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50.5¢ leo lithium limited

WHERE ARE WE AT ...., page-3

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MM0

239 Posts.

391

04/01/24

19:18

Post #: 71730727
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Originally posted by fooca: ↑

Where are we at, my perspective as an extension to previous posts by @MM0 and @xfactor1
Also responding (belated) @dazaliam
re: "I understand your POV but do you know of any other Mali based stock that is suspended pendoing further government comms?

Do any of the other companies operating in Mali have the same amountof items / issues / concerns simultaneously under discussion / negotiations?
~ FYI, LLL is in a "not at the entity's request" suspension for not adequately responding to the ASX enquiries, LLL is conforming to the ASX's listing rules and incomplete negotiations come under Listing Rule 3.1A which exempts it fromListing Rule 3.1 - Continuous Disclosure.
After all the following has been finalised, the Company then has to "respond to the ASX queries" before being readmitted to quotation, @Stas
~ how long is a piece of string?

Posters scoffing at the Company's replies as being complex, incomplete and confidential and suggesting that it is mainly to do with FFX should (as previously posted) do some more research.
I am not suggesting that the Firefinch debacle hasn’t/isn’t having an impact on the negotiations, but I would hardly think it is the main focus of Leo Lithium.

Any individual one of the following range of topics forming part of the current discussions / negotiations, any reasonable person would expect to have a material effect on the price or value entity's securities.
If the Company is able to achieve a favourable outcome to them, the value impact to the Companywill negate some of the additional cost burden that has presented in the formof the “Local Content Law”.

What we know the Company are in negotiations for, as per announcements:
(1) Direct Shipping Ore, the Company had provided information after being directed to suspend the DSO part of the operations while discussions with the ministry are ongoing. The Government are assessing the information and there has been no formal response.
++ IMO, the Company's value and price of securities as reflected in the share price as at the last trading day before being placed in a 2nd trading halt, this would include the market sentiment downtrend of all Lithium companies, theLithium price falling and the withdrawal of 2023 / 2024 production and sales guidance.
** IMO, if the DSO decision to proceed is granted, it could be a catalyst for share price appreciation but it would also show good will between theCompany and the Government?

It is unfortunate that the Minister was changed that has resulted in DSO being suspended, but from memory there is nothing in the 2012/2019 Mining codes that cover DSO. There is also nothing in the Feasibility Study in regards to DSO.Take into account we have a new minister that is plainly an academic (see Bairstow comments below) and has responded citing the 2023 Mining Code - opinion only.

Although we do not come under the 2023 code,Article 93 mentions tolling not covered in the initial feasibility study, must submit a new feasibility study with the view of obtaining a new operating permit.
~ Annoying also as the Company signed the storage contract at the port withthe start date aligning with the DSO shipments?

As a preamble to the following; posters suggesting that revised percentages of ownership (if we come under the 2023 code) will be better than nothing!, needto get a better understanding of the ramifications if the Government doesn’t honour the agreements they entered into re: Establishment Agreement and the Mining Code under which the Exploitation Licence was granted and thea dditional costs attributed to the local content law.

Although it is clear in both the 2019 & 2023 Mining Codes that isn't andshouldn’t be the case and it also a little comforting that Bristow comments(below) also align with the common/market/analysts’ views.It would set a precedent against historical stable tax and custom regimes thatattracts large investors to the country;
for Code 2023, Article 218:
~ The provisions of the Mining Code have a greater legal value than those ofthe Establishment Agreements.
~ Valid operating permits and quarry authorizations remain subject, for theirremaining duration and for the substances for which they were issued, to theprovisions of the legislative and regulatory texts governing their issuance.
~ Valid research permits remain subject to the provision of their code which governed their issuance. However, the provisions of this code apply at the timeof renewal or when applying for an operating permit.

(2) Government Free Carry Stake, looking at this across numerous Companiesoperating in Mali, past practice was the 10% free carry to the State, was takenup on the issuance of the Exploitation Licence and the additional 10% was atthe start (or close to) of mining operations.
~ currently, under the 2012 Mining Code, this remains the same with the agreed price for the optional 10%.
~ documents have been provided to the Government to effect the free carry stake.
~ when the Government takes up its free carry component, it will add more confidence that the project negotiations are moving in the right direction,

BUT,~ if and only if (IMO I doubt we will) the Government forces Leo Lithium ontothe newer 2023 Mining Code, the differences are staggering including the ambiguous wording in the Code.
Article 78 of the new code is concerning;
The granting of the operating permit by the State entitles it to a free participation set at a minimum of ten percent (10%) of the Capital of theoperating Company.
~ Which is suggestive that the Government may want to negotiate an increaseto its free carried interest?

The State has the option to increase its participation in the operating companyby purchasing in cash an additional up to 20% -- “cash participation”The method of calculating the cash participation is equal to;
The percent chosen by the State multiplied by the overall cost of the research work and the Feasibility Study relating to the deposit borne by the Company before its decision to implement it in operation of the deposit, increased by interest at BCEOA rate plus 2%.
The expenses already borne by the State for research work within theperimeter also increased by interest at the same rate are deducted from the acquisition price.
The tax expenditures (or exemptions) granted to the holderof the research permit and its subcontractors on the area covered by theexploitation permit will also be deducted from the amounts paid.
~ so yeah / nah to “”30%”” being better than nothing !!!!!

What would that mean to the Company?
A lot less VAT credits over the life ofmine?
Delay any future dividends?
Delay in funds available for JV MA activities?

(3) Government Import Duties and Taxes, with nothing much to add as the taxes that LLL has been charged isn’t consistent with the agreement nor the2012 Mining Code.

(4) Permits, as at the 30 September permits/approvals remain outstanding for;
~ power generation – which was approaching the critical path, power continues to be provided by smaller stand alone units that are not as cost effective.
~ airstrip
~ density gauges
~ exoneration processes – need help with what this is (anyone)?

(5) Commission
The setting up of a commission, was one of the recommendations from the2022 Mali mining industry audit that was ordered by the government.
It was also a recommendation from the World Bank when approving US$40m –(spread over 5 years) of credit for the Mali Governance of Mining Sector project in 2019.
Article 187 of the 2023 Mining Code:
A commission responsible for mining activities is created.
~ rather than in Leo’s announcement it is inferring the commission was set upfor matters dealing with LLL and including FFX?
~ unless there is a further commission that was established specifically to LeoLithium?

(6) What will (or could) affect Leo Lithium as (IMO) there are numerous articles of the new mining code that the Company will need to complywith by way of them being incorporated into the Local Content Law.
* This is only from my understanding of past practices after a new mining code is promulgated but excluding the protections afforded by being underestablishment agreements / previous mining codes.
~ Articles that were included in the code, examples being the varying funds that were established in line with The International Monetary Fund, 2023Article IV Consultation and both the 2020 & 2021 ECF (Extended Credit Facility)reviews with recommendations.
++ Directors (IMF personnel) encouraged the authorities (Mali Government) topursue ambitious fiscal consolidation to reduce the fiscal deficit below 3% ofGDP by 2025.
++ They further stressed that steadfast implementation of fiscal adjustmentsand other reforms were vital to boost economic growth, reducing the level ofpoverty and food insecurity.Local Development Fund; Article 95 2023 Code
~ to finance national regional and municipal development plans;
+ funded by holders of exploitation permits @ 0.75% of quarterly turnover.

Article 100 2023 Code, the funds admits within its administrative body
~ representatives of the mining companies
~ representatives of local authorities
~ representatives of the Minister in charge of Mines
~ other sectoral ministriesMining Sector Promotion Financing Fund; Article 97 2023 Code
~ to enable capacity building in the mining sector;
+ fuelled by resources intended for training, paid by mining companies onsigning Establishment Agreements and during transfer of mining titles
+ mandatory contributions and payments to this fund are deductible expensesin calculation of corporate tax.Energy, Water and Transport Infrastructure Development Fund;Article 98 2023 Code
~ is funded by holders of small & large mine operating permits being thebeneficiaries of industrial exploitation authorization for quarry substances upto 1% of the quarterly turnover and 10% of the royalty Ad-valorem tax for thefirst 5 years from the date of first production.
~ the rate of 1% turnover is increased to 2.25% therein after.Geological Research, Capacity Building and Training Fund;Article 99 2023 Code
Is intended to finance training activities, capacity building and geologicalresearch. Also finances activities to control innovation in the mining sectorsuch as study trips.
+ is funded by holders of small & large mine operating permits being thebeneficiaries of industrial exploitation authorization for quarry substances upto .5% of quarterly turnover.

Leo isn't the only company operating in Mali that are having some form ofnegotiations with the government over concerns with the new mining codeand/or the Local Content Law, that will impact all miners.

Prior to the National Transitional Council’s adoption of the mining code,Canadian mining giants (Barrick, B2Gold) were in vital discussions with thegovernment trying to get certain provisions changed before it waspromulgated.

Barrick's CEO Bristow commented in an interview (Miningm X ) after the releaseof their 3rd quarter results;
~ recent discussions had shown the government its revenue targets were notentirely viable in responding to first comments from the government, they arelooking to “increase revenue”, by more than total revenue before costs.
“We have had this conversation and consequence of that is we walked backsome of the components of mining code,” he said.
One of them was theretroactive effects of the code. Until your current conventions expire you canoperate under the existing code,”
~ there were other unaddressed issues with the code, one being the pressureon certain taxes that are not protected in the code, "we are working on that,but at the end of the day it is an education."
~ “he told the junta that future mining projects might not fly if the code wasapplied in its current form”;
~ “it takes time for people to really comprehend that, because these are noteconomists or miners, but military people.
They are all colonels, you have totake time to understand the model.”

In an article from the Canadian Dimension, Bristow also revealed that he haspersonally engaged with the Malian government on the mining code, “we areoptimistic, that, as in the past, we will find a mutually acceptable way to keepgold shining for Mali.”

Barrick, Mali’s largest gold miner, “was reassured about its future after initialexchanges its teams had with Mazars (mining auditor)
Mining needs ongoing capital investment and Mali has always been a placewhere the country has respected its own laws. This is a change in law, but it isstill respecting the law of the past.

Also from the Canadian Dimension, Canadian miner, B2Gold CEO Johnson hassaid there are a lot of discussions going on which is very healthy, and we areconfident we can find common ground going forward.

According to Economy Minister Sanou and Mines Minister Keita, “theapproved code will generate an additional 500 billion CFA francs ($803m) peryear for the state and increase the mining sector’s contribution to theeconomy by up to 20% of gross domestic product, from the current 9%.

The following plans under the Local Content Law do not include the currentplans the Company has entered into either as part of the EstablishmentAgreement, the 2012 Mining Code and/or good will including but not limitedto;
~ Community Development
~ Environmental and Social Management
~ Closure and Rehabilitation
++ includes progressive rehabilitation plansArticle 160 (2023 code) also addresses this with provisions for an escrowaccount to cover rehabilitation cost. Annual deposits are required from thedate of first production with the balance of the account guarantees therehabilitation.Local Content Law – the nonnegotiable!
The contents of the local content law will have an impact on Leo Lithium short,medium and long term finances to what extent only the bean counters willknow!

The Local Content Law is applicable to all activities in the mining sector of Mali,including the established gold miners and artisan mining projects with theobjectives being;
~ increase local value added and job creation in the mining industries valuechain through the use of expertise and local goods and services;~ promote the development of a qualified and competitive workforce;
~ develop national capacities in the mining value chain through education,training, transfer of technology, know-how and research and development;~ promote the strengthening of national competitiveness of Maliancompanies;
~ establish a transparent and reliable monitoring-evaluation mechanism forobligations linked to local content in line with national policies;
~ strengthen the participation of populations in the mining industries valuechain

Obligations related to Local Content:Local Content Plan;
the mining operator establishes a local content plan whichdescribes the company’s activities as well as the goods, services and skillnecessary to carry them out.
The plan is updated every year and contains at least the following;
~ participation of locals in the Capital of foreign companies;
~ the promotion of Malian businesses, employment and training;
~ promotion and use of local goods and services;
~ transfer of technology and know – how;
~ capping the salary costs of foreigners;
~ report detailing the Company’s achievements and the description of theforecasts according to the aforementioned axes over the last twelve months.

Part of the Local Content plan, the mining operator submits for approval to theSPCL (Permanent Secretariat for Local Content) the recruitment and trainingprogram for Malians which includes;
~ details of the recruitment and training of Malians to replace foreigners;
~ the percentage of foreign personnel compared to the total number of Malianpersonnel in all categories within the operating company;

The ratio between foreign personnel and the total number of Malian personnelin all categories must follow the following time line;
~ during the first 3 years from the start of mining operations, the percentagemust not exceed 10%
~ after the third year from the start of mining, the percentage must not exceed5% and;
~ after the sixth year from the start of mining operations, the holder mustensure that the 5% is systematically reduced with the intention of achievingfull Malian participation.

The SPCL is required to set up a database to monitor the flow of foreignersworking in mines .
Each mining operator is required to register its expatriatestaff and update the database with;
~ the positions to be filled by foreigners and their descriptions;
~ the conditions of service, duration and type of contract
~ the employment contract of the expatriate in accordance of the Labor Code
~ the CV of foreigners;
~ level of compliance with the ratios specified
~ visa and work permit for nationals outside of ECOWAS or countries that donot have an agreement with Mali.

This one may be of interest for those suggesting the executives of Leo Lithiumshould all be on the ground in Mali?

The percentage of payroll of foreign personnel in relation to the overall payrollof the operating company cannot exceed the following rates;
~ during the first 3 years from the start of mining operations, the percentagemust not exceed 30%;
~ after the third year from the start of mining operations, the percentage mustnot exceed 20% and;
~ after the sixth year from the start of mining operations, the holder mustensure that the 20% is systematically reduced with the intention of achievingfull Malian participation.Insurance & Reinsurance;
To cover risks linked to mining activities, any company participating in saidactivities takes out insurance contracts with insurance companies approved inMali.However, insurance contracts whose coverage exceeds the financial capacitiesof insurance companies approved in Mali can take out a reinsurance contractwith foreign companies.
~ these provisions apply proportionately to reinsurance linked to these miningactivities.
~ the mining operator cannot take out offshore insurance without the writtenagreement of the National Insurance Commission.

The mining operator must, no later than 30 April of each year following thedate of first production, submit a report to SPCL on;
~ all companies through which insurance or reinsurance cover has beenobtained,
~ premiums paid for insurance cover;
~ commissions and broker identities under the provisions of article 75 (Book ofTax procedures)Goods and Services

The mining operator must submit for approval a procurement plan for thesupply of goods and services which includes;
~ local sourcing targets at least covering the items specified in the localsourcing list;
~ local supply prospects;
~ all other information required by the SPCL

The mining operator submits reports on the implementation of the supply planevery 6 months.
Services provided by local companies only include;
~ catering and management services for the mining site base;
~ transport services to and from mining sites, including personal transport;
~ security services;
~ topographic surveys;
~ earthworks and civil engineering;
~ construction work on mud dams;
~ drilling activities related to research:
~ the provision of thermal energy production services;
~ the provision of renewable energy production services;
~ services linked to environmental and social studies;
~ execution of rehabilitation and closure plans for mining sites;
~ supplies of ore transport servicesObligation to create a company under Malian Law;

Any foreign contractor who provides services on behalf of an operatingcompany is required to transfer at least 35% participation to Malian partners.
~ this is also covered under Article 126 2023 Mining Code.

Any foreign supplier not a national of Mali who provides one-off repetitiveservices on behalf of the operating company, is required to create a companyunder Malian law with at least 35% of participation for Malian associates.

Mining companies and their subcontractors may obtain an exemption oncontracts linked to specific services currently being performed which cannotexceed a period of 3 years.
In this case, the submit a reasoned request to thePermanent Secretariat for Local Content for approval.

Leo Limited signed a 5 year contract with Corica Mali, this will impact Corica?
Corica Mali is the subsidiary owned by Corica Mining Services, head quarteredin Cote d’Ivoire thus falls outside the definitions under,
Chapter 1 – Definitions – point 24:

Local CompanyCapital Drilling Mali SARL, I assume are still the drillers for Leo Lithium?
They also will be impacted by the Local Content Law?
Although, they have an office in Bamako, they are head quartered in London.Tenements:
The Goulamina JVCo acquired 2 mineral concessions, Mafele West & NkemeneWest, as there are long term plans for exploration it would indicate that thereis a research permit over the area.
As these were once applied for by BGS, but were “granted” to Kodal before the2019 mining code was promulgated, they would fall under the previous 2012Mining Code? Or will they come under the new 2023 Mining Code on transferof the Exploration Permit?
~ if it was the case, my concern would be under the new code, Article 40, thepermit area is reduced by 50% on application of the second renewal.
All conditions under the Local Content Law are applicable to the newly acquiredconcessions, again Capital Drilling will be impacted (if they are our drillers)

cheers

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Brilliant work as always, bit to digest!

LLL Price at posting: 50.5¢ Sentiment: None Disclosure: Held
1 Upvote

0 Great analysis

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