TIDMKOD
RNS Number : 8874O
Kodal Minerals PLC
15 June 2022
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the UK Market Abuse Regulations
Kodal Minerals Plc / Index: AIM / Epic: KOD / Sector: Mining
15 June 2022
Kodal Minerals plc
("Kodal Minerals" or the "Company")
Bougouni Lithium Project Update
Kodal Minerals, the mineral exploration and development company
focused on lithium and gold assets in West Africa, is pleased to
provide details of an updated Project Feasibility Study and the
development status for its Bougouni Lithium Project in southern
Mali ("Bougouni" or the "Project"). This update is based on a
review of the engineering, process recovery and capital cost for
the proposed Project operation and improved financial metrics based
primarily on an improved market outlook for the sale of lithium
spodumene concentrates. The current buoyant market conditions for
lithium spodumene concentrate reflect current high and future
demand for battery minerals and recognise a supply deficit .
Highlights:
-- Confirmation of robust development project at Bougouni with key metrics including:
o NPV(7%) of US$760M (US$567M post-tax) compared to US$293M
(US$201M post tax) in the original Feasibility Study.
o 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).
o C1* cash costs of US$362 per tonne of 6% Li(2) O spodumene
concentrate ("SC6"), and costs of US$474 per tonne including
transportation and other selling costs.
o Total SC6 production of 2,024,000 tonnes with an annual
average production of 238,000 tonnes.
-- Bougouni 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.
-- A separate study to assess the capital development cost,
including a review of the process plant, has been undertaken by
Yantai Jinpeng Mining Machinery Co. Ltd ("Jinpeng") which indicates
an e stimated 20% capital cost saving for the process plant and
associated facilities compared to the feasibility study update
figures.
*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
Bernard Aylward, CEO of Kodal Minerals, remarked: "We are very
happy to release this feasibility study update to our shareholders
and our ongoing review highlights the robust development
opportunity our Bougouni Lithium Project presents. The current
buoyant market conditions for lithium spodumene concentrate
reflects the increasing demand for battery minerals and recognises
an expected supply deficit that provides further incentive for the
immediate development of the Bougouni Lithium Project.
"This feasibility study update continues to utilise conservative
pricing for the sale price of spodumene concentrate when compared
with current prices achieved by producers, including Pilbara
Minerals Ltd (ASX: PLS) reporting an average spodumene price
reference for sales in the first quarter of this year of US$2,650
per tonne of concentrate.
"The lithium market continues to be very strong and our Bougouni
Project continues to attract significant interest. 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 and more updates will be
provided in due course."
Further Information
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 SARL. 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 FS for the Bougouni Lithium Project proposes a contract
mining operation and conventional "milling and flotation"
processing facility, capable of treating 2Mtpa (million tonnes per
annum) of ore, complete with associated infrastructure, to mine and
process approximately 16Mt of pegmatite ore over an initial
8.5-year life of mine ("LOM") for the production of a 6% lithium
concentrate (refer to announcement of 27 January 2020).
Lithium Demand
Since the FS was published in January 2020, a number of factors
have resulted in a significant transformation potential for the
Project. Of primary significance is the forecast very high demand
for battery minerals, including lithium spodumene concentrate,
which has experienced exponential price increases in recent times.
Historically high demand is being driven not only by the EV market,
but significantly from an increase in planned gigafactory
facilities.
6% spodumene concentrate prices (CIF China) for the month of
March 2022 averaged US$2,810/t, an increase of 397% over the past
12 months, as reported by the Battery Materials Review ("BMR")
publication (refer www.batterymaterialsreview.com ). In April, BMR
reported the average price had increased another 25% to
$3,510/t.
Feasibility Study Costs and Project Economics Update
In response to rising SC6 prices, Kodal is pleased to provide an
update on Project Economics at Bougouni. Kodal has conducted a
Feasibility Study update ("SU") to assess variations in key cost
input parameters, optimisation of metallurgical recovery, and to
reflect increased SC6 sale prices since the original FS was
conducted.
The rising SC6 price remains the foremost positive impact on
project economics at Bougouni. However, a number of key capital and
operating costs inputs ("capex" and "opex") have increased over the
past 2.5 years that have a direct, albeit moderate, impact on the
Project's financial outcomes.
Of significance are rising iron ore prices (which directly
impacts steel prices, a major component of the process plant) and
rising fuel prices (which directly impacts shipping costs and
mining operating costs) which have been incorporated into this
study update.
Overall, this has resulted in an approximate 20% increase in the
expected capital cost to US$154.3 million and a 15% increase in
mining cost to US$3.03 per tonne.
Further advancement of spodumene concentrate flotation
technology has had a positive impact on metallurgical recoveries
which has also been addressed in the SU. Metallurgical testwork
conducted for the FS concluded that the laboratory flowsheet
predicts "a recovery of 75% of Li(2) O to a concentrate grade of
6%." Average recovery for life of mine of 74% was adopted for the
SU.
The Feasibility study update incorporated a review of capital
and operating costs of the proposed operation and the outcomes are
presented in the table below, including a comparison to the
estimates current at the time of the original FS (refer to
announcement of 27 January 2020).
Project Parameter Cost Basis; US$ Comment
or %
Original SU
FS
--------------------------- --------- --------- -------------------------------------
43% increase; increased
Average Sale Price demand for
(/t SC6) $738 $1,060 supply of battery minerals
--------- --------- -------------------------------------
20% increase; due to steel
costs and
Capital Costs (US$ shipping costs (fuel and
millions) $128.6 $154.3 demand related)
--------- --------- -------------------------------------
15% increase; due to fuel
Mining Costs (/t costs and
mined) $2.63 $3.03 contractor demand
--------- --------- -------------------------------------
8% increase; due to power
costs and
Processing Cost impact of fuel costs on
(/t SC6) $17.19 $18.56 opex
--------- --------- -------------------------------------
General & Admin. 10% increase; due to labour
(/t SC6) $2.92 $3.22 costs
--------- --------- -------------------------------------
20% increase; due to impact
SC6 Freight Costs of fuel costs
(/t SC6) $93.60 $112.32 on transport
--------- --------- -------------------------------------
3% increase; reflects improved
process
recoveries, technology advancement,
and low level of impurities
SC6 Recovery 71% 74% in ore
--------- --------- -------------------------------------
Other Costs
Royalties 3.0% 3.0%
Local Partner Royalties 0.5% 0.6%
Land Tax $149,333 $149,333 Per annum
Special products tax and
ad Valorem tax as required
ISCP on Turnover 3.0% 3.0% by the Mali Mining Code
Corporate Tax 25% 25%
--------- --------- -------------------------------------
Incorporating the above changes to key cost input parameters
into the operating cost model prepared for the FS highlight a C1
(Brook Hunt) operating cost excluding product selling costs for the
SU of US$362 per tonne of concentrate produced, with an additional
$112/t for selling costs which includes inland transport to the
port. This benchmarks the Project as a reasonably low-cost
producer. A summary of the operating cash costs is tabled
below:
Project Parameter Base Case (Total US$M) Cash Cost (US$/t of
SC6)
Original SU Original SU
FS FS
--------------------- -------------- --------- -------------- ------
Mining Costs 334 385 172 190
Processing Costs 275 297 141 147
General & Admin.
Costs 47 51 24 25
Sub Total C1 Cash
Cost
(per tonne of SC6
produced) 337 362
Selling Costs 182 227 94 112
-------------- --------- -------------- ------
All-in C1 Cash Cost 431 474
-------------- --------- -------------- ------
Royalties (Govt.
& NSR) 50 77 26 38
Sustaining Capital
Costs 16 16 8 8
-------------- --------- -------------- ------
Net Cash Operating
Costs 904 1,053 465 520
-------------- --------- -------------- ------
These operating and capital costs were then assembled into the
proposed mining and processing operation from the FS, based on
Indicated and Inferred Resources to develop a high-level financial
model in order to evaluate the economics of the operation. The
estimate for revenue is based on delivering a 6% spodumene
concentrate, Free on Board (FOB), to the Port of San Pedro in Côte
d'Ivoire.
SC6 concentrate selling price (FOB San Pedro Port in Côte
d'Ivoire) is based on a start price of $1,250/t for the first two
years of production, reducing to $1,200/t for the following 2
years, and then $900/t for the remaining life of mine. This equates
to the $1,060/t life of mine average price, which is considered
reasonable under current market conditions.
A summary of the cash flow model inputs and the resulting cash
flow model results are tabulated below:
Model Inputs:
Variable Units Original SU Case
FS Case
--------------------------------- ------------- --------- --------
Mine Life Years 8.5 8.5
Ore Tonnes Mt 16.0 16.0
Lithium Grade % 1.03 1.03
Lithium metallurgical recovery % 71.0 74.0
6% Lithium Concentrate Produced kilo-tonnes 1,942 2,024
Average Annual Production kilo-tonnes 218 238
NPV Discount Rate % 7.0% 7.0%
------------- --------- --------
Cash flow model results:
Parameter Original FS SU Case
Case (US $'000)
(US $'000)
----------------------- ------------- -------------
Pre-Tax Cash Flow
(EBITDA) 395,766 1,067,679
Pre-Tax NPV @ 7% 293,460 759,839
Post-Tax Cash Flow 306,186 773,634
(NPAT)
Post-Tax NPV @ 7% 200,769 567,231
IRR 50.9% 91.2%
Payback Period 1.8 yrs 0.8 yrs
Life of Mine Revenue 1,432,907 2,145,062
------------- -------------
Project Development Activities
The SU has highlighted the development of the Project as a
robust, economically viable proposition. Since publishing the first
FS, the Company has continued its activities to optimise and
advance the Project, including various strategic advances in
support of the SU and associated costs.
Kodal engaged an experienced Chinese engineering consultancy
based in Shandong, Yantai Jinpeng Mining Machinery Co. Ltd
("Jinpeng"), who boast direct experience in the design of hard rock
milling and flotation plants. Jinpeng were engaged to conduct study
update engineering services for the complete range of plant area
design necessary to provide a technically compliant processing
plant facility for Bougouni. This included all processing plant
equipment and services including crushing, milling, flotation,
filtration, tailings handling and product load out facilities.
The Jinpeng study update was completed in Q1 2022 and was based
on equipment suppliers from China for the same flowsheet as defined
in the FS. The original FS contemplated major equipment suppliers
in Europe and South Africa.
The Jinpeng SU capital cost estimate realised a circa 20%
capital cost saving for the process plant and associated facilities
and services when compared with the original FS. Engaging with
Jinpeng provides Kodal with an opportunity to decrease capital
costs (particularly given the forecast increased capital costs),
and this will be pursued in more detail in the future as the
Company advances the Project to development stage.
Other 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 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.
**ENDS**
For further information, please visit www.kodalminerals.com or
contact the following:
Kodal Minerals plc
Bernard Aylward, CEO Tel: +61 418 943
345
Allenby Capital Limited, Nominated Adviser
Jeremy Porter/Nick Harriss/Liz Kirchner Tel: 020 3328
5656
SP Angel Corporate Finance LLP, Financial
Adviser & Broker Tel: 020 3470
John Mackay/Adam Cowl 0470
St Brides Partners Ltd, Financial PR
Susie Geliher/Ana Ribeiro Tel: 020 7236
1177
Glossary:
CIF China - Cost, insurance, and freight (CIF) - Under CIF, the
buyer takes over ownership of the merchandise only at the port of
destination. The seller is responsible for the cost and freight and
ownership handover takes place at the destination port.
C1 (Brook Hunt) - a standard metric used in mining as a
reference point to denote the basic cash costs of running a mining
operation to allow a comparison across the industry. Under the
Brook Hunt definition, C1 costs are direct costs, which include
costs incurred in mining and processing (labour, power, reagents,
materials) plus local G&A, freight and realisation and selling
costs. Any by-product revenue is credited against costs at this
stage.
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