Ann: MoU Signed with Mali Gov & Sale of Entire Project to Ganfeng, page-762

Extracts and notes from a phone conversation with Simon Hay some 3 weeks post the announcement of the sale of Goulamina .. .. .. (28th May)

Project Sale and Tripartite Agreement:
Following Firefinch's latest announcements "Arbitration Notice" & "Market Update"

Impact of Firefinch Arbitration Notice:

Q: What are the implications, if any, for Leo Lithium?
A: We don't think any at all, that's a private matter for them and the contractor. They have said all along they don't have any ongoing obligations in the country with all my discussions with them. I won't go into it, as it is a matter for them but we don't see any implications for them.

Q: The recent arbitration notice from Firefinch mentions a potential delay in the deed transfer from Morila SA to SOREN. Could this delay impact Leo Lithium, the tripartite agreement or the Government signing off on the deed?
A: No, again it is all seperate, they see what's happening now is seperate to the settlement with Ganfeng.

Contingency plans for delays or Firefinch shareholder rejection:
Q: If delays occur or Firefinch shareholders reject the tripartite agreement, does Leo Lithium have a contingency plan?
A: What we have done with Firefinch in return for the A$11.5 million, we have agreed to settle with them, if the money isn't paid we don't settle and we will reserve all our rights. I won't discuss what we could or would do.

Sale Price and Payment Structure:
Valuation of A$517 million:

Q: How was the sale price of A$517 million determined, considering the previously reported post-tax NPV of A$4.1 billion:
A: That previous NPV was, forget about lithium price and those sorts of things by and large that remains consistent but what has changed is the code we have to work under. We will be providing more information in regards to this in the Notice of Meeting, what the key thing is the Government will take 35% to what we had previously banked on to be 20% which immediately takes away 15%. The the financial terms deteriorated on 30 different metrics, so there is no longer tax incentives on ten different metrics. The Corporate Tax holiday is gone, on every single lever they have moved it to favour the government, so the ground rules have changed.

Rationale for Split Payments:

Q: Why are the sale proceeds split into two tranches? Couldn't Ganfeng make a single payment after satisfying all conditions precedent?
A: It was a negotiating point between the parties, they have large capex requirements on their other projects plus still need to fund Goulamina 100% from here on. They came to us and said they would rather split the payments, our analysis is it is financially better and splitting in two was the best outcome we could get.

Government Approvals and Taxes:
Government Signing of the Share Transfer Deed:

Q: Has the Government already signed the share transfer deed? If not, at what stage of the process does the government need to sign the share transfer deed?
A: It is call a no objection letter and that is in progress.

Q: Discussion forums suggest the Malian government may seek capital gains tax on the sale. Is this correct? If so, can you help me understand why there is a potential Capital Gains Tax since the sale involves a share transfer with a Netherlands registered company?
A: It isn't something that has just been brought in, it is in every mining code going back to 2012, the reason we have to pay is our cost basis is very low, Ganfeng have done all the investment, it is entirely legal. I would tell you if they were doing anything illegal and in some areas they are borderline, this will be assessed by one of the top 4 accounting firms, and again the required information will be in the Notice of Meeting.

Ganfeng Relationship and Future Plans:

Q: Is the deposit an indication the Chinese Government have already provided approval and/or does the non-refundable deposit from Ganfeng suggest it's all been approved?
A: The deposit is the terms of the sale contract.

Profitability as Minority Shareholder vs Cooperation Agreement:

Q: The Company's financial experts likely analysed the economics of being a minority holder (26.5%) under the 2023 Mining Code.
How do the profit margins compare to remaining under the cooperation agreement with a 26.5% share and 150,000t per annum spodumene rights?
A: Firstly just on the spodumene, I think we were astute with that, as stage 2 & 3 may never be built and if they are built it will be well after we have left the country. We have converted something that is uncertain into real cash, an asset we can sell (1.5% royalty?) All this information will be provided in the meeting information.

Potential M & A Highlight:

Q: Following the project sale, is the relationship between Leo Lithium and Ganfeng still harmonious? Would Ganfeng consider Leo Lithium in future mergers and acquisitions?
A: The relationship is still very good, I met with the head of Australia who is going to be the COO of Mali, we discussed numerous topics but it was about the transition and completing the deal and everything is going well and nothing is off the table in the future.

Profit Sharing and Remaining Funds:
Claims on Profit Until Full Payment:

Q: Until full payment is received, does Leo Lithium still have claims on profits from production based on its remaining ownership status (40% until tranche 1 is paid, then 20% until tranche 2 is full paid)?
A: Good question, let me clarify one thing. In October when the deal is complete we will transfer all the shares and they will own 100% and we will be out completely. The second part of the payment is a debt that they owe us and they will pay interest, so it isn't a partial sale, it all goes in the 1 lot.

Tax Implications and Cash Management:
I communicated that I was happy (per sè) that the Company is returning the whole tranche 1 payment back to shareholders. Was this driven by large shareholders and institutions or was it a decision to give something back to long suffering shareholders?

Q: The first tranche payment to shareholders will be net after tax proceeds, what are the estimated tax implications, including capital gains tax and potential offsets for pre-joint venture expenses? Are there any other tax considerations for Leo Lithium?
A: All the above, major institutions were not united, some said they want it all back, some said they didn't want any back and re-invest it. My recommendation to board, that there is a doubt that this won't re-trade and it isn't up to us but is up to the ASX. Currently, there is no asset to trade and we are only a cash box and if it is the case, shareholders need to get some of their money back. The Board made a firm commitment last week but they looked at all the above.

Q: With the Company no longer needing short term holding accounts, will the majority of cash be moved into higher interest-bearing accounts?
A: Short answer, yes.

Current Fluctuations and Future Strategy:
Hedging the Australian Dollar:

Q: Considering potential US interest rate cuts, is the company considering hedging the Australian dollar to mitigate currency fluctuations?
A: No, we are not or don't have experience with currency hedging but may look at it.

Mergers and Acquisitions and winding up:
M & A / Capital Distribution for Tranche 2:

Q: Since Leo Lithium is disposing of its main asset, what M $ A or Capital distribution strategy is being developed for tranche 2?
Q: How long will M & A proposals be pursued before considering winding up the Company?
Q: Does the Company have M & A targets?
Q: When can shareholders expect a clearer roadmap regarding the trailing royalty sales, M & A and Capital distribution?
A: It is probably too early for that, I have only spoken to the board about tranche 1, they have a board meeting and they will be reviewing the Notice of Meeting and will provide that information. There will be a clearer raod map when the meeting notes come out, can't reveal M & A targets.

Company Restructuring:
Staffing and Board Reductions:

Q: With the project sale, will there be cutbacks in staffing levels and a reduction in the size of the Board?
A: It will be something that we will look at when we complete the transaction in October and will be talking with staff who will be affected before making any announcements. In general what we have talked about the company will look very different to what it is now.

Final questions:
Settlement Payment Disclosures:

Q: Can or will the Company disclose the nature / items of the settlement payments made to the Government of Mali?
A: We will answer ASX questions, it is a commercial settlement to end a dispute.
A: What is the dispute? It is totally seperate to Firefinch and their dispute, out dispute is over the 2023 Mining Code and the transfer of tenements.

Alleged Irregularities in Licence Transfer:

Q: Can you share the the alleged irregularities with the Goulamina Licence transfer, especially considering the the Prime Minister decree to approve it and Goita also being at the same Ministerial meeting when the decree was tabled?
A: That was their claim, they believed they had a strong position we disagreed, we believed we had a strong position and we were never going to agree and that is why we settled the dispute.

Trailing Royalty Payments:

Q: It looks like a saleable item, are you looking to sell that once established and the mine is stable and producing?
A: It is definitely saleable, but we won;t be doing it right now, we will wait for the mine to run up, which is why we designed the royalty payments that way.


Cheers