Leo Lithium (ASX: LLL) (OTCPK: LLLAF) shares are down 50% on their return from suspension. LLL shares are down on the announcement that there’s some problem with the Mali government. Specifically, about the direct shipping ore that Leo intends to send out as the first stage in the development of the mine. This is to be done while the concentration plant is built and then the shipping of lithium concentrate can start. Concentrate being a higher value product as the value of that concentration has been added in country.
The announcement: “The Ministry of Mines directed Lithium du Mali SA (LMSA - a Malian company that holds the Project) to suspend the DSO component of activities at the Project whilst discussions with the Ministry are pending. Despite previously receiving broad support for the export of DSO, LMSA immediately stopped crushing ore for DSO export.
The directive received does not delay any aspect of the Project. Mining continues as per the preexisting plan and mined ore is being stockpiled ahead of first spodumene concentrate production in Q2, 2024, which remains on schedule.”
One way to look at this is that Mali - the government that is - wants value to be added within the Malian economy. Therefore it doesn’t want raw ore shipped, it wants it to be upgraded to concentrate. We agree that it’s possible to make that case. We don’t agree with it, don’t think it’s a strong case in the slightest, but we do agree that the argument can be put forward.
Leo Lithium share price from Google Finance
However, we tend to another and entirely different explanation. DSO is an excuse. West Africa is not known as the home of open, fiscally reticent, government. In fact, as Kodal Minerals has been finding out, there can be considerable problems in Mali in getting the most innocuous pieces of paperwork carried out. In fact, as we’ve said about Kodal Minerals, we think there’s not enough bribery going on. There simply are parts of the world where the governmental system will attempt to squeeze bribes out of economic activity. Changing the name on a licence (as with Kodal) or quibbling about the terms of DSO as opposed to concentrate, these are opportunities to put the squeeze on.
We agree this is us being terribly cynical. Or, perhaps, realistic. We have done mining in such jurisdictions (no, not Mali itself) and have seen how the system works. Somewhere within the government and or bureaucracy there’s someone with their hand out. It is, these days, illegal to pay them. Which becomes something of a problem because usually the problems don’t go away until someone is. It’s difficult, therefore, to gain a resolution of such problems.
Further, if this one is solved then in something as complex as lithium mining there’s always another opportunity to do the same.