After months in a trading halt, Leo Lithium will bank US$342.7m from Chinese lithium giant Ganfeng for the last 40% it still holds of the Goulamina lithium mine
\nAlong with the deal, Leo has reached an MoU with the Mali Government to pay a US$60m settlement
\nLeo boss Simon Hay says the company\u2019s interests have been closely aligned with JV partner Ganfeng<\/p>\n
\u00a0 The \u2018African discount\u2019 \u2014 as well as the fact Leo never owned more than 50% of the proposed 500,000tpa Goulamina asset in Mali after its demerger from the ill-fated gold miner Firefinch (ASX:FFX)<\/strong><\/a> \u2014 was among the rationale for Leo never pushing beyond a fifth of the Tim Goyder-chaired Liontown\u2019s value despite the similar scope of their developments.<\/p>\n And jurisdictional risk concerns proved to be well-founded.<\/p>\n While Leo and its JV partner Ganfeng Lithium \u2014 China\u2019s largest lithium miner and processor \u2014 have been able to build the Goulamina mine through the turmoil, successive military coups in 2020 and 2021 in Mali that dismantled democratic rule had shifted the goalposts.<\/p>\n A new Mining Code was proposed in 2023 that could see the State and local businesses claim up to 35% of any new mining project in the West African country.<\/p>\n And Leo has been in a trading halt for months, navigating a dispute that has now been resolved with a US$60m settlement due to be paid by the company to the Malian Government.<\/p>\n The solution has been reached with Leo selling the remaining 40% of Goulamina it still held to Ganfeng for US$342.7m ($521m AUD). Leo previously shopped 5% to Ganfeng for US$65m and had US$68.5m of its capex at Goulamina covered by Ganfeng for another 5%.<\/p>\n The selldown will complete over the next six months once Malian and Chinese foreign investment approvals are cleared, with Leo shareholders to bag an initial US$10m before the first major tranche of US$161m is paid on the satisfaction of key conditions and a further US$171.2m at some time before June 30 next year.<\/p>\n Offtake rights linked to a downstream development previously expected to be jointly owned by Leo and Ganfeng will also be converted into a 1.5% royalty on revenue from Goulamina stage one over a 20 year period from the first shipment. The sale to Ganfeng will no doubt alight fears China is grabbing even greater control of the world\u2019s lithium resources to feed a local EV industry now making up 60% of the global market.<\/p>\n It has sparked concerns the country\u2019s government and dominant players could wield extraordinary control over prices, as it does in the case of other critical metals like rare earths<\/a>.<\/p>\n That has played out on the African continent, where low grade lepidolite exported to China was one of the sources which led to the oversupply that crunched prices in late 2023.<\/p>\n Meanwhile, a dispute has raged over control of Africa\u2019s largest spodumene deposit \u2014 the Manono project in the DRC \u2014 since 2022, with ASX-listed owner AVZ Minerals (ASX:AVZ)<\/strong><\/a> suspended from trade and locked in legal disputes with local companies and Chinese giant Zijin since.<\/p>\n Prospect Resources (ASX:PSC)<\/strong><\/a> on the other hand banked a major payday selling its Arcadia project in Zimbabwe to a Chinese miner for US$387m, the path eventually taken by Leo.<\/p>\n Despite the potential optics, Leo boss Simon Hay told Stockhead\u00a0<\/em>the company had been strongly supported by Ganfeng during its suspension, saying it shouldn\u2019t be a concern to have Ganfeng take full control of the major lithium mine.<\/p>\n \u201cI don\u2019t think so at all, and I definitely have to put in a very good word here for Ganfeng, they have been a fantastic partner for us throughout this whole process,\u201d Hay said.<\/p>\n \u201cWe\u2019ve been very aligned in our dealings with the Government from day one right up until this point in time.<\/p>\n \u201cI can\u2019t speak for them on how they view the government, but we\u2019ve been aligned in our approach.<\/p>\n \u201cThey\u2019ve been very supportive of Leo, they\u2019re the ones who\u2019ve invested US$307 million into the country so far, Leo hasn\u2019t invested money, we\u2019ve sold down our ownership of the project and that money has gone into the country.<\/p>\n \u201cWe think they\u2019ve paid a reasonable price under the circumstances for our share here.\u201d<\/p>\n Ganfeng, notably, already have investments in Australia\u2019s lithium sector, including a 50% ownership stake in Mineral Resources\u2019 (ASX:MIN)<\/strong><\/a> Mt Marion mine.<\/p>\n They were recently revealed as the successful party in a process to find a downstream processing partner for Pilbara Minerals (ASX:PLS)<\/strong><\/a>, agreeing to sell down their stake to satisfy US and European investment criteria if need be. With months to go before the deal\u2019s conditions are satisfied, it remains to be seen what Leo will do with the cash.<\/p>\n A dividend, similar to the one Prospect paid on the Arcadia sale, is certainly on the cards.<\/p>\n Hay, previously the boss of Galaxy Resources ahead of its merger with Orocobre to create Allkem (more recently merged with Livent to form Arcadium Lithium (ASX:LTM))<\/strong><\/a>, remains positive about the potential of the Leo management team to pick up another project.<\/p>\n Mali is likely out of the question, but he still thinks ASX listed companies can make a go of it in Africa.<\/p>\n News of the sale saw LLL neighbour First Lithium (ASX:FL1), which owns the Blakala prospect, run up 6.8% yesterday.<\/p>\n Shares in Atlantic Lithium (ASX:A11)<\/strong><\/a>, owner of the Ewoyaa project in Ghana, were also 3.8% higher.<\/p>\n \u201cIt\u2019s jurisdiction by jurisdiction, I think. There\u2019s certainly other Australian or Western lithium developers in the region,\u201d Hay said.<\/p>\n Hay said a capital distribution would be \u201cone of the first things\u201d on Leo\u2019s agenda, but said it would take discussions with big investors to decide it\u2019s path ahead.<\/p>\n \u201cI haven\u2019t spoken to all our major shareholders, so it is presumptuous to talk about what we do with the money,\u201d Hay said.<\/p>\n \u201cThat being said, we\u2019ve got a team here that\u2019s developed a lithium asset.<\/p>\n \u201cWe\u2019ve got a fair bit of lithium expertise in the company and we\u2019ve got an ambitious board and management team, so we would like to do something but it\u2019s too early to hone (in on) any targets.\u201d Another challenge facing African lithium developers was a crunch in lithium prices, which saw spodumene concentrate fall from levels above US$8000\/t last January to just US$850\/t early this year.<\/p>\n They have since rebounded beyond US$1200\/t, amid hopes the bear leg of the cycle was short-lived and as high cost supply from China and Australia was curbed.<\/p>\n \u201cEven with slowing in growth of EV sales in certain markets, the whole industry is still growing,\u201d Hay said.<\/p>\n \u201cSo I think that\u2019s really positive. If I look at chemicals and the pricing over the last five-six years, one good thing about this trough that we\u2019ve just passed through is that the trough was around about US$1,000\/t.<\/p>\n \u201cPrevious troughs have been US$400\/t. So I think the market overall has moved up and the end market has realised that incentive pricing for new lithium projects is no longer US$400-500\/t, it needs to be US$1000 and more.<\/p>\n \u201cI think that\u2019s the maturing of the industry.<\/p>\n \u201cFor us, we\u2019re selling the project now. Of course it\u2019s a long live project, there will be future value in it. We did try and retain some of that exposure to the future pricing through this royalty that we\u2019ve got as well.\u201d Links to Firefinch, Leo\u2019s 17.6% owner and the company from which LLL spunout, have also dogged the lithium play.<\/p>\n Among the issues raised by the Malian Government, along with Leo\u2019s plans to ship an unprocessed DSO product and concerns over the process to deliver Mali\u2019s 10% free carried stake, was Leo having to prove there was no corporate relationship between the companies.<\/p>\n Later correspondence from the Mali Government claimed the transfer of the Goulamina permit to the local holding company did not follow the relevant regulatory procedures.<\/p>\n Mali also wanted Leo and Ganfeng to apply for a new exploration permit and migrate the project to the new 2023 Mining Code.<\/p>\n Leo disputed these claims and continued construction of the project, also saying it should have been exempt from taxes and levies issued under its exploitation permit.<\/p>\n The settlement has dragged in the current managers of Firefinch and will include a US$60m payment by Leo, with AUD$11.5m contributed by FFX to Leo as part of the deal.<\/p>\n Firefinch\u2019s shares in its Morila mine will also be transferred to Mali\u2019s State owned mining company.<\/p>\n In exchange the project\u2019s title has been assured and dispute over the \u2018irregularity\u2019 of the transfer settled, permits will be granted for the project and the proponents will be exempt from customs and duties during the remaining construction phase.<\/p>\n First concentrate is expected in the September quarter.<\/p>\n \u00a0<\/p>\n <\/span>\u00a0<\/p>\n At Stockhead, we tell it like it is. While First Lithium was a Stockhead advertiser at the time of writing, it did not sponsor this article.<\/em><\/p>\n <\/span><\/p>\n The post No Country for Aussie Men? Leo Lithium boss says ASX African lithium plays can still succeed<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"
\nIt was touted as Africa\u2019s answer to Kathleen Valley, and when spodumene prices were at their apex in early 2023, Leo Lithium (ASX:LLL)<\/a> could seriously claim being \u2018undervalued\u2019 compared to Aussie developer peer Liontown Resources (ASX:LTR)<\/a> as a bid from Albemarle pushed the latter\u2019s value beyond $6 billion.<\/p>\n
\n\u00a0<\/p>\nBest outcome<\/h2>\n
\n\u00a0<\/p>\nPayout on the way?<\/h2>\n
\n\u00a0<\/p>\nLithium market turnaround<\/h2>\n
\n\u00a0<\/p>\nThe fine print<\/h2>\n
Leo Lithium (ASX:LLL) share price today<\/h2>\n\n