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Kodal Minerals turns its thoughts to the economics of production, following a maiden resource at Bougouni

Kodal Minerals is moving rapidly to work up the Bougouni project in Mali
Kodal Minerals turns its thoughts to the economics of production, following a maiden resource at Bougouni
INVESTMENT OVERVIEW: KOD The Big Picture
Lithium is one of the key materials in the developing green revolution in energy storage

What’s perhaps most impressive about the emergence of Kodal Minerals PLC (LON:KOD) as a serious force in the lithium exploration and development business is the speed with which it’s happened.

When chief executive Bernard Aylward joined the company in 2016, it was focused on gold in West Africa. But by the end of that year, it had acquired a new suite of lithium exploration assets at Bougouni in the south-west of Mali.

WATCH: Kodal Minerals sees $50mln free cash a year from Bougouni lithium project

Bougouni at that time, explains Aylward, amounted to 500 square kilometres of ground with known lithium pegmatite occurrences.

But once the acquisition had completed, Kodal moved swiftly.

“We rapidly began to build up a picture,” says Aylward.

“In December 2016 we did reconnaissance drilling and tested three prospects. The best results came from the Ngoualana vein where we hit a couple of intersections of over 2% lithium oxide (Li2O) and encountered broad, high-grade zones that were outcropping. That was the starting point for us to recognise that we had a good project.”

Fast forward eighteen months or so, and that “good” project is coming along leaps and bounds.

It now boasts a sizeable resource of 17.3mln tonnes of ore grading 1.2% lithium oxide, with exploration ongoing and realistic expectations of a considerable further boost. In fact, that resource comes not just from Ngoualana, but from two other prospects, Sogola-Baoule and Boumou. The greater part of the mineralised ore is at Sogola-Baoule, but the highest grades are at Ngoualana.

“So, the picture is now building,” says Aylward.

READ: Kodal Minerals delighted with first resource for Bougouni in Mali

Indeed, enough is now known about the overall Bougouni project for some realistic projections about future plans to be put in place.

“Our aim is to produce 130,000 tonnes per year of spodumene concentrate grading above 5.5% Li2O,” says Aylward.

“That puts us perfectly in the market for what our end users want.”

What’s more, it provides plenty of margin for Kodal investors too, given that the likely cost of producing concentrate will be around US$400 per tonne, as against a current selling price of between US$800 and US$900.

“It’s looking robust,” says Aylward.

Of course, there’s a little way to go between now and actual production, not least the projected US$60mln Aylward thinks it will cost to build the project. Still, as capital expenditure budgets go, that’s not exactly steep, and with Aylward’s connections and long experience in mining and capital markets, ought not to prove too much of a stretch.

Test work ahead

But before the big money comes in, plenty of further test work needs to be done, and the economic hypothesis outlined above needs to be firmed up into a formal study. The study itself is likely to be based on a larger resource, the data for which is being gathered in current drilling.

“Geologically it’s not overly complex,” says Aylward. “There’s an outcrop by the river, and we drilled that. And we’ve drilled undercover and managed to locate the vein too.”

Mineralisation thus far has proved to be pretty consistent across the suite of veins, and Aylward says he expects “no difference” in that consistency to be revealed by the latest drilling.

There will also be more speculative exploration drilling undertaken to identify new targets.

All of which will provide a good foundation for Kodal’s drive towards production.

“Our aim is to lodge a mining licence application in the first quarter of 2019,” says Aylward.

“We are looking to get into development as fast as we can. We should be looking at the way Tawana (ASX:TAW) went about its development in Western Australia. Their market capitalisation is just under A$200mln. It’s a clear indication of what can happen if we rapidly move through development.”

And it’s not as if Kodal has just plucked the hypothetical 130,000 tonnes per year from Bougouni out of the air. Rather, that figure was based on the modelling of pit shells which capture a sizeable amount of the resource already proved up at Bougouni. And engineering consultants have provided flow sheets based on metallurgical work already completed by Kodal.

So, with money in the bank from a major backer and future offtake partner in Singapore, who has significant links to the major lithium carbonate producers in the Shandong Province of China, it’s now all systems go at Kodal.

Expect plenty of newsflow over the next few months, and expect a bigger resource, the identification of new targets and further statements about the economic potential.

It’s a far cry from anonymity amongst the hordes of West African gold explorers. Instead, Kodal is on a path to production and is beginning to stand out from the crowd.

 

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