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Kodal Minerals secures funding to get lithium mine into production


Kodal Minerals [LON:KOD] the AIM-listed, multi-commodity mining and exploration company focussed on lithium and gold deposits in West Africa has had a strong 2023 to date.

Kodal opened trading today (30th January) at 0.41p. The company has offered a 50% year-to-date return, a 29% one-year return with its shares ranging between 0.2p and 0.45p over a 52-week period. The company has a market capitalisation of GBP68.5m.

Like its Viking ancestors, Kodal Minerals has ranged far and wide before finding a territory ripe for exploitation and settling down. Kodal initially started its journey in Scandinavia, in the phosphate and iron mining business in southern Norway and after listing on AIM at the end of 2013, moved into copper exploration in Norway in 2014.

Kodal Minerals going for gold

In March 2016 the company saw an opportunity in gold mining, acquiring Taruga Gold subsidiary, International Goldfields (Bermuda) Limited which opened the door to Africa through acquisitions of eight mineral licences and two licence applications in Cote d’Ivoire and Mali.

Later that year, Kodal acquired a controlling interest in a prospective high grade lithium project in Southern Mali from Gorutumu Mining SARL, which it followed-up with further lithium concession acquisitions in Mali.

In the following years, Kodal raise further funds to finance its exploration and drilling work in Africa, bringing on strategic partners, including Suay Chin International, a Singapore-registered company which was formed to supply the Chinese lithium market with raw materials. Suay Chin, supported by Shandong Mingrui Chemical Co Ltd became a strategic shareholder and primary offtaker locking in an agreement to take up to 100% of the lithium produced by Kodal.

Lithium opportunity

In 2020 the company brought in Australian miner, Mali Lithium Limited to help it develop in partnership the secondary lithium concessions that Kodal had acquired, whilst the company concentrated on developing its flagship project, the Bougouni Lithium Project. Later that year Kodal secured USD1.5m in further funding through an unsecured  15-month term 9.85% convertible loan with Riverfort Global Opportunities PCC and YA II PN Ltd. Combined with other funding activities and the continued support of Suay Chin, Kodal went into the lockdown and a period of political instability in Mali, comfortably capitalised.

Riverfort eventually decided to convert the loan into shares in the company. Although all-eyes remained on the lithium operation, Kodal was also quietly developing its West African gold assets, and secured USD2.5m financing for a drilling project for its gold concessions in 2021 from Riverfort. By this time, Kodal was building a bit of a story and took another nibble from the markets raising further capital in oversubscribed equity placements in 2021 despite the political situation in Mali slowing down issue of mining licences, a situation it resolved in November with regards to its Bougouni Lithium Project.

The company published its finals for 2021/22 in July last year. As it ramped up its operations losses increased to GBP903,000, up from GBPO623,000 the year previously. This was explained by a 370% increase in exploration costs to GBP2.6m, up from GBP0.5m in 2021. However, its exploration work showed payback, as the gold portfolio increased in value some 63% to GBP2.4m and the Bougouni Lithium Project appreciated 20% to GBP9m. With a comfortable cash buffer of GBP3.3m as at 8th July 2022, the company was pleased with the continued support it had received from the market, successfully completing GBP3m of placements during the period.

Mining licence secured

With a mining licence secured for the Bougouni Lithium Project, and the company owning 100% of the project Kodal went into the rest of the year in a strong position, announcing a life-of-mine of 8.5 years generating revenue exceeding USD2.1bn. With new tech being considered to expedite the speed of the mine development, Kodal had now a strong hand in its ambition to develop West Africa’s first commercial lithium project – that would put Mali on the map as a significant global lithium producer.

As 2022 closed, Kodal updated the market on its research into developing a dense media separation (DMS) processing plant, stating that it would cost USD65m to build the plant which would, the company said, generate a NPV of USD557m and based on full equity funding, a short payback of two months from commencement of operations. With lithium prices averaging USD2,080/tonne, according to broker forecasts, Kodal calculated that the DMS operation revenue forecast would exceed USD1bm in less than four years.

Exciting times for the former Viking iron mining company. The shares of Kodal really took-off earlier this month, with the announcement of a conditional funding package of USD117.75m on 19th January, which will provide full financing for the development and commencement of production at the Bougouni Lithium Project and support a major exploration and development programme.

Strategic investment

The funding was agreed – just before the Chinese Lunar New Year – with China’s Hainan Mining Co. Limited and its wholly owned UK-incorporated subsidiary Xinmao Investment Co. Hainan is a subsidiary of Fosun International Limited and is the industrial platform for mining and resources within Fosun.

Hainan is not only bringing a red envelope stuffed full of money to Kodal, but is also bringing its industrial and technical experience on the ground to help the Bougouni Lithium Project get into production. The funding would also get the DMS project up and running. As part of the deal, Hainan will acquire a 51% shareholding in Kodal’s newly incorporated UK subsidiary, Kodal Mining UK Limited which in turn will become the shareholder of a new Mali mining company to be formed by Kodal to own and develop the Bougouni Lithium Project.

This is all encouraging news for Kodal. Although the deal has to be ratified in China, if it goes through shareholders should brace themselves for a deluge of RNS announcements and more positive action on the share price.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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