Leo Lithium exits Goulamina project, sells remaining stake to Ganfeng for $520m
Leo Lithium (ASX: LLL) has agreed to sell its remaining 40% stake in the Goulamina lithium project in Mali to joint venture partner GFL International (Ganfeng) for $520 million.
The sale was instigated in light of Leo’s financial capacity to fund the project’s remaining working capital requirements as well as challenging sovereign and in-country security risks and the expected economic impact of a new mining code in Mali.
The code, introduced in August, will increase state and private Malian interests in new projects and will allow the local government to take a 10% stake with an option to buy an additional 20% within the first two years of commercial production.
The government initiated a review of Mali’s mining code earlier this year after an internal audit showed it was not receiving a fair share of profits while granting too many tax breaks.
Consideration for sale
Leo sold 5% of its equity in Goulamina to Ganfeng in January for $98m.
The consideration for the latest sale will comprise a $15.9m non-refundable deposit to be paid within 10 days of the agreement date, a $244m payment on completion of the transaction and $259m payable by 30 June, 2025.
The total consideration equates to $0.43 per Leo share.
Ganfeng has agreed to solely fund all remaining capital until the project’s first revenue.
Offtake rights
Upon completion of the sale, Leo will forfeit its offtake rights under a previously agreed co-operation agreement with Ganfeng for Goulamina spodumene production.
Termination of the agreement will result in Ganfeng paying a 1.5% gross revenue fee over 20 years to Leo Lithium in exchange for offtake and other rights.
Outstanding issues
The Goulamina sale follows a deal signed between Leo, Ganfeng and the Mali government to resolve all outstanding issues for the project, including permits and approvals.
Leo managing director Simon Hay said it ends a long period of negotiations.
“Despite our best efforts to reach a viable agreement with the Mali government and considering the increasing risks associated with operating in Mali, the board has determined that a sale of our equity in Goulamina is in the best interests of shareholders,” he said.
“We believe the sales will provide shareholders with certain value under highly challenging circumstances.”
“Our relationship with Ganfeng remains strong, and we look forward to the next phase of our partnership.”
Goulamina remains on track to become West Africa’s first spodumene producer before the year’s end.