Kodal Minerals (LON: KOD) has done very well in getting the Bougouni lithium project to the stage that it has. There is a little hitch in this final leg of the financing process: “The extension will provide additional time for certain conditions precedent to be satisfied, including the transfer of the Bougouni Project to a new Mali mining company owned by Kodal's recently incorporated UK subsidiary, Kodal Mining UK Limited ("KMUK"). This restructuring is in progress although is not expected to complete by 30 April 2023, the original deadline, and accordingly, the parties have agreed to extend the completion deadline for the funding package to 31 May 2023.” Well, yes, OK, dealing with bureaucracy in Africa. We're shocked, eh?
Except this does increase the risk of there being a larger problem. For inherent in the way lithium mining works the Chinese processor of the concentrate to be produced (here, Hainan) does much of the financing of the actual mine. In return for a contract for the production at a price. And that's what might become the problem, that price.
Kodal Minerals share price from London Stock ExchangeBecause that lithium price continues to sink. And the longer the dealy in finally signing off on the contracts and financing then the more likely it is that Hainan will want to recast the contracts possibly with a different price for that concentrate. There is also - a very much long shot - possibility that the price really goes down and so securing further long term supplies becomes something much less interesting.
We agree, this is just speculation at this point. But it is a risk that delay exposes Kodal to. Given the price movement in lithium the longer all of this takes to get sorted then the greater the risk. We would take delay as indicating further weakness in KOD. Quite possibly to be followed by a jump in relief if the deal goes through as currently written. Delay beyond May 31 we'd definitely say was a worry.
