What’s next for Leo Lithium (ASX:LLL)? Will it find another appealing project before its too late

After several years of developing the Goulamina project in Mali to a project worth almost US$3bn, Leo Lithium (ASX:LLL) was forced to part ways with it because the regime in Mali made it impossible to continue. The company currently sits in suspension and will remain so unless or until it can find a new project. But it is assuring investors it will find one, and that its time developing Goulamina was not entirely a lost cause.

Leo Lithium (ASX:LLL) forced out of Mali

Leo Lithium sold the (by then) minority stake it had in Goulamina to its Chinese JV partner Gangfeng for US$342.7m, and it negotiated a further US$60m settlement with the government. How did it get to this?

The military regime currently in charge of Mali had its eyes on the project, forming a commission to examine matters on the project. This committee halted Leo Lithium’s plans to ship its first unprocessed ore in 2024. The government announced a review of the code in early 2024 and this new code enables the government to take a stake of 10% in the project, an option to buy an additional 20% within the first two years of commercial production and a further 5% could be ceded to locals. It also abolished certain tax exemptions.

A sad outcome for all stakeholers involved. Goulamina had a Mineral Resource of 108Mt at 1.45% lithium and an Ore Reserve at 52Mt at 1.51% lithium. The DFS found an NPV of US$2.94bn and a post-tax IRR of 83%! Leo held a 45% stake in the project (a further 45% belonging to JV partner Ganfeng and the balance belonging to the government), which meant its stake was notionally worth A$1.7bn. The project was completed on-time, US$7m under budget and no ‘lost time’ injuries.

Not all a lost cause

While Goulamina itself is a lost cause, the company doesn’t think the experience was a waste of time. Its management released a presentation to the ASX outlining its future plans. It reminded investors that it was a feat to bring Goulamina to the point where it was at. The company has received half the money from Gangfeng and anticipates receiving the balance in due course, plus interest and a royalty of 1.5% gross revenue from Goulamina.

The company is in suspension until it finds a new project. ASX Listing Rules mandate a company’s operations must be adequate to warrant listing, and they are not right now. But Leo has not just said ‘the company is exploring its opportunities’ – it has outlined to investors the criteria it was looking for when it found a project. It was looking for the following:

• A lithium project
• A project pre-FID (Final Investment Decision Stage)
• A situation where Leo could be operator and/or majority owner, applying its expertise
• In WA, the US, Canada, South America’s lithium triangle or Europe (basically anywhere abundant with lithium but China or Africa).

Leo Lithium is aiming for a deal in Q3 of 2025 at the latest to avoid the automatic delisting that occurs when companies have been suspended for 2 years. If it got to that point, it wouldn’t be the end of the world because there’d be plenty of cash available for shareholders with minimal costs right now. It has $60m in cash right now.

Obviously any asset acquisition would need shareholder approval, which is likely why Leo is giving investors a heads up. And the market for lithium isn’t the best right now. Investors were told that the board has conducted due diligence on over 80 projects and some targets received them well – liking Leo’s delivery record, cash position and management experience. The company remains led by Simon Hay who used to be CEO of Galaxy Resources (ASX:GXY) which undertook a $5bn merger with Orocobre (later renamed Alkem and merged with Livent to become Arcadium Lithium).

Conclusion

We admire Leo Lithium for its efforts and honesty with shareholders in admitting it could not persist with Mali anymore. There are too many companies in jurisdictions that have stayed there just to ‘save face’. It is difficult for Leo shareholders being unable to buy and sell stock right now and facing the possibility the company may delist and they might not get much back for the money they invested in – if any. And all this is before you consider the state of the lithium market.

But if Leo Lithium can find the right asset, you just know this company will be up to the task of realising its potential.

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