Bacanora Announces Sonora Lithium Project Signing Lithium Supply Contract

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

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

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

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