Ganfeng gives Leo Lithium a lifeline with deal to buy remaining stake in Goulamina lithium project for $520m
Adrian RausoThe West Australian
Wed, 8 May 2024 11:00AM
Mali has proven too much to bear for Leo Lithium, which has cut a deal to sell its remaining stake in the Goulamina lithium project for $US342.7 million ($520m) and hand over $90m to the West African country’s regime in the process.
Leo Lithium has shaken hands with its Goulamina joint venture partner Ganfeng to offload a 40 per cent interest in the unfinished development, which is on top of the previously announced $99m sale it made to the Chinese battery manufacturer for 5 per cent.
Ganfeng will also pay a 1.5 per cent gross revenue fee over 20 years to West Perth-based Leo in exchange for its Goulamina offtake rights.
The Simon Hay-led Leo informed investors on Wednesday the deal with Ganfeng was binding, while a “memorandum of understanding” has been signed with the Malian government to resolve “all outstanding issues”.
The West Australian understands Leo had been locked in discussions regarding the Malian government’s free carry stake in Goulamina — which was 10 per cent prior to Leo’s suspension — as well as liabilities relating to Firefinch’s Morila gold mine in Mali.
Leo was spun out of Firefinch, which hastily exited Morila in late 2022 — angering local officials.
Leo on Wednesday also said Goulamina now also falls under a new mining code in Mali, lifting the government’s possible slice in the project to 30 per cent, plus another 5 per cent “local stake”.
The sale of Goulamina is equivalent to 43¢ per share.
Leo’s shares have been suspended since July last year after it received “correspondence” from the Malian government.
At the time of suspension its shares were trading at 50.5¢, albeit in a much healthier lithium price environment and no indication of major issues with the Malian regime.
Mr Hay said the deal to walk away from Mali would realise value for shareholders under “highly challenging circumstances”.
“.Despite our best efforts to reach a viable agreement with the Mali government and considering the increasing risks associated with operating in Mali, the impact of the new 2023 Mining Code and the company’s financial position for future funding, the board of Leo Lithium has determined that a sale of the company’s remaining interest in Goulamina is in the best interests of Leo Lithium shareholders,” he said.
“We have deeply appreciated our shareholders’ patience and support whilst we worked to settle this issue.”
Leo shareholders are set to vote on the sale in mid-July with completion of the transaction targeted for October.
Broker Wilsons has given the deal the thumbs up.
“The (sale price) is broadly in-line with our existing valuation for Leo Lithium, where our price target is based on a ‘liquidate scenario’ whereby the company sells its remaining stake in Goulamina to Ganfeng for a 30 per cent discount to the pro-rata rate which Leo announced the sale of a previous 5 per cent stake in Goulamina to Ganfeng for $US65m earlier this year,” a note to clients read.
In March Leo said construction at Goulamina — the world’s fifth largest spodumene lithium development — was 80 per cent complete.
On Wednesday the company reiterated that the project remains on track for first spodumene production next quarter.
Leo held $69.3m of cash by the end of the March quarter and the Goulamina JV itself held about $33m.
The political situation in Mali has gradually deteriorated since a coup d’état in 2021 and the military junta in charge has been cosying up to Russian mercenaries Wagner Group since early 2023.
Leo had a $605m market capitalisation at the time its shares were suspended.
LLL Price at posting:
50.5¢ Sentiment: Buy Disclosure: Held
(20min delay)