Home » Cadence Minerals (KDNC) » Cadence Minerals #KDNC – Sonora Lithium Investment Update

Cadence Minerals #KDNC – Sonora Lithium Investment Update

Cadence holds an interest in the Sonora Lithium Project via a 30% stake in the joint venture interests in each of MexilitS.A. de CV (“Mexilit”) and Minera Megalit S.A. de CV (“Megalit”).

Mexilit and Megalit form part of the Sonora Lithium Project (the “Project”). The Sonora Lithium Project consists of nine granted concessions. Two of the concessions (La Ventana, La Ventana 1) are owned 100% by subsidiaries of Ganfeng Lithium Group Co., Ltd (“Ganfeng”). El Sauz, El Sauz 1, El Sauz 2, Fleur and Fleur 1 concessions are owned by Mexilit S.A. de C.V. (“Mexilit”), which is owned 70% by Ganfeng and 30% by Cadence. The Buenavista and San Gabriel concessions are owned by Megalit, which is owned 70% by Ganfeng and 30% by Cadence. 

Ganfeng has been developing the Project, consisting of an open pit mine and lithium chemical product processing facility in Sonora, Mexico. The principal planned lithium product for the Project is lithium hydroxide. 

As previously announced by Cadence. In April 2022 and May 2023, the Mexican Government approved amendments to its Mining Law (the “Mining Law Reform”), which prohibited lithium concessions, declared lithium as a strategic sector and granted the exclusive right to engage in lithium mining operations to a state-owned entity. The Mining Law Reform is not supposed to apply to pre-existing concessions, including those held by the Mexilit and Megalit. Ganfeng’s and Cadence’s position is that these reforms cannot impact the Project’s concessions because they were granted prior to the enactment of the Mining Law Reform.

This is consistent with the terms of the Constitution of Mexico, which, among other principles and rights, recognizes the principles of legality and non-retroactivity of laws. Guided by the principles of good faith, cooperation, and mutual benefit, Ganfeng has been proactively engaging with the Mexican Government in general and with the Secretary of Economy in particular, regarding a potential collaboration on the Sonora Project while respecting Ganfeng and its subsidiaries rights (including those subsidiaries 30% owned by Cadence). Ganfeng continues to seek a mutually beneficial resolution. As of now, no agreement has been reached among the Company, Ganfeng and the Mexican Government concerning this potential collaboration.

As the operator of the Project, including the concessions held by Mexilit and Megalit, Ganfeng’s ability to develop the Project is based on a series of concessions granted in accordance with Mexican law and held by three controlled subsidiaries of the Ganfeng incorporated in Mexico (the “Mexican Subsidiaries”). 

While Ganfeng was holding discussions with the Secretary of Economy, the General Directorate of Mines (“DGM”) initiated a review of nine of the lithium concessions held by the Mexican Subsidiaries, including the lithium concessions including the concessions owned by Mexilit and Megalit.

According to the DGM, if the Mexican Subsidiaries failed to submit sufficient evidence within the specified timeframe to prove that they had complied with minimum investment obligations for the development of lithium concessions in 2017-2021, there was a risk of cancellation of the above-mentioned lithium concessions. 

As of May 2023, Mexlait and Megalit had submitted extensive evidence of their compliance with the minimum investment obligations of the above-mentioned lithium concessions in a timely manner. However, the DGM issued a formal decision notice to the Mexican Subsidiaries in August 2023, indicating that nine lithium concessions were cancelled, which include those owned by Mexilit and Megalit. 

The lithium concessions’ cancellations issued by the DGM are not final and are subject to ongoing appeals. Ganfeng and Cadence believe that the Mexican Subsidiaries have complied with their minimum investment obligations, as required by Mexican law. Indeed, the mine development investment by the Mexican Subsidiaries has significantly exceeded the minimum investment obligations, and the Mexican Subsidiaries regularly submitted to the DGM annual reports for the 2017-2021 periods detailing their operations within the prescribed period annually. The Mexican Government did not raise any objections until it recently notified Mexican Subsidiaries that the minimum investment obligations were allegedly not met, and it took action to cancel the lithium concessions.

Moreover, Ganfeng and Cadence’s position is that the resolutions cancelling the concessions violate both Mexican law and international law as they are arbitrary, unsubstantiated in both fact and law and infringe upon the Company’s, Ganfeng’s and its Subsidiaries’ fundamental due process rights. Therefore, Ganfeng and the Mexican Subsidiaries have filed administrative review recourses before the Secretary of Economy against the aforementioned resolutions. 

Impact on the Company

The lithium concessions’ cancellations issued by the DGM are not final. Depending on the progress of Ganfeng’s further actions and the outcome of the above-mentioned matters, whether cancellations will be revoked or maintained in place and the scope of the concessions affected are still uncertain. 

Cadence’s investment into the Sonora Lithium project is circa £3.89 million. The total value of Cadence’s portfolio of assets is circa £41.15 million, including £28.01 million attributed to our 30% stake in the Amapa Iron Ore project.

Ganfeng’s interim results announcement published on 29 August 2023 discussed these developments as part of their post-balance sheet analysis. Therefore, there is still uncertainty about the impact on Cadence’s investment. Ganfeng is pursuing various remedies, including administrative review recourses to challenge the DGM’s resolutions. If necessary, Ganfeng will resort to additional remedies under Mexican or international law. 

Cadence will continue to liaise with our joint venture partners on a regular basis and ensure within the limits of the join venture agreement that the matter is given the utmost attention and that regulatory requirements are fulfilled in a timely manner. 

Cadence CEO Kiran Morzaria commented: “While on the face of it, this development further delays the prospect of a return from the Mexalit and Megalit concessions for Cadence shareholders, it is important to remember that any opportunity to grow value at Sonora would only start to accrue once mining commences in the concessions owned by Mexilit, which is nine years into the mine life. In the board’s opinion, substantially more value is to be had from our 30% stake in the Amapa Iron Ore Project once it is brought back into production.” 

“I look forward to reporting on further progress at Amapa.”



For further information contact:


Cadence Minerals plc

+44 (0) 20 3582 6636

Andrew Suckling

Kiran Morzaria


WH Ireland Limited (NOMAD & Broker)


+44 (0) 207 220 1666

James Joyce

Darshan Patel

Brand Communications

+44 (0) 7976 431608

Public & Investor Relations               

Alan Green

Qualified Person

Kiran Morzaria B.Eng. (ACSM), MBA, has reviewed and approved the information contained in this announcement. Kiran holds a Bachelor of Engineering (Industrial Geology) from the Camborne School of Mines and an MBA (Finance) from CASS Business School. 

Cautionary and Forward-Looking Statements

Certain statements in this announcement are or may be deemed to be forward-looking statements. Forward-looking statements are identified by their use of terms and phrases such as “believe”, “could”, “should”, “envisage”, “estimate”, “intend”, “may”, “plan”, “will”, or the negative of those variations or comparable expressions including references to assumptions. These forward-looking statements are not based on historical facts but rather on the Directors’ current expectations and assumptions regarding the Company’s future growth results of operations performance, future capital, and other expenditures (including the amount, nature, and sources of funding thereof) competitive advantages business prospects and opportunities. Such forward-looking statements reflect the Directors’ current beliefs and assumptions and are based on information currently available to the Directors.  Many factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including risks associated with vulnerability to general economic and business conditions, competition, environmental and other regulatory changes actions by governmental authorities, the availability of capital markets reliance on key personnel uninsured and underinsured losses and other factors many of which are beyond the control of the Company. Although any forward-looking statements contained in this announcement are based upon what the Directors believe to be reasonable assumptions. The Company cannot assure investors that actual results will be consistent with such forward-looking statements.

The information contained within this announcement is deemed by the Company to constitute Inside Information as stipulated under the Market Abuse Regulation (E.U.) No. 596/2014, as it forms part of U.K. domestic law under the European Union (Withdrawal) Act 2018, as amended. Upon the publication of this announcement via a regulatory information service, this information is considered to be in the public domain.

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