TIDMKOD
RNS Number : 2599N
Kodal Minerals PLC
19 January 2023
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (596/2014/EU) as it
forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018. Upon the publication of this announcement,
such information no longer constitutes inside information.
Kodal Minerals Plc / Index: AIM / Epic: KOD / Sector: Mining
19 January 2023
Kodal Minerals plc
("Kodal Minerals", "Kodal" or the "Company")
Major funding package for development of the Bougouni Lithium
Project:
US$100 million (GBP82 million) to be invested into Project
Company and
US$17.75 million (GBP14.6 million) subscription for ordinary
shares in Kodal; and
proposed sale of Bougouni West Project for a consideration of
GBP2 million in cash
Kodal Minerals, the mineral exploration and development company
focused on lithium and gold assets in West Africa, is pleased to
announce it has agreed a conditional funding package of US$117.75
million which will provide full financing for the development and
commencement of production at the Bougouni Lithium Project in Mali
and support a major exploration and development programme.
The funding package has been agreed with Hainan Mining Co.
Limited ("Hainan" or "Hainan Mining") and its wholly owned
UK-incorporated subsidiary Xinmao Investment Co. Limited ("Xinmao"
and together the "Hainan Group"). Hainan is a subsidiary of Fosun
International Limited ("Fosun") and is the industrial platform for
mining and resources within Fosun. The Hainan Group are highly
experienced mining and development professionals and will be
working in partnership with Kodal which will continue to provide
the Mali and project expertise to develop the Bougouni Lithium
Project ("Bougouni Project", "Bougouni" or the "Project").
Highlights:
-- US$100 million committed to Kodal's newly incorporated UK
subsidiary, Kodal Mining UK Limited ("KMUK"), by the Hainan Group
to, inter alia, acquire 51% of KMUK to finance the construction of
the mine at the Bougouni Lithium Project.
-- US$17.75 million equity subscription by Hainan Group into
Kodal at a price of 0.5p per share, being a premium of
approximately 100% to the previous 10-days' VWAP (the
"Subscription").
-- KMUK would be fully funded for the US$65 million capital cost
of the Dense Media Separation ("DMS") development scenario at
Bougouni and is targeting delivery of first production within 12
months of receipt of funds.
-- The additional funds received by KMUK beyond the DMS funding
will be directed to expansion activities to increase the Bougouni
Project JORC compliant resource inventory currently at 21Mt @1.11%
Li(2) O and extend production beyond the initial four-year mine
life.
-- The US$17.75 million raised from the Subscription will be
used to advance the Company's portfolio of gold exploration assets
in Mali and Cote d'Ivoire, as well as the assessment of new
exploration and development opportunities in West Africa.
Closing of the funding transactions is conditional on approval
of certain authorities and regulators in China.
Bernard Aylward, CEO of Kodal Minerals, commented: "This is a
great outcome for Kodal following a competitive and complex process
to ensure we received appropriate recognition for the underlying
value of this asset.
"We are very pleased to welcome the Hainan Group as investors
into Kodal and as partners for the development of the Bougouni
Lithium Project. This investment provides us with a great
opportunity to fast track to production of spodumene concentrate in
a very strong market. The level of funding will allow us to fully
fund the dense media separation plant with mining planned to
commence at the high grade Ngoualana deposit as well as to support
major drilling and exploration campaigns to discover and define
additional lithium mineralisation to seek to increase the life of
the mining operation at Bougouni.
"The Hainan Group have completed extensive due diligence of the
Bougouni Project and confirmed the potential of this quality
project leading to this new partnership.
"The lithium sector remains very buoyant with high demand and
market prices for spodumene concentrate. The demand is supported by
the increasing take-up of electric vehicles ('EVs') and the demand
for secure supply is very high. Kodal will be looking to complete
an off-take agreement for the amount of product that it is free to
sell outside of existing arrangements and will also review the
potential to become involved in downstream processing to enhance
the value of the product if viable."
Liu Mingdong, Chairman of Hainan Mining, commented : "This
investment in Kodal and Kodal Mining UK Ltd is in line with Hainan
Mining's strategy of improving the level of resource and feedstock
security, and commencing the building of our lithium hydroxide
supply chain. It is a milestone for Hainan Mining's African
footprint and globalisation. We are looking forward to working
closely with our partner and jointly developing the Bougouni
Lithium Project in an effective way, aiming to start production and
reach full scale operations as quickly as possible and create value
for both partners shareholders and the people of Mali."
Details of the funding and its terms
Kodal has agreed a major funding package with the Hainan Group
which will acquire a 51% shareholding in Kodal's newly incorporated
UK subsidiary, Kodal Mining UK Limited (the "KMUK Funding
Transaction") . KMUK will become the shareholder of a new Mali
mining company to be formed by Kodal to own and develop the
Bougouni Lithium Project. In addition, the Hainan Group will
complete an equity subscription into Kodal Minerals for US$17.75
million (the "Kodal Subscription" and together with the KMUK
Funding Transaction the "Kodal Group Funding Transaction"),
becoming the largest shareholder in the Company at approximately
14.8%.
A summary of the key terms of the various agreements for the
Kodal Group Funding Transaction is provided below in this
announcement. Completion of the Kodal Group Funding Transaction,
including receipt of funds, is conditional upon satisfying various
conditions precedent on or before 30 April 2023, or such later date
as the parties may agree (the "Long Stop Date") and whilst the
parties have entered legally binding agreements, there is no
guarantee that the transaction will ultimately proceed. The
conditions include the approval in China from each of the National
Development and Reform Commission (NDRC), the Ministry of Commerce
(MOFCOM) and the State Administration of Foreign Exchange (SAFE).
Completion of the Kodal Group Funding Transaction is also subject
to the admission of shares issued pursuant to the Kodal
Subscription to trading on the AIM market of the London Stock
Exchange ("Admission") becoming effective. Further announcements
will be made on the progress of satisfying the conditions and
timing for completion in due course.
Transaction summary:
-- Through the KMUK Funding Transaction, Kodal's new subsidiary,
KMUK, will become the indirect owner of Bougouni and the Hainan
Group will acquire a 51% shareholding in KMUK by way of a US$94.34
million (GBP77.3 million) share subscription. The Hainan Group will
at the same time extend a US$5.66 million (GBP4.6 million) loan to
KMUK (the "KMUK Loan").
-- The proceeds from the KMUK Loan will be used by KMUK to
partially repay to Kodal the loan from Kodal to KMUK representing
capital invested by Kodal in the development of Bougouni to
date.
-- A deposit towards the KMUK Funding Transaction of US$7
million (GBP5.7 million) is to be paid by Hainan Group into an
escrow account within the next 10 business days.
-- Under the Kodal Subscription, the Hainan Group is
conditionally subscribing for 2,937,801,971 ordinary shares in
Kodal (the "Kodal Subscription Shares") for a total subscription
amount of US$17.75 million (GBP14.6 million), equating to a
subscription price of 0.5p per share, being a premium of
approximately 100% to the previous 10-days' VWAP (volume weighted
average share price).
-- On completion of the Kodal Subscription, Xinmao will become
the largest shareholder of Kodal and will have the right to appoint
a director to the Board of Kodal, with the potential in certain
circumstances to appoint a second director.
-- The Kodal Group Funding Transaction, including receipt of
funds, is conditional upon satisfying various conditions precedent
on or before 30 April 2023, or such later date as the parties may
agree.
-- The parties have entered into a shareholder's agreement, the
"KMUK Shareholders' Agreement" which, amongst other things,
provides a 12-month exclusivity period during which Kodal and the
Hainan Group will seek to negotiate an off-take agreement over that
portion of spodumene production from Bougouni which KMUK is able to
sell free without breaching any prior agreement or triggering any
existing rights of first refusal.
Use of funds
Kodal Minerals plc
The focus of Kodal will remain on the successful development of
the Bougouni Lithium Project and Kodal expects to continue working
closely with its new partner, the Hainan Group, to support this
development. In regard to funds raised by the Kodal Subscription, a
reserve of funds will be maintained by the Company in the event
that further financial support is required for the development of
Bougouni or other lithium opportunities in Mali identified by
KMUK.
In addition, the funds to be received from the Kodal
Subscription will be used to undertake a comprehensive exploration
programme on the Company's gold exploration assets in Mali and Cote
d'Ivoire, as well as the assessment of new exploration and
development opportunities in West Africa.
A draft budget has been prepared to undertake a major
exploration campaign on the high priority targets at the Company's
Fatou, Nielle and Dabakala projects with the aim of defining
significant new gold resources. The exploration programmes will
include detailed geological review, geochemical sampling,
geophysical surveys, and extensive drilling campaigns.
In addition to the existing portfolio of projects, Kodal will
continue to review and assess opportunities that may add further
high-quality assets to the Company.
KMUK - Development of Bougouni
The funds from the KMUK Funding Transaction will be used by KMUK
primarily to complete the construction of the lithium mine at
Bougouni as follows:
o Fast track mine construction using the DMS processing plant
option outlined in previous announcements.
o Total capital cost estimated at US$65 million.
o Expected processing capacity of 1Mtpa of lithium ore to
produce up to 130,000 tonnes per annum of spodumene
concentrate.
o Short construction period with the plant estimated to be
operational 12 months from receipt of funds.
o Funds from the KMUK Funding Transaction will be available to
KMUK to, amongst other things, undertake further exploration
activities to seek to further extend the Bougouni mine resource,
develop other lithium pegmatite veins within the project area and
assess opportunities for additional projects.
Kodal has continued the engineering, environmental and social
work at Bougouni to ensure it has been able to maintain momentum to
fast track the mine development. Kodal is expecting to commence
diamond drilling this January to provide additional engineering
information for geotechnical review and metallurgical testing, to
undertake hydrological testing and provide monitoring bores for
environmental monitoring of the Project.
Following completion of the KMUK Funding Transaction and receipt
of funds, a budget for the capital development and resource
definition and exploration activities will be finalised for
approval by the Board of KMUK. The capital costs for all
construction work and development of the mine are estimated at
US$65 million, as previously announced by Kodal.
In addition, a programme of extensional and definition drilling
is expected to be undertaken by KMUK within the vicinity of the DMS
plant where previous work completed by Kodal has indicated the
presence of lithium bearing pegmatites. The Board of Kodal believes
that these additional veins near the plant have the potential to be
economically mined and processed following the completion of
construction.
About Hainan Mining Co. Limited
Hainan is committed to becoming a "leading industrial
development group based on strategic resources with international
presence" through the twin-driver strategy of industry operations
and industrial investment. Fosun is the controlling shareholder of
Hainan holding a 45.9% equity interest. Hainan was established in
August 2007 and listed on the Shanghai Stock Exchange in December
2014 ( stock code: SH 601969).
Hainan's core businesses are iron ore mining, processing and
sales through its Shilu iron ore mine; oil and gas exploration,
development, production and sales through its subsidiary Roc Oil
Limited; and resource investment and financing. Based on Hainan's
strategic plan, it is developing its new energy business (mining
and processing new energy metals) to become its third business
line.
In August 2021, Hainan announced the proposed investment of
1.065 billion yuan (US$164 million) to develop a new processing
plant to make battery-grade lithium hydroxide as a starting point
of its move into the lithium sector and look to support the booming
demand in the EV sector. In June 2022, Hainan announced that the
project (Phase I), with an annual battery-grade lithium hydroxide
production capacity of 20,000 tonnes, will be in Yangpu Economic
Development Zone, with construction commenced to accelerate the
project completion.
The Kodal Group Funding Transaction is Hainan's first entry into
the mining and processing of hard rock pegmatite hosted
mineralisation given its long and strong experience in iron ore
mining and processing.
About Fosun International Limited
In 2007, Fosun International Limited listed on the main board of
the Hong Kong Stock Exchange (stock code: 00656.HK). As of 30 June
2022, Fosun's total assets amounted to RMB 849.7 billion (US$126
billion). Fosun International ranks No.589 on the 2022 Forbes
Global 2000 List, with a MSCI ESG rating of AA.
Summary of the key agreements
The agreements entered into today for the Kodal Group Funding
Transaction are inter-conditional and are subject to the
satisfaction or waiver of certain conditions by the Long Stop
Date.
It is a condition to completing the Kodal Group Funding
Transaction that Kodal's existing subsidiary in Mali, Future
Minerals SARL, which currently owns the Bougouni Project, including
the mining licence and other lithium exploration licences in Mali,
will become a wholly owned subsidiary of KMUK. The parties have
also agreed that following completion, any future investment and
operations in lithium in Mali will be conducted by them through the
KMUK joint venture. After completion of the Kodal Group Funding
Transaction, it is intended that a new subsidiary company of KMUK
will be formed in Mali with the name Les Mines de Lithium de
Bougouni S.A, to be the owner of the Bougouni Project, and the
exploitation licence pertaining to the Bougouni Project will also
be transferred to this company . The Mali government has a right to
a 10% shareholding in the entity that owns the Bougouni Project for
nil cost (the " M ali Stake "), and the right to buy a further
10%.
The principal terms of the agreements pursuant to the Kodal
Group Funding Transaction are set out below.
Kodal Subscription Agreement
Kodal and Xinmao have entered into a subscription agreement (the
"Kodal Subscription Agreement") pursuant to which Xinmao has agreed
to subscribe for the Kodal Subscription Shares for an aggregate
subscription price of US$17,750,000 (GBP14.5 million), equating to
a subscription price of 0.5p per share, being a premium of
approximately 100% to the previous 10-days' VWAP . Upon completion
of the Kodal Subscription, Xinmao will be the Company's largest
shareholder with a shareholding of approximately 14.81%.
Pursuant to Suay Chin International Pte Limited's ("Suay Chin")
existing contractual pre-emption rights, the Company has offered
Suay Chin the right to subscribe for up to 485,568,717 ordinary
shares in Kodal on the same terms and conditions as set out in the
Kodal Subscription Agreement to maintain its shareholding at its
current level of 14.18%. If Suay Chin does not elect to subscribe
for these shares it will be diluted to a shareholding in Kodal of
12.08% on completion of the Kodal Subscription. If Suay Chin elects
to take up its entitlement in full, Xinmao's holding in the Company
will be reduced to 14.45% of the issued share capital.
The Kodal Subscription is conditional on a number of conditions,
including Admission of the Kodal Subscription Shares. The Kodal
Subscription Shares will be issued within the Company's existing
share allotment authorities which were granted at the Company's
annual general meeting held on 29 September 2022. A further
announcement will be made by Kodal once the timing of Admission is
known.
Relationship and Lock-in Deed
Due to level of the Hainan Group's shareholding in the Company
on completion of the Kodal Subscription, Xinmao has entered into a
relationship and lock-in deed (the "Relationship and Lock-in Deed")
with the Company, Allenby Capital Limited and SP Angel Corporate
Finance LLP ("SP Angel"). Pursuant to the Relationship and Lock-in
Deed, Xinmao has agreed to not dispose of any Kodal Subscription
Shares for a period of 12 months following Admission and, for a
further period of 12 months, to only dispose of Kodal Subscription
Shares through SP Angel or the Company's then broker on an orderly
market basis.
In addition, Xinmao has agreed to do all things it is reasonably
able to do, including the exercise of its voting rights, to,
amongst other things, ensure that the Company is able to act
independently of the Hainan Group, having regard to the
shareholders of the Company as a whole, and that any transactions
between Kodal and the Hainan Group are concluded on arm's length
commercial terms.
Further, for so long as the Hainan Group holds an interest in
10% or more of Kodal's issued ordinary shares, Xinmao shall have
the following director nomination rights:
(a) for such time as there are five or fewer independent
directors on the Board of Kodal (being directors independent of the
Hainan Group), Xinmao may nominate one director to the Board of
Kodal; and
(b) for such time as there are six or more independent directors
on the Board of Kodal, Xinmao may nominate two directors to the
Board of Kodal
The Relationship and Lock-in Deed also provides that for such
time as the Hainan Group holds an interest in 10% or more of
Kodal's issued ordinary shares, the Company shall not, without the
prior written consent of Xinmao or save for certain exempt
issuances, allot or issue any equity securities to any person,
without having prior to or at the same time made an offer to Xinmao
to subscribe for such equity securities on a pro-rata basis in
proportion to Xinmao's percentage interest in the issued ordinary
shares on the same terms, and at the same price, as such equity
securities are to be offered to any other person.
KMUK Implementation and Subscription agreement
Kodal, KMUK and Xinmao have entered into an implementation and
subscription agreement (the "KMUK Implementation and Subscription
Agreement") pursuant to which Xinmao has conditionally agreed to
subscribe for 5,100 ordinary shares in KMUK (representing 51% of
the issued shares on completion (prior to the Mali Stake)) for an
aggregate subscription amount of US$94.34 million
(GBP77.3 million). Xinmao has agreed to pay a deposit of US$7
million into an escrow account within the next 10 business
days.
Kodal and KMUK have given various warranties to the Hainan Group
in relation to, amongst other things, their ability to enter into
and perform the various transaction documents for the Kodal Group
Funding Transaction and the validity and title to the various
licences and permits necessary to carry on the business and
operations of Kodal, KMUK and the Bougouni Project.
Kodal has also agreed to guarantee the performance of KMUK's
obligations under the KMUK Implementation and Subscription
Agreement.
KMUK Shareholders' Agreement
The Company and Xinmao have entered into the KMUK Shareholders'
Agreement in order to regulate the ownership, governance and
operation of KMUK as a joint venture between Kodal and the Hainan
Group. Pursuant to the KMUK Shareholders' Agreement, Kodal and
Xinmao will each be entitled to appoint two directors of KMUK and
each of its subsidiaries. The Hainan Group will appoint the Chair
of KMUK, who will have a casting vote.
The KMUK Shareholders' Agreement contains certain reserved
matters in relation to KMUK and its subsidiaries which may not be
effected without the prior approval of both Kodal and Xinmao. These
reserved matters include the entry into third party borrowing
arrangements or project finance in excess of certain agreement
amounts, the making by KMUK of cash calls from its shareholders,
incurring capital expenditure in excess of a certain threshold and
disposing of KMUK's assets and licences. As is usual for agreements
of this nature, the KMUK Shareholders' Agreement contains
provisions for dealing with a deadlock situation where reserved
matters are not approved.
The KMUK Shareholders' Agreement contains pre-emption provisions
relating to the sale of shares in KMUK by one of the shareholder
parties in favour of the other, together with tag along
provisions.
Under the KMUK Shareholders' Agreement, KMUK has agreed for a
period of 12 months to exclusively negotiate with the Hainan Group
to agree an off-take agreement over that portion of spodumene
production from Bougouni which KMUK is able to sell free of any
rights of first refusal in favour of Suay Chin (currently 20% of
annual production) ("Available Product"). If at the expiry of the
exclusivity period, the parties have been unable to agree the terms
of an offtake agreement then the Hainan/Fosun Group shall have a
right to match the offtake terms KMUK may agree with any third
parties in relation to the Available Product.
Loan Agreement
Xinmao and KMUK have entered into a loan agreement pursuant to
which Xinmao has agreed to make a loan of US$5,660,000 to KMUK on
completion of the KMUK Funding Transaction. The KMUK Loan shall
bear interest at a rate of 4% per annum, which shall accrue from
the date of draw down but only be payable following the
commencement of commercial production from Bougouni. The KMUK Loan
is repayable on demand. KMUK may use the proceeds of the KMUK Loan
to partially repay to Kodal the historic expenditure incurred by
the Company in relation to Bougouni.
Update on Bougouni West
With the Company's focus on Bougouni, Kodal has entered a
non-binding term sheet for the sale of its Bougouni West project
(which for the avoidance of doubt, is unconnected to the Bougouni
Project) for a consideration of GBP2 million in cash (the "
Disposal "). The Disposal is subject, amongst other things, to
completion of due diligence, and agreement of final contractual
terms, and therefore there is no guarantee on timing or whether the
Disposal will ultimately proceed. Further updates will be provided
in due course.
**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/Vivek Bhardwaj/Nick Harriss Tel: 020 3328
5656
SP Angel Corporate Finance LLP, Financial
Adviser & Joint Broker Tel: 020 3470
John Mackay/Adam Cowl 0470
Canaccord Genuity UK Limited, Joint Broker
James Asensio/Gordon Hamilton Tel: 0207 523
4680
St Brides Partners Ltd, Financial PR
Susie Geliher/Ana Ribeiro Tel: 020 7236
1177
Glossary
Exchange rate utilised is US$1=GBP0.8198 (GBP1=US$1.2198)
JORC - 'Australasian Code for Reporting of Mineral Resources and
Ore Reserves' of December 2012 ("JORC Code") as prepared by the
Joint Ore Reserves Committee of the Australasian Institute of
Mining and Metallurgy. Terms including Measured, Indicated and
Inferred Resources as defined therein.
1Mtpa - One million tonnes per annum, pertaining to throughput
of the proposed processing plant.
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