(b) Basis of preparation continued Going Concern continued • The Company’s share of forecast equity contributions through this period can be funded from the Company’s existing cash reserves of $67.1 million. In the event that the key assumptions noted above are not achieved and additional funding is required, the Company can alter the Project operational plans or seek alternative sources of funding for the Goulamina JV or the Company which the Directors believe would be available. Should the proposed Goulamina JV investment of US$137.2 million by Ganfeng not complete and the ongoing Mali Government discussions result in a material adverse impact to the Goulamina JV (refer Note 9 “Events After the Reporting Period”), a material uncertainty exists that may cast significant doubt about the Company’s ability to continue as a going concern and, therefore, whether it would be able to realise its assets and discharge its liabilities in the normal course of business and at the amounts stated in the financial report. However, the directors believe that the Company will be successful in the above matters and, accordingly, have prepared the financial report on a going concern basis. The financial statements do not include any adjustment relating to the recoverability or classification of recorded asset amounts or to the amounts or classification of liabilities that might be necessary should the Company not be able to continue as a going concern.
Note 9 (page 24)
Other than the matter set out below, in the interval between the end of the Half-Year and the date of this report there has not arisen any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years: (a) Mali Government Discussions On 18 July 2023, the Company entered into a trading halt of its ordinary shares on Australian Securities Exchange (ASX) and was in a voluntary suspension from trading from 20 July 2023 to 4 September 2023, when the Company resumed trading on the ASX after release of an announcement titled “Goulamina on Schedule Post Discussions with Mali Government”. The Company received correspondence from the Mali Government on 17 July 2023, covering a number of topics including direct shipping ore (DSO), status of the Government free carry stake and overall status of the Project. The Mali Government formed a commission to examine these items as well as issues surrounding the Morila Gold Mine in Mali which is owned by Firefinch Limited (Firefinch) and the relationship between the Company and Firefinch (Commission). At the directive of the Mali Government, DSO activities have been suspended at the Project. This does not delay any aspect of the Project with mining continuing as per the pre-existing plan and mined ore being stockpiled ahead of first spodumene concentrate production in Q2, 2024, which remains on schedule. The Company and Ganfeng presented information to the Commission that conclusively shows that they have no connection with Firefinch (other than Firefinch holding a 17.6% shareholding in the Company with no board representation), that the Project license was validly transferred from a Firefinch entity to LMSA (the Malian company that holds the Project) and that the Company and Ganfeng were not involved with the Morila Gold Mine at any time. LMSA has an Establishment Agreement with the Mali Government which provides exemptions from, among other things, duties and taxes on petroleum products and a three-year exemption from import duties and taxes for the importation of Project equipment. Since mid-July 2023, the Mali Government’s actions have not been consistent with the Project’s exemptions from import duties and taxes. If the matter is not resolved, the Project could pay up to US$45-50 million (Leo Lithium share US$20-23 million) in the capital phase of the Project for unplanned import duties and taxes. The Company and Ganfeng continue to engage in good faith with the Mali Government on the matters outlined above. The Government has not set a timeframe for resolution on the items and therefore no guidance can be provided as to the timing for conclusions. (b) Ganfeng Investment On 29 May 2023, the Company announced that it had entered into a binding agreement with Ganfeng to, amongst other matters, raise $106.1 million through the issue of 131 million new fully paid ordinary shares in Leo Lithium (Placement). The Placement was subject to the satisfaction of conditions precedent, including: • Regulatory approvals in China; and • Execution of a Cooperation Agreement On 4 September 2023, the Company announced that it had executed the Cooperation Agreement and reached agreement with Ganfeng for a direct equity investment by Ganfeng of US$137.2 million into MLBV (the Goulamina JV holding company) whereby Ganfeng will increase its equity in MLBV to 55% and Leo Lithium’s equity stake will reduce to 45% (Equity Investment) and terminated the Placement. The funds from the Equity Investment together with the drawdown of the Ganfeng US$40 million debt facility will be used to develop the Project before any further contributions are required from either Leo Lithium or Ganfeng. The Equity Investment has subsequently received Board approval by both Leo Lithium and Ganfeng and has been formalised in an executed legal agreement that is subject to receipt of regulatory approvals which at the date of signing the financial statements remain outstanding. The Equity Investment structure into MLBV is the same as the initial equity investment of US$130 million by Ganfeng that received all regulatory approvals in 2022.
Probably explains why the share price has been driven down.
(20min delay)