The likely "settlement" isn't a payment for any Firefinch Limited incurred debt/s.
The following is my opinion and/or comments based solely on my interpretation of the 2012 Mali Mining Code.
The Mali government has (documented in Mining Code) the right to collect tax on a change of control over tenements, regardless of what Leo Lithium considers as there being no CGT liability as a result of the Demerger or the reorganisation of the Goulamina Lithium project assets to facilitate the Joint Venture.
Although there is nothing simple in the Mining Code, some of which may be related to the translation from French to English; but;
Article 107: The allocation of mining titles, authorizations to open or exploit quarries and artisanal exploitation authorizations, their transfer by assignment or transmission as well as their renewal are subject to payment of the following rights and taxes: (skipping points a, b & c as they are a list of normal fees)
(d) in the event of a transfer, the tax on the capital gain from the transfer or transmission of a mining research or exploitation title is 10%.
However, even in the absence of added value, the following will be levied:
- for operating permits and authorization: 1% of the tax-free value of the project defined by the feasibility study.
If the levy value is based on the Net Present Value (updated DFS) of A$4.1billion then are we looking at a A$41million levy? plus whatever the capital gains tax will/could be, although the company does not believe there are capital gains from the reorganisation (change of control) of the Goulamina assets.
The indemnity for both Firefinch Limited and Ganfeng is only related to any tax liabilities, loss or damage in connection with the change of control in the company as a result of the reorganisation of assets and associated liabilities required to implement the Joint Venture.
Although the Company also made a point of saying that the cash consideration of the 5% sale of Goulamina, should not be considered an indication of the settlement (potential) amount, the first tranche of US$35 million (converted A$53 million) sure does line up with the above levy and possible CGT @ 10%?
Firefinch Limited have their own problems, that are starting to possibly get worse with the Morila Mine being put on Care & Maintenance and a dispute with the mine workers that are in limbo and asked to take technical leave -- which in short is leave without pay, until negotiations with a buyer are possibly finalised.
The mine workers want to be retrenched with their full entitlements as they cannot afford to be out of work for extended periods without pay.
As i see it, the Firefinch preferred buyer (West African not specifically Mali) didn't align with the New Contents Law that was implemented along with the new Mining Code, which also aligns up with the timing of being advised that there was another buyer?
What if there is no agreement with any buyers and the mine is closed?
It is quite obvious that the advice the board received and then actioned this flippant walk away strategy, may not hold?
Good faith discussion eh? Don't think so if you need to be represented by a large International Law firm .. .. .. ..
cheers
