Following an announcement by Hainan Mining related to the memorandum of understanding (MoU) between the Mali government, Hainan and Aim-listed Kodal Minerals’ jointly owned subsidiary Kodal Minerals UK (KMUK), Kodal has expressed concern that it was not consulted by Hainan, and its position is not consistent with correspondence between the parties.

Hainan stated in its announcement on November 5 that a $15-million payment due to the Mali government by KMUK and Future Minerals was in respect of taxes due to the government.

Hainan also noted that, pursuant to the KMUK financing agreements entered into between the parties on January 19, 2023, taxes arising from the $117-million Hainan funding transaction for the Bougouni lithium project shall be borne by Kodal and that KMUK is reserving its rights in respect of any claim against Kodal in relation to the $15-million payment. 

Kodal says it was not consulted by Hainan on its announcement released on November 5 and that the position stated by Hainan is not consistent with the discussions and correspondence between the parties and the Mali government in connection with the finalisation of the MoU.

Kodal's understanding of the position reached with Hainan is that all parties acknowledged that the $15-million payment would be borne by KMUK.

AGREEMENT BACKGROUND

KMUK is 51%-owned by Hainan and 49% by Kodal, with the Mali government having entered into the MoU on November 1 to finalise the transfer of the Bougouni lithium project mining licence from Future Minerals to the Mali-registered company Les Mines de Lithium de Bougouni (LMLB).

Mining Weekly previously reported that the Bougouni lithium project, located in southern Mali, is funded through a $117.5-million investment from Hainan, made in November 2023. This funding comprises a $100-million investment into KMUK, which is responsible for developing the project as the parent company of Future Minerals and LMLB.

The MoU confirms that the mining licence will be governed by the 2023 Mining Code of Mali. Key terms include the allocation of a 35% equity interest in LMLB to the Mali State and national investors, with the remaining 65% held by KMUK.

The licence, initially valid for ten years, will be eligible for renewal as per the mining code in effect at the time of renewal.

The agreement extends customs and duties exemptions during the construction phase and guarantees the issuance of all necessary permits, including export permits for spodumene.

The MoU also stipulates a $15-million payment from KMUK to the Mali State, payable in two instalments: the first $7.5-million following the MoU signing, and the final amount before March 31, 2025.

Upon completion, the licence will be fully compliant with Mali’s legal requirements.

"The MoU with the State for the transfer of the Bougouni mining licence is the final legal step required as we rapidly progress the construction of the project, with production on track for the first quarter of 2025," Kodal CEO Bernard Aylward said on November 1.

He added that the transfer to LMLB confirms the project’s standing and secures ongoing support from the Malian State.

"The strong partnership built between Kodal and the State has allowed discussions to be accelerated, culminating with this landmark MoU," Aylward said.

In 2022, Mali’s government initiated an audit of the mining sector, which included reviews of current mining conventions. Following this, the 2023 Mining Code was issued in August 2023, and a commission was formed with government advisers and representatives to negotiate certain elements of the code. The code’s Implementation Decree, which clarified economic aspects, was finalised in July.

KMUK has completed discussions with the commission to finalise the Bougouni mining licence transfer and confirm the terms of the Hainan transaction that supports the project’s development.

The MoU establishes migration to the 2023 Mining Code and includes provisions for customs and tax exemptions for the project’s construction phase. Customs exemptions include temporary admission of vehicles and machinery needed for construction, import duty exemptions on essential tools, oils and greases for machines, petroleum products, spare parts, and equipment permanently incorporated into the project.

Under the MoU, Mali’s government and national investors will obtain a 35% equity stake in LMLB through new shares issued according to the 2023 Mining Code. This interest includes a 10% free participation right initially held by the State, with the additional 25% equity acquired at an estimated cost of $4.3-million.

The MoU stipulates that the State and national investors’ shares cannot be diluted below 35% in any future capital increases in LMLB. KMUK retains the right to recover all capital investment and intercompany loans as a priority.

Further terms include the establishment of a shareholder agreement, which will ensure the LMLB board includes at least four State-appointed directors, including two independent directors.

The MoU also formalises approval of all agreements linked to the Hainan transaction and confirms the associated $15-million payment by KMUK to the State, with specified deadlines for each instalment.