal recourses available to it.

The Company has considered the impact of the actions taken by DGM and the legal advice from lawyers and has
concluded that the Mining Companies have strong arguments and evidence that protect the ownership of the
concession titles under Mexican and international law and that this does not impact the going concern assessment.

Having considered the modelling and other factors as described above, the Company has concluded that the going
concern basis of accounting is appropriate to assume when preparing the Company Financial Statements for the year
ended 31 December 2023.

3 Accounting policies

The preparation of Financial Statements in compliance with IFRS requires management to make certain critical
accounting estimates. It also requires management to exercise judgement in applying the Company’s accounting
policies. Below are the material accounting policies applied by management. The areas involving a higher degree of
judgement or complexity, or areas where assumptions and estimates are significant to the Financial Statements are
disclosed in note 4.

a) Standards, amendments and interpretations adopted

During the year, the following standards and amendments have been implemented.

Standard
IFRS 17
IAS 1
IAS 8

IAS 12

Detail
Insurance Contracts
Amendment – regarding the disclosure of accounting policies
Amendment – regarding the definition of accounting estimate
Amendment - regarding deferred tax related to assets and liabilities
arising from a single transaction
Amendment – International tax reform – Pillar Two Model Rules

Effective date
1 January 2023
1 January 2023
1 January 2023

1 January 2023

23 May 2023

The adopted amendments have not resulted in any changes to the Financial Statements.

b) Standards, amendments and interpretations effective in future periods

At the date of authorisation of these Financial Statements, the following amendments and interpretations to existing
standards have been published but are not yet effective and have not been adopted early by the Company.

Standard
IFRS 16
IAS 1
IAS 7 and IFRS 7
IAS 21

Detail
Amendment – regarding the leases on sale and leaseback
Amendment – regarding the non-current liabilities with covenants
Amendment – regarding the supplier finance
Amendment – regarding the lack of exchangeability

Effective date
1 January 2024
1 January 2024
1 January 2024
1 January 2025

Management anticipates that all the pronouncements will be adopted in the Company’s accounting policies for the
first period beginning after the effective date of the pronouncement. No material impact to the Company’s financial
statements is expected.

c) Foreign currency transactions and balances

In preparing the Financial Statements, transactions in currencies other than the entity’s functional currency (foreign
currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each
reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that
date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates
prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of
historical cost in a foreign currency are not retranslated at the end of each reporting period.

Exchange differences on monetary items are recognised in the Statement of Comprehensive Income in the period in
which they arise.

d) Cash and cash equivalents

Cash and cash equivalents comprise cash held on deposit and other short-term, highly liquid investments with original
maturities of three months or less. These deposits and investments are readily convertible to known amounts of cash
and subject to an insignificant risk of change in value.

e) Other receivables

All other receivables are held at amortised cost less any provision for impairment. A loss allowance for expected
credit losses is made to reflect changes in credit risk since the initial recognition.

The method of measuring the expected credit losses can be referred to note 3(k)(i) below.

Investments in subsidiaries

Unlisted investments are carried at cost, being the purchase price, less provision for impairment. The Company assess
at the end of reporting period whether there is any indication that unlisted investments may be impaired. If any such
indication exists, the Company shall estimate the recoverable amount of the unlisted investments.

Investments in joint venture

Certain company activities are conducted through joint arrangements in which two or more parties have joint control.
A joint arrangement is classified as either a joint operation or a joint venture, depending on the rights and obligations
of the parties to the arrangement.

Joint ventures arise when the Company has rights to the net assets of the arrangement. For these arrangements, the
Company uses equity accounting and recognizes initial and subsequent investments at cost, adjusting for the
Company’s share of the joint venture’s income or loss, dividends received and other comprehensive income
thereafter. The transactions between the Company and the joint venture are assessed for recognition in accordance
with IFRS and are disclosed in note 16 to the Financial Statements.

h) Provisions

Provisions are recognised when the Company has a present obligation, legal or constructive, that has arisen as a result
of a past event and it is probable that a future outflow of resources will be required to settle the obligation, provided
that a reliable estimate can be made of the amount of the obligation.

Provisions are measured at management’s best estimate of the present value of the expenditures expected to be
required to settle the obligation using a pre-tax discount rate that reflects current market assessments of the time
value of money and the risk specific to the obligation. The increase in any provision due to passage of time is
recognised as an accretion expense.

Interest income

Interest income is recorded on an accrual basis using the effective interest method.

j) Financial instruments

Financial assets and liabilities are recognised when the Company becomes a party to the contractual provisions of
the financial instrument. Financial assets are derecognised when the contractual rights to the cash flows from the
financial asset expire, or when the financial asset and all substantial risks and rewards are transferred. A financial
liability is derecognised when it is extinguished, discharged, cancelled or expired.

Financial assets and financial liabilities are measured initially at fair value plus or minus, in the case of a financial
asset or financial liability not at fair value through profit or loss, transactions costs that are directly attributable to
the acquisition or issue of the financial instrument. Financial assets and financial liabilities are subsequently measured
as described below.

Financial assets

Financial assets are subsequently recognised at amortised cost under IFRS 9 if it meets both the hold to collect and
contractual cash flow characteristics tests. A financial asset is measured at fair value through other comprehensive
income if the financial asset is held within a business model whose objective is achieved by both collecting contractual
cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to
cash flows that are solely payments of principal and interest on the principal amount outstanding.

If neither of the above classification are met the asset is classified at fair value through profit and loss or unless
management elect to do so provided to do so eliminates or significantly reduces a measurement or recognition
inconsistency.

Financial liabilities

Financial liabilities are subsequently measured at amortised cost using the effective interest method, except for
financial liabilities designated at fair value through profit or loss, that are carried subsequently at fair value with
gains and losses recognised in the Statement of Comprehensive Income.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating
and recognising interest expense in the profit and loss account, over the relevant period. The effective interest rate
is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability,
or, where appropriate, a shorter period to the amortised cost of the financial liability.

Impairment of assets

Financial assets

The Company recognises an allowance for expected credit losses (“ECLs”) for all debt instruments not held at fair
value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance
with the contract and all the cash flows that the Company expects to receive, discounted at an approximation of the
original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or
other credit enhancements that are integral to the contractual terms.

The Company has applied below ECLs model for its other receivables, receivables from related parties as permitted
by IFRS 9 Financial Instruments.

Other receivables and receivables from related parties that are not carried at fair value through profit or loss is
assessed at each reporting date to determine a loss allowance for expected credit losses. If the credit risk on a
financial instrument has increased significantly since initial recognition, the loss allowance is equal to the lifetime
expected credit losses. If the credit risk has not increased significantly, the loss allowance is equal to the twelve
month expected credit losses.

The ECLs are measured in a way that reflects the unbiased and probability weighted amount that is determined by
evaluating a range of possible outcomes; the time value of money and reasonable and supportable information that
is available about past events, current conditions and forecasts of future economic conditions.

ii Investments in joint venture

Joint ventures are tested for impairment whenever objective evidence indicates that the carrying amount of the
investment may not be recoverable under the equity method of accounting. The impairment amount is measured as
the difference between the carrying amount of the investment and the higher of its fair value less costs of disposal
and its value in use.

The Company carried out an assessment of the carrying amount of the investment at the balance sheet date and no
impairment was required. Management considered the increase in current lithium commodity prices in the market
compared to those applied in the feasibility study performed in previous years.

Income taxes

Current income tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax
rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable or receivable in
respect of previous years.

Deferred income taxes are calculated based on temporary differences between the carrying amounts of assets and
liabilities and their tax bases.

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the
extent that it is probable that future taxable profits will be available against which they can be utilised.

The Company has not recognized a deferred tax asset associated with its carried forward losses on the basis that its
investment is not likely to distribute dividends in the foreseeable future. Until such time as this can be predicted
with a level of certainty to the extent its losses will be offset against earned profits, it is prudent that the Company
does not recognise a deferred tax asset on its Statement of Financial Position.

m) Share premium

Share premium represents the excess of proceeds received over the nominal value of new shares issued.

4 Critical accounting estimates and judgements

The preparation of the Company’s Financial Statements in accordance with IFRS requires management to make
certain judgements, estimates, and assumptions about recognition and measurement of assets, liabilities, income
and expenses. The actual results are likely to differ from these estimates. The following information about the
significant judgements, estimates, and assumptions that have the most significant effect on the recognition and
measurement of assets, liabilities, income and expenses that are relevant to the Company Financial Statements are
discussed below.

a) Recoverability of investment in joint venture and non-current receivables from related partiese

The investment in joint venture is assessed at each reporting period date for impairment in accordance with IAS 28.
An impairment is recognised if there is objective evidence that events after the recognition of the investment have
had an impact on the estimated future cash flows which can be reliably estimated. During the impairment review an
indicator of impairment was identified and following the assessment an impairment charge is not required to be

recognised as at 31 December 2023. The Directors also consider that the non-current receivables from related parties
are fully recoverable at 31 December 2023.

On 23 August 2022, the President of Mexico issued a decree titled “Decree that creates the decentralized public organ
of the Federal Public Administration called Litio para México”. This decree established a State-owned entity named
Litio para México or LitioMX to explore, exploit, benefit, and use lithium in Mexico and to be in charge of the
administration and control of the economic value chain of said mineral.

Another Presidential Decree also dated 18 February 2023 instructed the Secretary of Energy to take any necessary
actions to oversee the execution of the aforementioned Presidential Decree and conduct all necessary actions to
comply with the 2022 Amendment regarding lithium, as well as the Decree creating Litio-MX.

In February 2023, the Secretary of Economy, through the DGM also initiated an administrative procedure for the
cancellation of nine of the concessions held by the Mining Entities. According to the DGM, the basis for these
cancellation proceedings was that the Mining Entities had purportedly not complied with minimum investment
obligations for the development of such concessions in 2017-2021. In those proceedings, the Mining Entities submitted
extensive evidence of their compliance with such obligations in a timely manner. On 4 August 2023, however, the
DGM notified the Mining Entities of the resolutions cancelling these nine concessions (“Cancellation Resolutions”).

The Mining Entities are challenging the legality of the Cancellation Resolutions under Mexican law through annulment
claims before the Federal Tribunal of Administrative Justice in Mexico. Please refer to note 19 to the Financial
Statements for further information. The Company is also analysing other legal actions available to it under
international law.

As at 31 December 2023 and as at the date of the approval of these Financial Statements, the Company’s position is
that the Cancellation Resolutions violate both Mexican law and international law as they are arbitrary,
unsubstantiated in both fact and law, and infringe upon the Company’s and the Mining Entities’ fundamental due
process rights. The Company has taken legal advice and has considered the impact of the Mexican Government’s 2022
Amendment and the Cancellation Resolutions, at the balance sheet date, and concluded that no impairment charge
is required to be recorded against the investment in joint venture in the year. The Directors consider it appropriate
to continue to record the investment in the Sonora Project at historic cost.

The Company and its legal counsel continue to closely monitor developments associated with the changes of Mining
Law and the Cancellation Resolutions and the lawsuits that affect lithium concessions, and stands ready to evaluate
the impact on its investments should that become necessary in the future.

b) Functional currency

The Company transacts in multiple currencies. The assessment of the functional currency of the Company involves
the use of judgement in determining the primary economic environment each entity operates in. The Company first
considers the currency that mainly influences sales prices for goods and services which is USD, and the currency that
mainly influences labour, material and other costs of providing goods or services, which are either in or heavily
influenced by USD denominations. In determining functional currency, the Company also considers the currency from
which funds from financing activities are generated, and the currency in which receipts from operating activities are
usually retained, these either are in USD or will be in USD. The Company also finances the Sonora Project in USD
denominations, where capital expenditure will mainly be USD denominated also. As a result, the functional currency
of the Company is USD.

Investments in subsidiaries

In US$

Investment in Bacanora
Finco Ltd

Investment in
Bacanora Treasury Ltd

Total

Balance as at 31.12.2022
and 31.12.2023

The Company has the following subsidiaries, held at cost, at 31 December 2023:

Name of subsidiary

Country
of
incorporation

Shareholding on
31 December 2023

Shareholding on
31 December 2022

Nature of business

Bacanora Finco Ltd

Bacanora Treasury Ltd

100%

Dormant Financing
company
Dormant Financing
Company

For the above UK subsidiaries, the registered address for each subsidiary is 4 More London Riverside, London, SE1
2AU.

6 Investment in joint venture

The Company’s investment in the Sonora Group has been accounted for using the equity method for the years ended
31 December 2023 and 31 December 2022. There is no change on shareholding in Sonora Group. The Sonora Group is
mainly engaged in development of the Lithium concessions in Mexico.

Name

Country
incorporation

Principal place
of business

Sonora Lithium Ltd

Shareholding
31 December 2023
50.0%

Shareholding
31 December 2022
50.0%

Investment reconciliations

The reconciliation of the carrying amount of the investment in joint venture is as follows:

In US$

Opening carrying value
Share of loss on investment in joint venture

31 December 2023

31 December 2022

48,295,448
(2,395,036)

50,144,596
(1,849,148)

Closing carrying value

45,900,412

48,295,448

The summarised financial information of the Sonora Group and reconciliation to the investment carrying value is set
out below. The functional currency of Sonora Group was USD which is the same of the Company and no impact on
foreign currency translation was noted. The summarised information represents amounts shown in SLL’s consolidated
financial information.

In US$

Current assets
Non-current assets
Current liabilities
Non-current liabilities

Net assets (100%)

31 December 2023

31 December 2022

21,928,894
45,292,837
(3,775,519)
(12,245,297)

51,200,915

23,574,345
44,565,672
(4,125,458)
(7,974,441)

56,040,118

149,863

Net assets attributable to non-controlling interests

198,994

Share of net assets attributable to the equity
shareholders of SLL

51,399,909

56,189,981

The Company share of net assets (50%)

25,699,954

28,094,990

Current assets include cash and cash equivalents of US$3,873,934 (2022: US$21,306,747).

Summarised financial information relating to the consolidated loss of the Sonora Group for the year ended 31
December 2023 is presented below:

In US$

31 December 2023

31 December 2022

Other income
General and administrative expenses
Depreciation
Foreign exchange gain
Interest income
Related party interest income
Related party interest expense
Loss on dissolution of subsidiary
Impairment on Exploration and Evaluation Assets
Loss on write off of property, plant and equipment
Gain / (loss) on disposal of property, plant and equipment
Tax charge

884
(3,164,352)
(189,364)
324,634
619,251
138,938
(1,634,641)
–
(817,055)
(495)
79,581
(196,584)

(2,364,543)
(170,566)
61,011
236,626
–
(804,635)
(623,670)
–
–
(799)
(66,025)

Total loss after tax and total comprehensive loss

(4,839,203)

(3,732,601)

Company share of total loss after tax and total comprehensive
loss
NCI share of total loss after tax and total comprehensive loss

(2,395,036)

(1,849,148)

(24,566)

(17,153)

Commitments

At the reporting date, the Sonora Group had capital commitment of construction contracts signed but not provided
for US$0.9 million (2022: US$0.8 million).

Legal cases

Sonora lithium related legal cases

The Sonora Group has ongoing legal cases, which are relevant to the Company.

The Mexican Entities have submitted constitutional challenges (“amparos”) regarding Mexico’s 2022 Amendment,
establishment of LitioMX, declaration of a lithium reservation zone in areas encompassing the Sonora Project, as well
as additional changes to the Mining Law approved in 2023. These amparo actions are ongoing.

In February 2023, the Secretary of Economy, through the DGM, also initiated administrative procedures for the
cancellation of nine of the concessions held by the Mining Entities. According to the DGM, the basis for these
cancellation proceedings was that the Mining Entities had purportedly not complied with minimum investment
obligations for the development of such concessions in 2017-2021. In those proceedings, the Mining Entities submitted
extensive evidence of their compliance with such obligations in a timely manner. On 4 August 2023, however, the
DGM notified the Mining Entities of the Cancellation Resolutions.

On 25 August 2023, the Mining Entities filed administrative review recourses before the Secretary of Economy
challenging the legality of the Cancellation Resolutions under Mexican law for each of the nine concessions.
Shortly thereafter, on 24 November 2023, the Secretary of Economy issued decisions maintaining the Cancellation
Resolutions issued by the DGM. Please refer to note 19 to the Financial Statements for further information.

The Mining Entities are challenging the legality of the Cancellation Resolutions under Mexican law through annulment
claims before the Federal Tribunal of Administrative Justice in Mexico. The Company is also analysing other legal
options it may have under international law.

Orr-Ewing royalty dispute

In 2017, Bacanora Minerals Ltd, a subsidiary of SLL, commenced litigation with the Estate of Colin Orr-Ewing (the
“Estate”) in regard to its purported royalty over the Sonora Lithium Project, which in turn resulted in the Estate
making a counterclaim. Bacanora Minerals Ltd maintains that the royalty is invalid and unenforceable on the grounds
of misrepresentation and a lack of consideration. The initial litigation was undertaken to have the royalty pre-
emptively declared invalid by the Alberta Courts. In 2021, the Alberta Court heard a Summary Trial application solely
around the matter of “time limitations” to initiate a pre-emptive declaration of invalidity. The Summary Trial which
was heard was not around the merits of the royalty. The judgment from the Court of King’s Bench was that this
specific action by Bacanora Minerals Ltd was time-barred. Bacanora Minerals Ltd appealed this judgment and on 26
April 2023, the Alberta Court of Appeal found in favour of Bacanora Minerals Ltd and overturned the original judgment
and awarded costs against the Estate. As at the date of this report, the Estate has not paid these costs and Bacanora
Minerals Ltd is considering its next steps in enforcing this costs judgment.

The Alberta Courts have not ruled in any way on the validity of the royalty. Bacanora Minerals Ltd maintains that
the royalty is invalid and unenforceable. The validity of the royalty remains to be determined by the Alberta
Courts.

The Company and Sonora Group have at all times taken a conservative approach to the treatment of the purported
royalty and included it fully in the financial model for the Sonora Feasibility Study published in 2018, as well as all
financial projections to investors and debt funding partners. No provisions have been made relating to the validity
of the royalty case and no contingent liability is disclosed by the Company, as management has assessed an adverse
result of the case as being remote.

7 Receivables from related parties

In US$

31 December 2023

31 December 2022

GFL International Co. Limited (note i)
Bacanora Treasury Limited (note ii, iv)
Sonora Lithium Ltd (note ii, iv)
Bacanora Chemco S.A. de C.V. (note iii, iv)
Bacanora Minerals Ltd (note ii, iv)

Total

Non-current portion
Current portion

Total

60,775,834
15
64
12,171,378
73,853

73,021,145

12,245,311
60,775,834

73,021,145

60,271,667
15
12,851
7,887,737
73,853

68,246,123

7,974,456
60,271,667

68,246,123

i) During the year ended 31 December 2022, a short term related party loan of US$60.0m was advanced to GFL International Co.

Limited, was fully drawn at 31 December 2022 and was fully settled in September 2023.
A renewed short term loan was provided to GFL International Co. Limited for a period of one year (2022: one year), the loan
is interest bearing at 4.75% (2022: 2%) per annum and is repayable on demand. The loan, with accrued interest, must be repaid
no later than 24 September 2024 (2022: 20 September 2023). The loan was fully drawn at 31 December 2023. The receivable
had been classified as a short term asset according to the repayment term of the loan.

ii) The amounts due from related parties are unsecured, non-interest bearing and no fixed terms of repayment. The amount due

was from the intercompany recharge of expenses.

iii) The amount due from related party is unsecured, interest bearing at 21.5% per annum (2022: 21.5%) and is repayable on

demand. The loan, with accrued interest, must be repaid no later than 2 July 2038 (2022: 2 July 2038).

iv) The recoverability of the Company’s non-current receivables from related parties are affected by the critical accounting

estimates and judgements described in note 4(a).

8 Other receivables and prepayments

Other receivables and prepayments comprise short term receivables from VAT and other indirect taxes, prepaid
expenses and deposits paid. All receivables are due within one year. They are assessed by the three stage approach
to evaluate any expected credit losses. The expected credit losses are updated if there is objective evidence that
the receivable is irrecoverable.

In US$

Other receivables
Prepayments and deposits
Total
Non-current portion:
Prepayments and deposits
Current portion

31 December 2023

31 December 2022

53,783
716,150
769,933

(497,993)
271,940

41,875
888,672
930,547

(666,099)
264,448

As at 31 December 2023 and 2022, the Company recognised prepaid insurance which covered period to year 2026.

9 Accounts payable and accrued liabilities

Accrued liabilities mainly comprise accrued legal and professional fees related to the legal proceedings in Mexico.
The Company’s accounts payable and accrued liabilities as at 31 December 2023 are as follows:

In US$

Trade payables

Accrued liabilities

Other payables

Total

10 Financial instruments

31 December 2023

31 December 2022

5,525

262,120

39,524

307,169

8,580

78,395

37,400

124,375

The Company’s principal financial assets and liabilities are classified as follows:

As at 31 December 2023 (In US$)
Financial assets
Receivables from related parties
Other receivables
Cash and cash equivalents

Total financial assets

Financial liabilities
Accounts payable and accrued liabilities

Payable to related party
Total financial liabilities

Net financial assets

As at 31 December 2022 (In US$)
Financial assets
Receivables from related parties
Other receivables
Cash and cash equivalents

Total financial assets

Financial liabilities
Accounts payable and accrued liabilities

Payable to related party
Total financial liabilities

Net financial assets

At amortised cost

73,021,145
40,441
9,943,874

83,005,460

307,169
1

307,170

82,698,290

At amortised cost

68,246,123
133
13,969,133

82,215,389

124,375
1
124,376

82,091,013

11 Financial risk management

The Company is exposed to risks that arise from its use of financial instruments. The principal financial instruments
used by the Company, from which financial risk arises, are set out in note 10. The types of risk exposure the Company
is subjected to in the financial year are as follows:

a) Credit risk

Credit risk arises from the risk that a counter party will fail to perform its obligations. Financial instruments that
potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents, other
receivables and receivables from related parties. The Company considers a financial asset in default when contractual
payments are over the credit term. The Company may also consider a financial asset to be in default when internal
or external information indicates that the Company is unlikely to receive the outstanding contractual amounts in full
before taking into account any credit enhancements held by the Company.

The Company’s cash is held in major UK banks, and as such that the Company is exposed to the risks of those financial
institutions. Under Standard & Poor’s short term credit ratings, the Company’s total cash balance is held in institutions
with a A-1 rating (2022: A-1 rating).

The Company’s current receivables from related parties mainly relate to receivables from a fellow subsidiary in the
Ganfeng Group, the Company believes this to be a minimal credit risk. Where management estimate a lower
receivable amount is recoverable, that difference in recoverability will be recognised in the profit and loss account
in the period of determination.

An IFRS 9 expected credit losses impairment assessment on the related party receivable was performed by
management at 31 December 2023. This involved analysing the expected credit loss on the receivables from related
parties to the Company as well as an assessment of the forward projections of cashflows and cash availability by the
counterparty of the loans to the Company’s joint venture companies. This resulted in no credit loss expected at 31
December 2023 taking into consideration the availability of cash to repay the loan from the counterparty and expected
future profit from the counterparty’s ongoing projects.

The total carrying amount of cash and cash equivalents, other receivables and receivables from related parties
represent the Company’s maximum credit exposure.

The Board of Directors monitors the exposure to credit risk on an ongoing basis and does not consider such risk to be
significant. The Company considers all of its accounts receivables as at the reporting date to be fully collectible.

b) Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The
Company's approach to managing liquidity risk is to ensure, as far as possible, that it will have sufficient liquidity to
meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses.

The following table illustrates the contractual maturity analysis of the Company’s gross financial liabilities based on
exchange rates on the reporting date. Contractual gross financial liabilities, shown below, are undiscounted estimated
cash outflows which where applicable include estimated future interest payments.

As at 31 December 2023 (In US$)

Within 30
days

30 days to
6 months

6 to 12
months

Over 12
months

Accounts payable and accrued liabilities

307,169

–

As at 31 December 2022 (In US$)

Within 30
days

30 days to 6
months

6 to 12
months

Accounts payable and accrued liabilities

124,375

–

Over 12
months

c) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, commodity prices, and interest
rates will affect the value of the Company’s financial instruments. The objective is to manage and control market
risk exposures within acceptable limits, while maximizing long-term returns.

A portion of the Company’s expenditures, other receivables, accounts payables and accrued liabilities are
predominately denominated in US dollars and Great British pound and are therefore subject to fluctuation in exchange
rates.

As at 31 December 2023, a 5% change in the exchange rate between the United States dollar and Great British pound,
which is a reasonable estimation of volatility in exchange rates, would result in US$0.1 million (2022: US$0.1 million)
change to the Company’s total comprehensive loss.

The carrying amounts of short-term financial assets and receivables (e.g. receivables from related parties, other
receivables and cash and cash equivalents) and short-term payables (e.g. accounts payable and accrued liabilities)
approximated their fair values, and accordingly no disclosure of the fair values of these items is presented.

d) Capital management

The Company’s objectives in managing capital are to safeguard its ability to operate as a going concern and to support
the development of Sonora Project and thereby maximise shareholder’s value. The Company defines capital as the
equity attributable to equity shareholders of the Company.

At 31 December 2023, the Company held US$129,402,494 (31 December 2022: US$131,316,878) of capital. The
Company sets the amount of capital in proportion to risk and corporate growth objectives. The Company manages its
capital structure and adjusts it in light of changes in economic conditions.

12 Equity

a) Authorised and issued share capital

The authorised and issued share capital of the Company consists of 387,136,502 voting common shares of par value
£0.10 (2022: £0.10).

On 26 January 2022, the shares of the Company had been cancelled for trading on AIM and the Company delisted
from the AIM stock exchange. On 2 August 2022, Ganfeng completed its purchase of the entire issued shares of the
Company. There is no change on the shareholding as at 31 December 2023. The Company has the following shares in
issue:

31 December 2022

31 December 2023

b) Merger reserve

Share Capital
(US$)

Share Premium
(US$)

387,136,502

53,014,057

387,136,502

53,014,057

813,170

On 23 March 2018, the Plan of Arrangement to re-domicile the Bacanora Group from Canada to the UK became
effective resulting in Bacanora Lithium Limited becoming the new holding company for Bacanora Minerals Ltd. Under
the Company’s Act 06 Section 612, a merger reserve was created to account for the difference between the share
capital and net asset investment in Bacanora Minerals Ltd.

c) Share-based payment expense

There is no share-based compensation granted during the year ended 31 December 2023 and 2022.

13 General and administrative expenses

The Company’s general and administrative expenses include the following:

In US$

Legal and accounting fees
Employee and contractor costs
Foreign exchange (gains) / losses
Investor relations
Travel
Office and other expenses
Intercompany recharges
Audit fee

Year ended

31 December 2023

31 December 2022

1,043,199
1,556,627
(7,586)
–
83,842
517,748
–
73,255

3,267,085

181,993
1,635,979
393,164
75,143
95,511
494,577
75,632
67,389

3,019,388

The audit fee represented provision of annual audit services payable to Ernst & Young LLP only. No non-audit services
were provided.

14 Finance income and costs

The Company’s finance income and costs are as follows:

In US$

Interest income

Finance income

Intercompany interest expenses
Finance costs

Net finance costs

15 Taxation

Current taxation

Year ended

31 December 2023

31 December 2022

3,673,440

3,673,440
–
–

3,673,440

1,870,754

1,870,754
(52,429)
(52,429)

1,818,325

No provision for taxation has been recognised in the year ended 31 December 2023 (2022: Nil), hence the effective
tax rate is nil (2022: Nil). The Company applied the exception to recognising and disclosing information about deferred
tax assets and liabilities related to Pillar Two income taxes.

Legislation was introduced in UK Finance Act 2021 to increase the main rate of UK corporation tax from 19%
to 25% from 1 April 2023. The pro rata tax rate had been calculated of 23.52%. The reasons for the difference
between the actual tax charge for the year and the standard rate of corporation in the United Kingdom
applied to the loss for the year is as follows:

In US$

Loss before tax
Tax credit on losses at the statutory tax rate of 23.52%
(2022: 19%)
Expenses not deductible
Income not taxable
Group relief
Tax losses not recognised
Unrecognised tax losses and timing difference

Tax charge

Year ended

31 December 2023

31 December 2022

(1,988,681)

(2,963,193)

(467,736)

563,312
–
(23,908)
(71,668)
–

–

(563,007)

352,160
(12)
14,816
(390,415)
586,458

–

Deferred tax

The Company has no recognized deferred tax balance on losses for the year ended 31 December 2023 (2022: Nil).
Economic benefits embodied in deferred tax assets will flow to the entity only if it earns sufficient taxable profits
against which tax deductions can be offset. An entity recognises deferred tax assets only when it is probable that
taxable profits will be available against which the deductible temporary differences can be utilised. Management has
assessed that taxable profits are not probable at this stage of the Company’s development. As at 31 December 2023,
the Company has, for tax purpose, non-capital losses available to carry forward to future years of US$30,732,241
(2022: US$30,949,852). There is no expiry date on the losses.

16 Related party disclosures

Related party transactions

The Company’s related parties include:

-
-
-

Its subsidiaries;
joint venture: Sonora Lithium Ltd and its subsidiaries, together the “Sonora Group”;
shareholder: Ganfeng International Trading (Shanghai) Ltd and its parent, Ganfeng Lithium Group Co.,
Ltd. and fellow subsidiaries, together the “Ganfeng Group”; and
the Company’s key management personnel i.e. directors of the Company and CFO.

The following transactions took place between the Company and related parties (other than with key management
personnel which have been disclosed separately below) for the year ended 31 December 2023:

Name of related party

Type of transaction

Transaction
value

Profit/(loss)
impact

Balance owed by /
(owed to) related
parties

GFL International Co.
Limited

Sonora Lithium Ltd

Bacanora Chemco S.A. de
C.V.
Bacanora Minerals Ltd
Bacanora Treasury Limited

Short term loan and interest1

122,800,833

1,652,500

60,775,834

Short term loans and
repayment
Settlement of intercompany
balances

480,000

12,787

–

Project funding and interest

4,384,237

1,634,641

12,171,378

Recharge of expenses
Recharge of expenses

Bacanora Finco Limited

Recharge of expenses

–
–

–

–
–

–

73,853
15

(1)

1 A short term loan was made to GFL International Co. Limited for a period of one year, the loan is interest bearing at 4.75% per annum (2022: 2%)
and is repayable on demand. The loan must be repaid not later than 24 September 2024 (2022: 20 September 2023). The loan was fully drawn at
31 December 2023.

–

73,853
15

(1)

A summary of transactions and outstanding balances for the year ended 31 December 2022 are set out below:

Name of related party

Type of transaction

Transaction
value

Profit/(loss)
impact

Balance owed by /
(owed to) related
parties

Ganfeng International
Trading (Shanghai) Ltd
GFL International Co.
Limited

Sonora Lithium Ltd

Sonora Lithium Ltd
Bacanora Chemco S.A. de
C.V.

Bacanora Minerals Ltd

Bacanora Minerals Ltd
Bacanora Treasury Limited

Share option receivable1

2,726,934

–

Short term loan and interest2

60,271,667

271,667

60,271,667

Short term loans and
repayment
Recharge of expenses

12,283,091

–

12,851

Project funding and interest

5,094,784

804,635

7,887,737

Working capital and
repayment
Recharge of expenses
Non-interest bearing

1,222,270

–

73,853
–

Bacanora Finco Limited

Recharge of expenses

319,907

(128,061)

1 On 17 December 2021, 2,991,601 new ordinary shares in relation to the Company’s options were exercised. 1,258,009 were issued at an issue
price of 24.4p, 1,300,863 were issued at an issue price of 33.25p and 432,729 were issued at an issue price of 39.25p. The option holders agreed
to sell the new shares to Ganfeng International Trading (Shanghai) Ltd as part of the Ganfeng offer at 67.5p. It was agreed by the Company,
Ganfeng and the option holders that Ganfeng would pay the Company the sale funds and the Company would retain the exercise price per share
and pass on the profit to the option holders. This was settled in financial year 2022.

2 A short term loan was made to GFL International Co. Limited for a period of one year, the loan is interest bearing at 2% per annum and is
repayable on demand. The loan must be repaid not later than 20 September 2023. The loan was fully drawn at 31 December 2022.

Key management personnel compensation

During the year ended 31 December 2023, key management personnel remuneration totalled US$858,061 (2022:
US$772,046). Of the total amount incurred, US$nil remains in accounts payables and accrued liabilities at 31
December 2023 (2022: US$nil).

17 Directors and employees of the Company

The below information relates to all Directors and employees:

In US$

Short-term employee benefits
Post-employment benefits

Total cost

Average number of employees and
Directors

Year ended

31 December 2023
908,866
30,815

31 December 2022
780,158
25,066

939,681

805,224

Directors’ remuneration totalled the following:

In US$

Short-term employee benefits
Share-based payments

Total remuneration

Number of Directors

Year ended
31 December 2023

Year ended
31 December 2022

500,323
–

500,323

471,875
–

471,875

Only one of the directors received remuneration. The highest paid Director received remuneration in the year ended
31 December 2023 of US$500,323 (2022: US$471,875). The highest paid Director did not exercise any share options
or RSUs in the year ended 31 December 2023 (2022: Nil).

18 Commitments and contingencies

Bacanora Lithium Limited had a commitment on its UK office of US$14,845 (2022: US$27,720) for 4 months’ rent
(2022: 6 months’ rent) at 31 December 2023.

19 Subsequent events

On 19 January 2024 and 22 January 2024, the Mining Entities submitted annulment claims to challenge the legality of
the Cancellation Resolutions under Mexican law. If necessary, the Mining Entities and/or the Company will resort to
additional remedies under Mexican or international law. The final outcome of the Group’s exercise of these remedies
is subject to uncertainties. The Board will pay active attention to the progress of the matter in a timely manner.

As noted above, both the 2022 Amendment concerning lithium, as well as further general amendments to the Mining
Law that were approved in May 2023 (“2023 Amendment”), have been challenged in amparo actions by both the
Mexican Entities and other companies that are impacted by those amendments. At this stage, no decision has been
issued in connection with the 2022 Amendment. Regarding the 2023 Amendment, some federal courts have issued
decisions that continue to be subject to appeal. These decisions, however, do not concern either the 2022 Amendment
or the Cancellation Resolutions that are specific to lithium and the Sonora Project, respectively. Thus, the decisions
concerning the 2023 Amendment do not change the risk outlook described above concerning Mexico’s actions and the
ongoing legal proceedings.

For background information of legal cases, please refer to Section 3 – Key Challenges of Strategic Report and note 4
to the Financial Statements.