Leo grapples with West African challenges

Leo Lithium shares traded 50 per cent lower today after the company emerged from a trading suspension with clarification on issues at its lithium project in Mali.

The West Perth-headquartered ASX-listed developer revealed the Mali Ministry of Mines had imposed a suspension on direct shipping ore from its Goulamina project, owned under a joint venture with China’s largest lithium producer Ganfeng Lithium Group.

The suspension was put in place as part of a government review into aspects of the project and broader industry, and Leo maintains it is on track to produce spodumene concentrate in the second quarter of 2024.

However, the review has halted DSO export and is exploring other aspects of the project and its ownership.

This includes the nature of the government’s current 10 per cent free carried stake in Goulamina. Leo is also seeking clarification around tax arrangements at Goulamina.

“Since mid-July 2023, the government’s actions have not been consistent with the project’s exemptions from import duties and taxes for the importation of equipment,” the company said.

“Leo Lithium did not receive any communication of this change. Leo Lithium is attempting to resolve this matter with the government.”

Leo estimates the joint venture has paid around US$4 million ($6.2 million) in import duties and taxes since the changes came into place.

The company has also sought to clarify it has no current connection with Firefinch Limited, which was developing the Morila gold project in Mali until it decided to withdraw from the jurisdiction last year.

Leo was spun out from Firefinch last year, and while the latter holds a 17.6 per cent stake Leo it has no board representation.

Leo said it continued to engage in good faith with the government on matters relating to Goulamina, with managing director Simon Hay and a Ganfeng representative in Mali recently for meetings and discussions.

No timeline was provided for conclusions to the government review.

Leo estimated that Goulamina was 35 per cent complete at the end of July, with work expected to accelerate in coming months. 

Hot off the heels of a $A106 million investment and cooperation agreement in May, Ganfeng will retain its position within the joint venture. 

However, the two parties are revising the investment structure associated with the agreement – a move which will mean Ganfeng will replace a strategic placement into Leo with a direct equity injection into the joint venture equity.

This move will mean Ganfeng will sole-fund around US$137.2 million ($212 million) worth of Goulamina capital costs to earn up to a 55 per cent economic interest in the joint venture.

Leo will remain the operator and manager of the JV. The change is subject to board approvals on both sides and Chinese regulatory approval.

Mr Hay said the joint venture remained positive about the project’s prospects.  

“We are pleased to execute the cooperation agreement with Ganfeng and revise the investment structure; this further demonstrates the positive working relationship between the JV partners and Ganfeng’s continuing support for the Goulamina project,” he said. 

“Goulamina remains a technically and financially robust world-class lithium project and continues to represent the next lithium project of significant scale to enter production globally, without the addition of early DSO product. 

“While Leo Lithium had a preference to bring Goulamina DSO product to market in advance of our expected spodumene concentrate production in the first half of 2024, it is not necessary for a successful project, and we did not consider a DSO opportunity in our feasibility studies. 

“We will continue to engage with the Ministry of Mines and advance our world-class spodumene project. 

“We anticipate further positive developments with the latest mineral resource setting the foundation for an updated ore reserve estimate later this month.” 

On the market, Leo Lithium shares last traded 57 cents as of 3:28pm AEST.