Kodal Minerals PLC, AIM:KOD, announced that a significant funding package of US$117.75mln was reached with Hainan Mining Co Ltd. This will cover the full development and production of the Bougouni Lithium Project in Mali.
Kodal shares soared 51%, to 0.36p in morning trading, marking a nine-month high.
Hainan Mining will make a conditional investment of US$100mln in order to acquire a 51% share in Kodal’s UK subsidiary, Kodal Mining UK Ltd. (KMUK). KMUK will be the shareholder in a new Mali mining firm that Kodal is forming to develop and own Bougouni.
Kodal’s chief executive Bernard Aylward said in a statement that “This is a great result for Kodal after a complex and competitive process to ensure we got appropriate recognition for this asset’s underlying value.” This investment gives us a tremendous opportunity to quickly track production of spodumene concentrate on a strong market.
KMUK will be fully funded for US$65mln capital costs of Dense Media Separation development scenario in Bougouni. It is aiming to deliver first production within 12 month of receiving funds.
Kodal stated that the additional funds would be used to raise the JORC-compliant resource estimate for Bougouni, which is currently 21.3 million tonnes at 1.11% Lithium Oxide, and extend production beyond its initial four-year life.
“The funding level will enable us to fully finance the dense media separation plant with mining scheduled to begin at the Ngoualana high-grade deposit. It will also support major drilling and exploration campaigns in order to find and define additional lithium mineralisation, which will help to extend the life of the Bougouni mining operation.
Aylward added that the Hainan Group had done extensive due diligence on the Bougouni Project and have confirmed the potential for this high-quality project, leading to this partnership.
Kodal’s largest shareholder
Hainan will also complete an equity subscription to Kodal at a price 0.5p per share. This is a 108% premium over yesterday’s closing share prices.
Hainan, together with the KMUK funding will be Kodal’s largest shareholder with a 14.8% share.
According to Kodal, the subscription’s proceeds will be used by Kodal to expand his portfolio of gold exploration assets in Mali & Ivory Coast as well as to assess new exploration and development possibilities in West Africa.
Closing the funding transactions requires approval from certain regulators and authorities in China.
Shanghai-listed Hainan has two core businesses: iron ore through its Shilu Iron Ore Mine, and oil & gas. Hainan’s investment in Kodal marks its first venture into the mining and processing hard rock pegmatite-hosted minerals.
Chairman of Hainan Mining, Liu Mingdong stated that this investment in Kodal and Kodal Mining UK Ltd was in line with Hainan Mining’s strategy to improve the level of resource and feedstock safety and begin the construction of our lithium-hydroxide supply chain.
Fosun International Ltd, the controlling shareholder in Hainan, holds a 45.9% share.
Aylward of Kodal noted the positive outlook on lithium: “The sector is very buoyant with high market prices for spodumene concentrate and high demand. The increasing use of electric vehicles (‘EVs) is a support to the rising demand and high demand for spodumene concentrate.