Kodal Minerals PLC (AIM:KOD) Final Results

Kodal Minerals, the mineral exploration, and development company focused on lithium and gold assets in West Africa, announces its final results for the year ended 31 March 2022.

The Company’s Annual Report and Accounts will be made available on the Company’s website  www.kodalminerals.com  sh ortly. The Company will confirm in due course when the Annual Report has been posted to shareholders and will provide information about the date and location of the Annual General Meeting.

Financial and Corporate Highlights

· Group loss before other comprehensive income for the year of £903,000 (2021: £623,000)

· 370% increase in exploration and evaluation expenditure of £2,547,000 (2021: £542,000)

· 63% increase in the value of the gold projects in Mail and Mali and Cote d’Ivoire to £2,411,000 (2021: £1,476,000)

· 20% increase in value of the Bougouni lithium project in Mali to £9,031.000 (2021: £7,488,000)

· Cash balance of £1,046,000 as at 31 March 2022 (2021: £2,433,000)

· Post period end, the Company successfully raised £3 million (before expenses)

· Cash balance of £3,333,000 as at 8 July 2022

Operational Highlights

Bougouni Lithium Project, Mali (“Bougouni” or the Project”)

· Mining Licence granted – the Project is now fully permitted for development and construction

· Achieved 100% ownership of all concessions following the acquisition of minority interests held by the original vendors (prior to formation of the new mining company in which the Mali Government will have an interest of between 10% and 20%)

· Initiated a six-month work programme focussed on updating the original Feasibility Study

· Ongoing community engagement, consultation, and evaluation of the impact of the proposed mining sites

· Robust economics confirmed by the updated Project Feasibility Study announced post period end

 NPV7% of US$760 million (US$567 million post-tax) compared to US$293 million (US$201 million post tax) in the original Feasibility Study.

 Life of mine (8.5 years) revenue exceeding US$2,145,000,000 based on an average sell price of US$1,060 per tonne (FOB basis).

 C1* cash costs of US$362 per tonne of 6% Li2O spodumene concentrate (“SC6”), and costs of US$474 per tonne including transportation and other selling costs.

 Total SC6 production of 2,024,000 tonnes with an annual average production of 238,000 tonnes.

 Development based on unchanged operating assumptions of open cut truck and shovel contractor mining operation, feeding 2Mtpa of lithium ore to the flotation processing plant, utilising a conventional flotation circuit to maximise spodumene recovery.

 Capital cost of the Project increased approximately 20% to US$154 million reflecting increased raw material and fuel costs

Fatou and Nielle and Dabakala Gold projects

· Significant exploration programmes at Fatou and Nielle gold projects yielded positive results and identified wide gold intersections and high-grade gold mineralised areas

· Infill geochemical sampling at Dakabala returned high-grade surface samples at new discovery zones

Commenting on the results, Bernard Aylward, CEO of Kodal Minerals said:

“We are in the enviable position of owning 100% of the concessions of what I believe will become one of the most significant lithium spodumene producing projects in West Africa, and the first in Mali. The prices of lithium spodumene have risen exponentially as global demand for this critical mineral shows no sign of abating driven by the green agenda and the EV (electric vehicle) revolution.

“The work carried out by our team on the ground resulted in the successful receipt of our Mining Licence at Bougouni and initiated a six-month work programme to update the original feasibility study carried out in 2020. The results have further enhanced the Project’s already robust economic fundamentals with an IRR of 91%, a payback period of eight months and a life of mine revenue of approximately US$2.14 billion, nearly a 50% increase on our original feasibility study estimate.

“Looking ahead, we will continue to invest in exploration at our gold projects following the excellent results from our reverse core drilling campaign.  However, our priority is to de-risk the Bougouni Project, by further reducing expected operating costs whilst advancing discussions with potential partners on funding for construction with the view of bringing the Project into production.”

*  C1 cash cost includes all mining, processing and all general and administration costs per tonne sold, and additional to that the costs of transport to port and associated selling costs.

Chairman’s Statement   

I am pleased to present the Annual Report of Kodal Minerals plc for the year ended 31 March 2022.

Kodal continues to make excellent progress towards achieving its overarching objective of bringing its flagship lithium project in Bougouni, Mali, (“Bougouni Lithium Project” or “the Project”) to fruition.  During this financial year, and continuing in subsequent months, Kodal has taken the necessary steps to lay the technical and commercial foundations of the Project, together with the mandatory permitting obligations, and we are now tantalisingly close to pushing forward into financing and construction.

Indeed, the backdrop of the lithium market over recent months has provided a significant tailwind, supporting our commercial and financing discussions.  The Company is continuing to review and discuss potential opportunities for collaboration with third parties, including major mining groups, to support the development of the Project providing Kodal with multiple routes through which to capitalise on the inherent value of Bougouni.

Lithium prices continue to make headlines, with major producers such as ASX listed Pilbara Minerals Limited achieving record sales prices for 5.5% Li2O spodumene concentrate of US$6,350/t FOB.  When compared with our initial selling price input of US$680/t SC6 reported in the original feasibility study in 2020, it is apparent just how far the industry has moved on over the past 24 months.

This pricing environment has been driven by the global appetite and awareness for electric vehicles and efficient battery storage, together with concerns from key decision makers about the security of lithium supply, along with other critical minerals, from stable jurisdictions.  Whilst some commentators have recently asserted that these price rises are unsustainable in the long-term, it remains widely accepted that demand is going to continue to increase rapidly over the next decade, and new sources of supply may not materialise within this critical timeframe.  While a market like copper typically grows by 2%-4% a year, providing producers and developers with a degree of confidence as to the demand fundamentals, lithium analysts are anticipating annual demand growth of more than 20% between 2021 and 2025.  This presents late-stage developers and pre-production companies such as Kodal with a unique advantage, with the ability and agility to rapidly move projects through the construction phase and into production in order to fulfil this potential supply deficit.

With this in mind, the Board of Kodal is resolute in its objective to assemble the requisite components to support Bougouni’s successful transition into production, including technical delivery, permitting approvals, environmental, social and governance frameworks and commercial commitments.

Following the grant of the Mining Licence for Bougouni in November 2021, the Company initiated a six-month work programme focussed on updating the Feasibility Study.  This was completed in June 2022 and demonstrated to the market that the shift in market conditions have further enhanced the Project’s already robust economic fundamentals.  Indeed, the updated feasibility study highlighted an IRR of 91% and a payback period of only eight months.  With life of mine revenue anticipated to be in excess of US$2.14 billion, nearly 50% more than our original feasibility study estimate, our conversations with potential partners have intensified with a view to reaching the optimum route for delivery in as short timeframe as practicable.  Further details of this Feasibility Study update are included in the Operating Review.

Whilst simultaneously pushing closer to development at Bougouni, our exploration team has also made solid progress across our gold portfolio.  Work has centred primarily on the Fatou Gold project in Mali, and the Nielle Gold project in Cote d’Ivoire, both discoveries which we believe have significant resource potential.  Earlier stage but no less exciting is the Dabakala Gold project in Cote d’Ivoire where geochemical sampling has confirmed the continuity of high-grade gold anomalism extending for over 11km and surface width up to 3km.  I am confident that our gold portfolio has the potential to yield new large gold deposits, and I look forward to reporting on what the next field season delivers.

The next 12 months will be a pivotal time for Kodal as we seek to advance both our gold portfolio and, more importantly, our flagship Bougouni Lithium Project, supported by strategic investors and within a market environment which remains very buoyant for quality near-term lithium assets.  I look forward to updating shareholders on a regular basis with updates on our operational and corporate advancements.

Robert Wooldridge

Non-executive Chairman

18 July 2022 

OPERATIONAL REVIEW

Kodal has maintained its sizeable tenure in Mali and Cote d’Ivoire, whilst completing the acquisition of minority interests to become the 100% holder of the flagship Bougouni Lithium Project located in Western Mali. Kodal’s management has continued to ensure that all government compliance, reporting and fees are kept up to date and all concessions are retained in good standing.

Mining Licence and Exploration Concession Review

Kodal’s Bougouni and Bougouni West lithium exploration projects are located in southern Mali, with the rights and concessions held by subsidiary company Future Minerals SARL (“Future Minerals”), a Malian registered company owned 100% by the Group. In November 2021, Kodal acquired the minority shareholdings of Bougouni from the original vendors of the Project and as a result, Kodal through Future Minerals, now holds 100% interest in all concessions of the Bougouni Lithium Project.

Bougouni Lithium Project – Mining Licence details:

Tenements

Country

Kodal Economic Ownership

Project / Joint Venture

Validity

Foulaboula

Mali

100% ownership (80 to 90% upon Mali State’s participation) / 10% free carried + up to 10% contributing interest

Bougouni Lithium Project

Mining Licence N°2021-0774/PM-RM of November 5 2021.  Permit is valid 12 years renewable for 10 years period each until depletion of the resources

Following the Company agreed-upon modifications to the Foulaboula, Sogola Nord and Fariedele concessions which were changed to ensure all areas of mineralisation, mining infrastructure and processing plant are included within the one licence area, Kodal was granted the Foulaboula Permis d’Exploitation number No2021-0774/PM-RM (“Mining Licence”) in November 2021.  This covered the proposed open-pit mining and processing operation at Bougouni, making the Project fully permitted for development and construction.

The Mining Licence is valid for an initial 12-year term and renewable in ten-year blocks until all resources are mined.  The Mining Licence is granted under the 2019 Mining Code and extends over a 97.2 square km area that will be a focus for Kodal’s exploration programme to ensure further resources are delineated to prolong the Bougouni Lithium Project mine life.

Table of Concessions – Kodal lithium Concessions in Mali:

Tenements

Country

Kodal Economic Ownership

Project / Joint Venture

Validity

Dogobala

Mali

100% economic interest via direct ownership following completion of option payments

Bougouni Lithium Project

Licence valid and in good standing.  Arrêté No. 2018-1115 granted on 13 April 2018 for initial 3-year period, with option for 2 extensions of 2 years validity each

Application for first renewal has been lodged and all fees paid.

Renewal approval pending

Sogola Nord

Mali

100% economic interest.  Concession replaces part of the original Madina concession which had reached its time limit

Bougouni Lithium Project

Licence valid and in good standing.  Arrêté number 2020-0072 granted 22 January 2020 for an initial 3-year period, with option for 2 extensions of 2 years validity each.

Licence area modified during 2020 to account for the future Foulaboula Mining Licence.

Fariedele

Mali

100% economic interest.  Concession replaces part of the original Madina concession which had reached its time limit

Bougouni Lithium Project

Licence valid and in good standing.  Arrêté number 2020-0073 granted 22 January 2020 for an initial 3-year period, with option for 2 extensions of 2 years validity each

Licence area modified during 2020 to account for the future Foulaboula Mining Licence.

Mafele Ouest

Mali

Kodal completed all obligations of the Option to Purchase agreement and now is the beneficial holder of 80% economic interest

Bougouni West Lithium

Licence valid and in good standing.  Arrêté No. 2018-4537 granted on 31 December 2018 for initial 3-year period, with option for 2 extensions of 2 years validity each. All taxes and renewal fees have been paid.

Renewal approval pending

NKemene Ouest

Mali

Kodal completed all obligations of the Option to Purchase agreement and now is the beneficial holder of 80% economic interest

Bougouni West Lithium

Licence valid and in good standing.  Arrêté No. 2018-4486 granted on 28 December 2018 for initial 3-year period, with option for 2 extensions of 2 years validity each. All taxes and renewal fees have been paid.

Renewal approval pending

The Bougouni Lithium Project concessions surround the Foulaboula mining licence and will be explored for additional pegmatite hosted resources that can be added to the mining area through agreement with the Mali Government as required.  The concessions are all in good standing, and exploration completed to date by Kodal has indicated priority sites for additional exploration within the concessions.

The Bougouni West concessions remain in good standing with Kodal having completed all obligations under the Option to Purchase agreement and now are the beneficial holders of 80% of the licences.  Kodal intends to undertake future exploration in the concession areas.

Table of Concessions – Kodal Gold Concessions in West Africa:

Tenements

Country

Kodal Economic Ownership

Project / Joint Venture

Validity

Boundiali

Côte d’Ivoire

100% direct ownership (under application)

 

Gold Exploration

Licence application submitted and in process.  Application updated during 2020 and application remains in good standing.

Korhogo

Côte d’Ivoire

100% direct ownership

Gold Exploration

Licence valid and in good standing.  Renewal granted on 31 March 2020 for a 3 year-term.

Dabakala

Côte d’Ivoire

100% direct ownership

Gold Exploration

Licence valid and in good standing.  Renewal granted on 31 March 2020 for a 3 year-term.

Niéllé

Côte d’Ivoire

100% direct ownership

Gold Exploration

Licence valid and in good standing.  Initial licence expired on 7 January 2017, and Renewal decree received on the 28 February 2018 for a 3 year- period.  Second Renewal decree received 18 December 2020 for a 3 year-period.

Tiebissou

Côte d’Ivoire

100% direct ownership

Gold Exploration

Licence valid and in good standing.  Initial term expired 30 September 2018.  An application for renewal has been lodged, fees paid and approved.  Renewal decree is pending signature.

M’Bahiakro

Côte d’Ivoire

100% direct ownership

(under application)

Gold Exploration

Licence application submitted and in process.

Application updated during 2020 and application remains in good standing.

Djelibani Sud

Mali

100% direct ownership

Gold Exploration

Licence valid and in good standing.  Arrêté N° 2021-5133/MMEE-SG granted on 28 December 2021 for an initial 3 year-period, with option for 2 extensions of 3 years validity each. All taxes have been paid.

Nangalasso

Mali

100% direct ownership following completion of option payments

Nangalasso Project

Gold Exploration

Nangalasso arrêté completed second renewal on 4 February 2021.  A new Convention application covering the same permit has been lodged with the DNGM and is awaiting approval.

Sotian

Mali

Completed Option agreement and is 100% beneficial owner of concession.

Nangalasso Project

Gold Exploration

Arrêté No. 2018-1925 granted on 12 June 2018 for initial 3 years period, with option for 2 extensions of 3 years validity each

First renewal has been approved

Tiedougoubougou

Mali

Kodal completed Option agreement and is 100% beneficial owner of concession

Nangalasso Project

Gold Exploration

Arrêté No. 2018-3319 granted on 4 September 2018 for initial 3 years period, with option for 2 extensions of 3 years validity each.

 Application for first renewal has been lodged and all fees paid.  Renewal approval pending

Fininko

Mali

Held through Option Agreement giving right to acquire 100% ownership

Fatou Project

Gold Exploration

Licence in good standing. First renewal granted by Arrêté No. 2021-2876/MMEE-SG of August 6th 2021 for a period of 3 years.

Foutiere

Mali

Held through Option Agreement giving right to acquire 100% ownership

Fatou Project

Gold Exploration

Licence in good standing. Arrêté N°2017-0170/MM-SG of February 2nd 2017.

Application for first renewal has been lodged and all fees and taxes have been paid.

Renewal approval pending

Bougouni Lithium Project Status

Kodal Minerals was granted an Environmental Permit over the Project in November 2019. The original Feasibility Study (“FS”) was completed by Kodal Minerals in January 2020, culminating in the granting of a large-scale Mining Licence in November 2021 to the Company’s Mali subsidiary company, Future Minerals.  The Mining Licence is valid for an initial 12-year term and renewable in ten-year blocks until all resources are mined.  The Mining Licence is granted under the 2019 Mining Code and extends over 97.2 square kilometres covering the proposed open-pit mining and processing operation at Bougouni (refer to announcement of 8 November 2021).

The original Bougouni Lithium Project Feasibility study was completed in January 2020 and following the grant of the mining licence, Kodal commenced work on updating the study focussing on the engineering, process recovery and capital cost for the Project as these key areas had undergone substantial change over the previous 2 years.  The results of the updated study were announced on 15 June 2022.

The June 2022 Bougouni Project Feasibility Study update confirms a very robust project with key metric highlights including:

· NPV7% of US$760M (US$567M post-tax) compared to US$293M (US$201M post tax) in the original Feasibility Study.

· Life of mine (8.5 years) revenue exceeding US$2,145,000,000 based on an average sell price of US$1,060 per tonne (FOB basis).

· C1* cash costs of US$362 per tonne of 6% Li2O spodumene concentrate (“SC6”), and costs of US$474 per tonne including transportation and other selling costs.

· Total SC6** production of 2,024,000 tonnes with an annual average production of 238,000 tonnes.

· Bougouni Lithium Project development based on unchanged operating assumptions of open cut truck and shovel contractor mining operation, feeding 2Mtpa of lithium ore to the flotation processing plant, utilising a conventional flotation circuit to maximise spodumene recovery.

· Capital cost of the Project increased approximately 20% to US$154M reflecting increased raw material and fuel costs.

*  C1 cash cost includes all mining, processing and all general and administration costs per tonne sold, and additional to that the costs of transport to port and associated selling costs

Kodal completed a technical site visit to Bougouni in January 2022 to continue the development programme.  A detailed LIDAR survey has been completed for the Project area and is being used to provide detailed topographical information to assist in the final planning of the processing plant and associated infrastructure.

In addition, community engagement, consultation, and evaluation of the impact of the proposed mining sites is continuing with our Environmental Consultants, Digby Wells.  This is a key component of Kodal’s continuing engagement with the Bougouni community and is fundamental to the Company achieving the development of its mining operation and ensuring that it enjoys the support of and returns benefits to these communities.

Kodal has continued its engineering work programme to optimise the capital cost estimate for the development of the Project and complete a detailed assessment to confirm the operating costs of the Project, including the review of the proposed transport costs (details of which were previously announced on 27 January 2020), ahead of securing funding for mine development and construction.  This engineering work programme is continuing with a focus on the process plant design and capital cost estimate, improvements in metallurgical recovery and an update of the open pit optimisation of the defined minerals resources.

Suay Chin and Off-take arrangement Update

Kodal has been informed that there has been a restructuring of the ownership of Suay Chin International Pte Ltd (‘Suay Chin’).  Suay Chin is the Company’s major shareholder with 14.18% of the issued share capital.

Suay Chin is now indirectly controlled by Zhejiang Kanglongda Special Protection Technology Co., Ltd (“Kanglongda”) which is listed on the Shanghai Stock Exchange. Kanglongda’s previous business focus was in the area of functional labour protection gloves, but it has recently developed a new strategy of investment in the lithium industry.

Kodal confirms that the binding term sheet (the “Off-take Term Sheet”) entered into between Kodal and Suay Chin in March 2017 remains in place.  The Off-take Term Sheet contemplates that the parties will negotiate an extended off-take agreement for between 80% and 100% of the spodumene product produced at the Project for a period of three years.The Off-take Term Sheet sets out certain agreed off-take principles that are to be included in the off-take agreement including the parties agreeing to buy and sell the contract quantity as well as the formal agreement including a right to match any third party off-take terms agreed for a period of three years following the expiry of the formal agreement. Whilst a formal agreement has not been entered into, Suay Chin retains the first right of refusal for a period of three years from first production of product from the Project whereby Kodal may not enter into any agreement with a third party to sell more than 20% of future production from the Project without having first offered to sell the production to Suay Chin on the terms offered by the third party. There can be no guarantee on the timing of completion of a formal off-take agreement or if any such agreement will ultimately be agreed.

Gold Exploration Projects and Exploration Programme

In addition to the progress made at the Bougouni Lithium Project, the Company has also made strong progress at its various gold projects situated across West Africa.

At the Nielle project in northern Cote d’Ivoire, Kodal has completed a 1,000m reverse core (“RC”) drilling programme which has returned wide intersections of gold mineralisation and includes zones of high-grade gold mineralisation including results such as 13m at 5.7g/t from 12m. The Company has also completed the 5,000m aircore drill programme which has confirmed a 4.5km gold mineralised trench with an extension of up to 1.5km south and over 1km north.

At the Dabakala project also in Cote d’Ivoire, infill geochemical sampling has continued to return high-grade surface samples at new discovery zone with the new assay results confirming up to 1.97g/t gold with further results confirming continuity of high-grade gold anomalism extending for over 11km and surface width up to 3km.

At the Fatou project in Mali, Kodal has completed the initial RC drilling programme of 1,242m and has returned results including 23m at 1.63 g/t gold from 82m. The completion of the campaign has confirmed multiple mineralised zones and highlights extensions to the north and south requiring additional drilling to test the Fatou prospect.

Future Activity

Kodal is focussed on the advancement and development of its Bougouni Lithium Project.  The Company is continuing to undertake engineering studies to investigate opportunities to decrease capital costs and future operating costs.  These studies will be pursued in more detail during the coming year as the Company advances the Project to development stage.

Key areas that have the potential to enhance the Bougouni Lithium Project include:

· Resource growth and increase of head grade from further exploration in the highly prospective areas contained within existing exploration leases;

· Reduction in capital cost through further optimisation of the flowsheet and engaging with experienced Chinese and other manufacturers;

· Investigate more favourable power supply solutions to reduce operating costs, which is currently under way on the basis of connecting to the future high-voltage grid approximately 15km from the site (the new Bougouni substation is being constructed presently under the 225 kV Sikasso-Bougouni-Sanankoroba-Bamako Transmission line project by the Mali power authority – Energies de Mali);

· Optimisation of mine scheduling and drill and blast strategy; and

· Cost savings relating to the construction of the tailings storage facility (“TSF”).  Currently the design of Stage 1 is based on 24 months of capacity to combat potential for adverse climatic conditions.  Potentially this could be reduced to about 18 months’ capacity if the sequencing of construction is favourable with respect to maximising construction in the dry season.

As Kodal focusses on the technical planning, engineering and optimisation of the proposed development, the Company will be seeking to finalise financial options for the construction of the Bougouni mining and processing operation.  It is looking to move to production as quickly as possible to take advantage of the current high prices of its Lithium Spodumene product in a rising demand cycle.

I look forward to reporting on our advances during the year.

Read More

Bernard Aylward

Chief Executive Officer

18 July 2022


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