Leo Lithium Mali project

Leo Lithium ready to pounce on roaring EV market as it advances on Goulamina Project

This article is a sponsored feature from Mining.com.au partner Leo Lithium Holdings Ltd. It is not financial advice. Talk to a registered financial expert before making investment decisions.

It may seem implausible for a small African songbird (a Firefinch) to give birth to a roaring lion cub.

But when gold producer Firefinch (ASX:FFX) demerged its lithium assets in Mali and spun-out Leo Lithium (ASX:LLL) in a June initial public offering (IPO), it was perhaps no wonder the lion, often referred to as the king of the jungle, roared in size in comparison.

The Leo Lithium IPO followed an April 2022 Firefinch announcement of plans to demerge its interest in the Goulamina Lithium Project via an in-specie distribution of 80% of its shares in its wholly owned subsidiary, Leo Lithium, to Firefinch shareholders on a pro rata basis.

The catalyst for the demerger was to separate two assets – gold and lithium – into separate entities to realise the true value of both assets.

Leo Lithium Managing Director Simon Hay notes: “In the investment community gold investors and lithium investors often have quite different objectives. There certainly was the feeling that the lithium asset (Goulamina) wasn’t properly valued in Firefinch so the view was to split it out, enabling the investors to focus on their particular investment themes.”

When compared to many other recent demergers, the Leo Lithium spinout was unique.

In our case, we are one of the rare demergers where the child was bigger than the parent.”

“In our case, we are one of the rare demergers where the child was bigger than the parent”

As Hay reaffirms, the spin-out was borne from the fact that Firefinch had both the Morila Gold Mine and the Goulamina Lithium Project – both of which are situated in Mali. But now as separate listed entities, being located in Mali is where the similarities end.

“The nature of the projects is really quite different – Firefinch are reviving an old mature asset. It was already in production treating tailings, whereas Goulamina is a greenfields startup of a large scale spodumene mine and concentrator.

We are designing and building a new purpose-built mine from scratch.”

Leo Lithium's Mali project

Goulamina a world-class asset

The Goulamina Lithium Project located in southern Mali, some 150km south of the country’s capital of Bamako, is one of the largest undeveloped hard rock lithium deposits globally. It ranks in the top 10 undeveloped and developed lithium hard rock deposits, boasting more than 100m tonne resource, and a 52m tonne reserve.

Goulamina has a Mineral Resource of 109Mt at 1.45% Li2O (3.9Mt LCE) and Ore Reserve of 52Mt at 1.51% Li2O (1.9Mt LCE). Drilling is underway targeting increases to the current resources and reserves.

Hay notes: “They’re huge numbers in themselves.”

The 1.51% lithia grade in the reserve also places Goulamina as a top-ranking asset when compared to many of Leo’s peers which are reporting grades of 1.2% or 1.3%.

Hay adds: “So, we have a great advantage with that grade position.”

The pegmatite dykes in the Goulamina deposit are ‘very thick’ with Leo often returning drill results with pegmatite contacts of 40-60m of thickness.

In addition, Goulamina is a spodumene project. Spodumene is an important source of lithium, used in ceramics, greases, industrial uses and medicine, however the market Leo’s JV partner Ganfeng is focused on is lithium-ion batteries for EVs.

Also, spodumene currently provides more than 50% of the world’s lithium although it does require extra conversion. Spodumene concentrate typically contains about 6% lithia and that is then upgraded in chemical processing facilities to make lithium hydroxide and lithium carbonate. These lithium chemicals are processed into the cathode active materials before finding their way into lithium-ion batteries and then EVs.

a spodumene project like Goulamina is attractive from an investment proposition as they generally come online pretty quickly

Hay explains, a spodumene project like Goulamina is attractive from an investment proposition as they generally come online pretty quickly when compared to lithium brine projects.

If you look at what happened in Western Australia in 2016-17, and even 2018, a number of mines came into production pretty quickly.

Goulamina from start of construction until full production is a little over 2 years.

If you think about a brine deposit, typically in South America and some in China as well, to bring them online and reach full production is normally over 4-5 years.”

Accelerating towards the EV market

Leo Lithium completed an updated Definitive Feasibility Study (DFS) in December 2021 outlining that conventional open-pit mining methods will be used at Goulamina.

At present, not only is all development work progressing within schedule and budget, but Leo is intending to investigate accelerating the construction program.

With development underway, Leo has all approvals and key permits in place to bring the project into production, with the mine expected to come online in 2024.

With development underway, Leo has all approvals and key permits in place to bring the project into production, with the mine expected to come online in 2024

Hay explains that momentum continues to build on design, engineering, and procurement activities. Early site works are underway including an access road which is nearly complete; installation of the first set of modules for the accommodation camp almost finished; and in Perth, design works are tracking well with over 20% complete on the design.

Procurement of long-lead items such as the ball mill, jaw crusher, and cone crushers de-risked a significant part of the project procurement profile. The ball mill was the most critical item and was secured under budget and with an 8-week improvement on the baseline schedule, due to the assistance of its joint venture (JV) partner Ganfeng.

Leo has a number of tender packages that have gone out with vendors which it is now assessing, in the lead up to 2023 in which there will be “a lot of construction activity”. Leo will also mobilise the bulk earthworks contractor later this half.

“In the next 6-12 months we’ll start to see construction, we’ll start to see steel work coming out of the ground after the foundations are all done,” the managing director explained.

We certainly have intentions to accelerate the project – where possible. But to do that, first of all we need to complete the design and we need all the information back from our vendors, all the suppliers of steel piping, and specialist equipment, etc.”

Once Leo has received the expected timeframes from vendors then the company will be in a position to determine if it can expedite works.

This is particularly important considering Leo, like all mining companies, is operating in an environment where costs are ever increasing.

We’re obviously in a high inflationary environment. So, we’re being very cautious and monitoring all costs closely.”

Well-funded and partnered

However, the MD notes that Leo is well positioned. The DFS capital cost was re-estimated in late 2021 with a stage one cost of US$255 million, including a contingency component which is currently untouched. Leo is well capitalised having secured US$130 million in equity which it holds in its joint venture (JV) account with partner Ganfeng. The company also has a US$40 million debt facility from Ganfeng, which is ‘potentially expandable’.

Hay adds: “It’s good to know that we have that available in our funding options.”

Ganfeng is the world’s leading lithium eco-enterprise, which covers the supply chain through upstream lithium resource development, midstream lithium salt deep processing, and lithium metal smelt, all the way to downstream lithium battery manufacturing and battery recycling.

Hay said the importance and benefits of the partnership with Ganfeng cannot be understated. As a major supplier to automakers such as Tesla (NASDAQ:TSLA), BMW, and local EV companies in China, the Chinese company needs new lithium sources to power its growth plans.

“Goulamina is a key plank in Ganfeng’s growth plans”

Ganfeng is seeing huge growth in EVs coming but currently don’t have enough lithium raw materials in their portfolio to supply their growth plans – Goulamina is a key plank in Ganfeng’s growth plans.”

When we come into production in 2024, they will have a new converter built to take our spodumene and that will supply their customers in China and elsewhere.”

In terms of Leo’s own growth plans, Hay says the future looks bright.

Although in Mali two years ago there was a coup d’état, Leo is working closely with the current government and all relevant mining agencies, which Hay notes operate in a very professional manner.

Making a positive contribution

The MD adds: “There is a solid history of gold mining in Mali over at least two decades and that gives us confidence in developing the Goulamina mine, which will be Mali’s and West Africa’s first lithium spodumene mine.”

In 2024, when the Goulamina project is due to come into production, the military government currently in place has agreed to return to democracy, culminating in presidential elections in February that year.

On 6 June, the Mali government announced that the transitional period had been set for 24 months, effective from 26 March 2022.

As noted, the Goulamina Lithium Project located in southern Mali, is one of the largest undeveloped hard rock lithium deposits globally, so it has incredible importance to such a country.

Leo Lithium will create hundreds of jobs in a range of different sectors, will bring economic activity to the Goulamina region, as well as provide education opportunities to local communities.

Hay adds: “On the social sense we’re very happy as a team at Leo Lithium to be making a major contribution to a developing region.”

As timing goes, Leo Lithium will also be happy to pounce on the roaring lithium market in 2024, while the growth of the EV sector accelerates.

Write to Adam Orlando at Mining.com.au

Images: Leo Lithium Ltd
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Written By Adam Orlando
Mining.com.au Editor-in-Chief Adam Orlando has more than 20 years’ experience in the media having held senior roles at various publications, including as Asia-Pacific Sector Head (Mining) at global newswire Acuris (formerly Mergermarket). Orlando has worked in newsrooms around the world including Hong Kong, Singapore, London, and Sydney.