Mr. Peter Secker reports

BACANORA MINERALS ANNOUNCES COMPLETION OF NI 43-101 PRE-FEASIBILITY STUDY FOR PRODUCTION OF 35,000 TPA LITHIUM CARBONATE AT ITS SONORA LITHIUM PROJECT, MEXICO

Bacanora Minerals Ltd. has released positive results of a prefeasibility study (prepared in accordance with National Instrument 43-101 (standards of disclosure for mineral projects)) for the development of a mine and lithium-carbonate-(Li2CO3)-processing facility at Sonora. The PFS estimates a project pretax internal rate of return (IRR) of 29 per cent (posttax 25 per cent) and an associated net present value (NPV) of $776-million (U.S.) (posttax $542-million (U.S.)) at an 8-per-cent discount rate. These results highlight the strong economic potential of producing up to 35,000 tonnes per annum of battery-grade Li2CO3 at Sonora. In addition, Sonora has the potential to produce up to 50,000 tonnes per year of potassium sulphate (K2SO4) for sale to the fertilizer industry.

With an indicated mineral resource estimate of 5.0 million tonnes (Mt) of lithium carbonate equivalent (LCE) and an inferred mineral resource of 3.9 Mt of LCE, Sonora is one of the world's larger-known clay lithium deposits. Following the results of the PFS, management is focused on advancing the development of Sonora and will immediately commence a feasibility study (FS), as it looks to bring the project into production to satisfy expected strong growth in demand for lithium from fast-growing sectors, such as electric vehicles and energy storage.

Highlights of Sonora PFS

Two-phase open-pit mine and lithium-carbonate-processing facility with a life of over 20 years:

• Phase 1: 17,500 tonnes per year of battery-grade Li2CO3, for the first two years;
• Phase 2: expansion to 35,000 tonnes Li2CO3 per year;
• Potential to produce up to 50,000 tonnes per year of K2SO4 in the third year, for sale to the domestic Mexican fertilizer industry.

The PFS demonstrates the attractive economics of Sonora, and key findings are shown in the attached key results table.

                                KEY RESULTS

Prefeasibility study key indicators                                    Value

Pretax net present value                                               $776M
Pretax IRR (%)                                                            29%
Simple payback (years)                                                     5
Initial construction capital cost                                      $240M
Stage 2 construction capital cost                                      $177M
Average LOM operating costs ($/t Li2CO3)                              $2,698
Average operating costs ($/t Li2CO3 net of K2SO4 credits)             $2,100
Posttax NPV (at 8% discount)                                           $542M
Posttax IRR (%)                                                           25%
Average annual EBITDA with co-products (U.S.$)                         $134M
Average annual Li2CO3 production capacity (years 1 and 2)           17,500 t
Average annual Li2CO3 production capacity (years 3 to 20)           35,000 t
Average annual K2SO4 production (years 3 to 20)                     50,000 t

Key results:

• Estimated project pretax IRR of 29 per cent; NPV of $776-million (U.S.) (at an 8-per-cent discount rate); and simple payback of five years, based on a flat $6,000 (U.S.) per tonne for battery-grade lithium carbonate over the life of mine;
• Recent price increases have seen spot prices of Li2CO3 in Asia increase to above $6,000 (U.S.) per tonne;
• Average annual earnings before interest, taxes, depreciation and amortization estimated at $134-million (U.S.) per annum;
• Stage 1 capital cost estimate of $240-million (U.S.) includes processing plant, on- and off-site infrastructure, tailings management facility construction, and general administration costs;
• Mine design indicates a total of 50 Mt of ore to be mined over the planned 20-year mine life with a stripping ratio of approximately 3 to 1 over LOM;
• Integrated plant designed to initially process 1.4 Mt of ore per year, during the first two years of the project, subsequently increasing to 2.7 Mt per year subsequent to year three;
• The company intends to complete an FS by first quarter 2017 and commence detailed design and site preparation work in second quarter 2017.

Peter Secker, chief executive officer of Bacanora, commented: "With a pretax NPV of $776-million (U.S.) and an IRR of 29 per cent, the PFS supports that Sonora is well placed to become one of the next major lithium producers, supplying fast-growing industries, such as electric vehicles, smart phones and energy storage. The next key step in the development of Sonora is a feasibility study, which is fully funded and expected to be completed in Q1 2017.

"In tandem with the FS, we will be seeking additional offtake partners for Sonora's lithium carbonate, which will represent a major milestone as we focus on commercializing the project. With recent lithium price increases in the Asian market, we believe that Sonora is a highly compelling project with which to generate value for shareholders. I look forward to providing further updates on our progress as we focus on transforming Bacanora from an exploration and development company into the next significant producer of lithium carbonate."

Project introduction

The Sonora lithium project is located in northern Sonora state, Mexico, approximately three hours drive northeast of the state capital of Hermosillo, a city of approximately 700,000 people. Access to the site is by road from either Hermosillo or the U.S. border town of Agua Prieta. The project has access to significant support infrastructure, including paved roads, process water and high-voltage power.

The Sonora lithium property hosts one of the world's larger-known clay lithium deposits. The polylithionite and hectorite mineralization is hosted within shallow-dipping sequences, outcropping on surface. A mineral resource estimate was prepared by SRK Consulting (U.K.) Ltd. in accordance with NI 43-101 with an effective date of Nov. 19, 2015.

                            INDICATED MINERAL RESOURCES
                                                                         LCE
                                                                attributable
                      Tonnes                                     to Bacanora
Cut-off (Li ppm)       (000t)    Li (ppm)       K (%)  LCE (000t)      (000t)

450                  364,000       2,600         1.1       4,997       4,070

                           INFERRED MINERAL RESOURCES
                                                                         LCE
                                                                attributable
                      Tonnes                                     to Bacanora
Cut-off (Li ppm)       (000t)    Li (ppm)       K (%)  LCE (000t)      (000t)

450                  355,000       2,000         0.9       3,853       3,220

Mining operations

The mining operation for the project is planned as an open-pit operation using conventional truck-/shovel-mining methods. Mining operations will be carried out with hydraulic excavators and haul trucks and an ancillary fleet of dozers, graders and water trucks. The mineral reserve estimate was prepared by Independent Mining Consultants Inc. in Tucson, Ariz. The reserve estimate used an ore recovery factor of 100 per cent and a mining dilution rate of 10 per cent at an average dilution grade of 0 per cent. The mineral reserve stripping ratio is approximately 5.4 to 1.

                     PROBABLE MINERAL RESERVES
             (cut-off grade of 0.12 per cent lithium)
                                                                         LCE
                                                                attributable
                  Tonnes ore                                     to Bacanora
Category               (000t)    Li (ppm)       K (%)  LCE (000t)      (000t)

Probable             129,774       3,015        1.28       2,083       1,813

For the Stage 1/Stage 2 mining design, a total of 50 Mt of ore at a grade of 3,525 parts per million Li and 1.49 per cent potassium and a stripping ratio of 3.1 to 1 will be mined over the initial 20-year mine life.

Processing

Metallurgical testwork for the PFS was carried out at SGS Lakefield Laboratories in Canada, and process engineering and design for the process plants and infrastructure were completed by Ausenco Ltd. The processing plant design comprises a preconcentration stage comprising scrubber, hydrocyclones and reverse flotation to produce an initial concentrate prior to roasting. The concentrate is subsequently heated in a kiln, at approximately 1,000 C, with gypsum to produce a lithium sulphate product. This sulphate material then undergoes hydrometallurgical treatment, filtration, cleaning, precipitation and packaging, to produce a 99.5-per-cent-Li2CO3 final battery-grade product. The integrated plant has been designed to initially process 1.4 Mt of ore per year, during the first two years of the project, subsequently increasing to about 2.7 Mt per year subsequent to year three.

The plant design also includes a circuit to produce 50,000 tonnes per annum of commercial-grade K2SO4 through a series of evaporation, precipitation, filtration and packaging stages. The plant has the potential to produce up to 50,000 tonnes per annum of this material, which could be sold as a fertilizer-grade product for domestic consumption in Mexico.

Capital costs

The initial mining capital costs include an initial fleet comprising a 12-cubic-metre backhoe excavator and three 90-tonne haul trucks, building up to 16 haul trucks at full production. In addition, there is an ancillary mobile fleet including dozers, graders and front-end loaders. The initial capital cost of the equipment is estimated to be $19-million (U.S.).

The metallurgical-processing-facility capital cost estimate is based on an on-site processing plant, comprising all new equipment, to produce battery-grade lithium carbonate.

The capital cost estimates for process plant, infrastructure, tailings management facility construction, engineering, procurement and construction management (EPCM) fees, owner's costs, and general administration costs were determined by Ausenco.

                       CONSTRUCTION CAPITAL COSTS
                    (rounded to nearest $000 (U.S.))

                                   Estimate Stage 1         Estimate Stage 2
Category                                 ($000 (U.S.))            ($000 (U.S.))

Mining equipment                            $19,000                   $9,600
Mining infrastructure                         3,700                        0
Beneficiation plant                          20,500                   18,100
Lithium-processing plant                     90,500                   81,400
On-site infrastructure                       15,900                    9,600
Off-site infrastructure                      16,800                    5,900
EPCM/owner cost/indirect                     45,600                   30,000
Contingency                                  28,000                   22,500
Total                                      $240,000                 $177,100

The LOM sustaining mining and processing capital requirement is approximately $111-million (U.S.).

Operating cost estimate

The mining and processing operating costs are for an operation achieving average annual production of approximately 35,000 tonnes of battery-grade, 99.5 per cent Li2CO3. The estimated average operating cost for the mine and primary and secondary processing facilities are presented in the attached project operating costs table.

                         PROJECT OPERATING COSTS

                             Stage 1             Stage 2         Average LOM
Category             (U.S.$/t Li2CO3)    (U.S.$/t Li2CO3)    (U.S.$/t Li2CO3)

Mining                          $642                $538                $543
Processing                     2,037               1,930               1,934
G&A                              446                 212                 221
Total                          3,125               2,680               2,698

Cash flow analysis

The project is currently estimated to have a short payback period of five years. Cash flows are based on a 100-per-cent equity financing basis, and the economic analysis indicates a pretax net present value, discounted at 8 per cent, of approximately $776-million (U.S.), and an IRR of approximately 29 per cent. Posttax, the NPV is approximately $542-million (U.S.) and an IRR of 25 per cent.

                           SENSITIVITY ANALYSIS

                               Base-case pretax NPV    Base-Case posttax NPV
Discount rate                        (U.S.$ million)          (U.S.$ million)

0%                                           $2,145                   $1,545
2%                                            1,647                    1,182
4%                                            1,275                      910
6%                                              993                      702
8%                                              776                      542

Base-case LOM revenue is estimated at $4-billion (U.S.), with an earnings before interest, taxes, depreciation and amortization of approximately $2.7-billion (U.S.). An average Mexican-peso/U.S.-dollar exchange rate of 17.1 to 1 has been used over the life of the mine.

Market review

SignumBox (Chile) has provided a lithium carbonate price forecast in the range of $5,500 to $6,000 per tonne. Recent data from Asia indicate that spot pricing is currently above $6,000 per tonne.

The current dominant lithium battery technologies such as lithium cobalt oxide, lithium manganese oxide and lithium nickel manganese cobalt oxide typically use lithium carbonate as the main source of lithium cathode material, and battery cathode demand is the fastest-growing segment of the lithium market. K2SO4 is used as a fertilizer product and can sell in the range of $600 to $700 per tonne.

Community and environment

As part of the company's environmental management programs, initial site sampling and monitoring commenced in third quarter 2015. Local environmental consulting groups are being used to prepare the Manifestacion de Impacto Ambiental, which is scheduled to be lodged with the appropriate local authorities in third quarter 2016. In addition, the company has designed an active program to engage with the local communities living within the project area.

Project timetable

Over the next 18 months, the company will continue to progress the Sonora lithium project through the project development stages, with the intention of completing a feasibility study by first quarter (calendar) 2017. The following preliminary indicative timetable is proposed:

• First quarter (calendar) 2016: file NI 43-101 PFS;
• Third quarter (calendar) 2016: complete pilot plant trials, distribute lithium samples to potential offtakers;
• First quarter (calendar) 2017: finalize NI 43-101 FS;
• Second quarter (calendar) 2017: commence detailed design and site preparation works;
• Fourth quarter (calendar) 2018: commence commissioning.

Report filing

A technical report on this prefeasibility study (prepared in accordance with NI 43-101) will be filed on SEDAR and at the company's website within 45 days of the date of this news release.

Qualified persons

Each of the qualified persons below has reviewed and approved the technical information contained in this press release and is independent of the company. The qualified persons are:

Kevin Scott, PEng, of Ausenco, is the qualified person responsible for the recovery methods, infrastructure, capital cost and operating cost estimates, and the overall preparation of the report.

The SRK mineral resource estimate was prepared by Martin Pittuck of SRK, who is an independent qualified person as defined by NI 43-101.

The mineral reserve estimate and mine plan were prepared by Herb Welhener of Independent Mining Consultants, who is an independent qualified person as defined by NI 43-101.

The indicated and inferred mineral resource and probable mineral reserve estimates in this press release were prepared in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum definition standards on mineral resources and mineral reserves adopted by the CIM council on May 10, 2014, and the CIM estimation of mineral resource and mineral reserve best-practice guidelines, adopted by CIM council on Nov. 23, 2003, in compliance with NI 43-101 guidelines.

We seek Safe Harbor.