The latest update yesterday from lithium miner, Kodal Minerals (LSE:KOD) is good news for those investors who saw it coming. The firm has finalised the changes to the previously lodged feasibility report at its Lithium Bougouni Project in Southern Mali. It is now in line with Mali’s Mining Code 2019.
What this means in practice is that the Bougouni Lithium Project is a step closer to becoming viable. The next stage is for Direction Nationale de la Géologie et des Mines (DNGM) to send Kodal a confirmation letter formally requesting payment of the application fee (£135,000) for the mining licence which then needs to be approved by the Prime Minister.
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Shares have been climbing since the end of April and the price has more than doubled from 0.12 to 0.3 at time of writing.
Good prospects for Bougouni Lithium
The demand for lithium continues to grow and the rise in the share price no doubt reflects this. But the feasibility study which was published in Q1 2020, indicates that this could be a robust mining operation. With a minimum 8.5-year mine life, the mine is expected to produce around 220,000 tonnes of 6% spodumene concentrate per year (expected total – 1.94 million tonnes of concentrate) with a payback period of 1.7 years and an IRR of 58% (before tax).
Another positive is that mined spodumene lithium, like that mined at Bougouni, is lower cost, more stable to extract and more sustainable than lithium brine. With prices for spodumene on the rise and Kodal estimating costs of US$431 per tonne of concentrate, there is significant margin to be had.
China funding the Bougouni Project
In terms of financing, Kodal’s largest shareholder is Suay Chin International (around 14%). CEO, Bernard Aylward and non-executive directors, Robert Wooldridge, Qingtao Zeng and Charles Joseland together hold just under 3%. Since September 2020, the firm has been talking to Sinohydro Corporation, a subsidiary of PowerChina. Sinohydro which will review and advise on financing for the Bougouni Project, particularly on procurement and civil engineering aspects of the feasibility study. However, we are yet to find out whether Sinohydro will finance the project.
Advancing the gold portfolio
Kodal Minerals is first and foremost a lithium miner – it claims its primary focus is on the Bougouni Project. However, it also has a portfolio of gold assets. It confirmed today that it has secured two drill rigs for the Nielle Project for its gold project in Northern Côte d’Ivoire and that the drilling programme will start within the week. On top of this, infill geochemical sampling at the Dabakala project has now started with sampling targeting anomalism up to 6.14g/t gold. While it is a new gold zone defined in Côte d’Ivoire and still in its early stages, Aylward says that they could make a significant gold discovery.
With Mali as the fourth largest gold producer in Africa and the interim government keen to diversify the mining sector as well as reduce the military influence within the country, prospects are good for Kodal. The question is whether we see a further climb in share price or if the latest update has already been priced in. Only time will tell.