KOD Kodal Minerals Plc

Kodal Minerals Plc / Index: AIM / Epic: KOD / Sector: Mining

3 September 2024

Kodal Minerals plc ("Kodal Minerals", the "Company" or the "Group")

Annual Results & Notice of AGM  

Kodal Minerals, the mineral exploration and development company focused on lithium and gold assets in West Africa, is pleased to provide its final results for the year ended 31 March 2024.

The Company's Annual Report and Accounts will be made available on the Company's website www.kodalminerals.com shortly and will be posted to shareholders today. The Company's annual general meeting ("AGM") will be held at 11:00am on 26 September 2024 at Fieldfisher LLP, 9th Floor, Riverbank House, 2 Swan Lane, London EC4R 3TT.

Operational Highlights:

Bougouni Lithium Project, Mali ("Bougouni" or the Project")

·    Kodal finalised the US$117.75 million funding package to develop the Bougouni Lithium Project Stage 1 ("Bougouni" or "the Project") with our operating partner Hainan Mining Co. Limited ("Hainan"), a subsidiary of Fosun International Ltd ("Fosun")

·    Completed the transfer of the Project to Kodal Mining UK Limited ("KMUK"), , which is 51% owned by Hainan in return for US$100 million investment, with Kodal retaining a 49% stake

·    Additional US$17.75m investment into Kodal Minerals plc by Hainan to fund the exploration of new investment opportunities

·    Increased Bougouni's JORC compliant Mineral Resource Estimate ("MRE") by 40% to 31.9Mt at 1.06% Li₂O, following reverse circulation ("RC") drilling completed in the first half of 2023

·    Construction of Bougouni Stage 1 using a dense media separation ("DMS") approach now well underway, with the 2020 feasibility study capex estimate of US$65m confirmed following a full project review

§ Appointment of Bougouni mining contractor in early 2024 - a consortium consisting of Malian mining contractor EGTF Mining SARL ("EGTF") and Auxin Mining Services Mali SARL ("Auxin"); earthwork and civil engineering works commenced and completed post period end

§ Long lead items of DMS units and dual stream crushing modules ordered and delivery to Port of Abidjan in Côte d'Ivoire received post period

§ Construction of all access roads to Bougouni site completed

·    Appointed Lei ("David") Teng as Non-Executive Director to the Board as Hainan's representative

·    Received approval for the updated Environmental and Social Impact Assessment ("ESIA") for Bougouni Stage 1 DMS from Mali's Department of the Environment including Kodal's Community Development Plan

·    Implementation of several targeted ESG community initiatives including: funding a full-time school teacher at Kola Sokoura village; donation of tractors to support agriculture; road upgrades; and installation of solar capacity at community water well

·    Project on track to becoming the first London-listed lithium producer in West Africa with maiden production expected at the end of 2024. 

Gold portfolio

o  Strategic review of Group gold projects completed with the Fatou and Niéllé Gold Projects prioritised as core assets

o  Development of an exploration targeting assessment by Kodal's exploration geologists to finalise planning of exploration programmes at both projects

o  Company is well funded to undertake the required exploration at Fatou and Niéllé prospects and advance projects towards maiden minerals resource estimates. 

Financial & Corporate Highlights:

•           Group operating loss of £3,344,000 after impairments and share based payments (2023: £1,461,000 loss)

•           7.9% decrease in exploration and evaluation expenditure of £2,971,000 (2023: £3,227,000)

•           Sale of the Bougouni Lithium Project to KMUK reduced the carrying value of the lithium projects in Mali to £nil (2023: £11,216,000)

•           34.6% decrease in the value of gold projects in Mali and Cote d'Ivoire to £2,162,000 (2023: £3,306,000)

•           266% increase in Group net assets of £57,430,000 (2023: £15,683,000)

•           Cash balance of £16,327,000 as at 31 March 2024 (2023: £545,000).

Commenting on the results, CEO Bernard Aylward said:

"The past 12 months have been truly transformational for Kodal as the Bougouni Lithium Project has advanced in Mali and transitions from developer to producer, with Stage 1 first production firmly on track for Q4 2024, which would make Bougouni the first London-listed lithium producer. 

This will be no small achievement and is testament to the team's strong capital discipline maintaining capex within the US$65m estimate from the 2020 feasibility study, strong community relations in Mali thanks to KMUK's inclusive ESG programme and operational expertise onsite led by Operations Director Steve Zaninovich.

We are excited about the role Kodal lithium will play in the global EV revolution, providing feedstock to Hainan's lithium hydroxide plant in China, which, in turn, is supplying Asian markets including Japanese and Korean car battery makers.

Additionally, we would like to thank Hainan for the huge support since becoming our operating partners and largest shareholder in November, in particular the invaluable experience our new Non-Executive Director David Teng has brought to Kodal. Together, we will develop Bougouni into a truly prolific lithium project in West Africa.

We are advancing the development of Bougouni firmly on schedule with the delivery of DMS units and equipment at the Port of Abidjan expected this week. I look forward to updating shareholders on progress in the months ahead and would like to express our utmost gratitude for your unrelenting support as we embark on the next crucial stage of our lithium mining journey."

**ENDS**

For further information, please visit www.kodalminerals.com or contact the following:

CHAIRMAN'S STATEMENT

I am delighted to present the Annual Report of Kodal Minerals plc for the year ended 31 March 2024.

This financial year saw our Group deliver on its near-term strategy of developing the Bougouni Lithium Project into a significant producer of spodumene concentrate, a product critical for the lithium-ion battery industry.  The completion of the financing by our operating partner Hainan, a subsidiary of Fosun International, and the commencement of construction of Bougouni, are key stepping stones in our broader strategy of becoming a focused lithium explorer and developer participating in the rapidly expanding global electric vehicle and battery storage industries.

The relationship with Hainan, Fosun's industrial platform for mining and resources, is critical to the construction of Bougouni. This partnership was cemented through the completion of the milestone funding package in November 2023, providing US$100m for the construction, development and commencement of production at Bougouni, for a 51% stake in KMUK, which owns the Bougouni asset. This funding also provides capital for an extensive exploration programme across the Bougouni licence area. The transaction with Hainan gave rise to a non-cash revaluation gain in the Group of £30.5 million, recognised in the year to 31 March 2024. 

As discussed in more detail in the Operational Review, significant progress was made in the financial year, and has continued to be made over the last six months, in constructing the mine and building the operational teams in Mali.  We have also continued to work with and support the local community through a wide variety of local initiatives and look forward to continuing to build on this strong relationship.

The Hainan agreement also provided additional funding for continued exploration, and our ongoing drilling at the Boumou prospect continues to exceed our expectations.  The extension drilling has returned wide, high-grade intersections that have allowed the Company to announce a significant 40% increase to Bougouni's mineral resource, adding 10.6Mt to bring the overall JORC compliant Mineral Resource Estimate ("MRE") to 31.9Mt at 1.06% Li₂O following 3,230 metres of reverse circulation ("RC") drilling completed in the first half of 2023. 

The Board has undertaken a review of the Group's gold projects during the year and intends to focus ongoing attention on the Fatou and Niéllé gold projects, where we believe there is a reasonable prospect of advancing the projects towards mineral resource estimates. 

The direct investment of US$17.75m into Kodal Minerals plc by Hainan, becoming our largest single shareholder with a stake of 14.51%, has provided a platform for the Company to seek additional investment opportunities in the lithium sector. 

Kodal took the opportunity to further strengthen the Board with the appointment of Lei ("David") Teng, President and Vice Chairman of Hainan, as a Non-executive Director in March 2024. David is able to draw on over fifteen years' experience from his many roles in natural resources at the Fosun Group, from Investment Director to Co-Chairman, and is a welcome addition to our management team at a Board level as well as at project level in Mali. Dr Qingtao Zeng, retired from the board in September 2023 and I would like to thank him for his valuable contributions to the Group during his time as a director.

Kodal remains firmly committed to the highest standards of corporate governance and, as guided by the QCA Code, we are continuing to look to further improve and strengthen our team as the Company evolves from development into production.

Outlook

As Bougouni goes into production, expected by the end of 2024, the next twelve months will see KMUK take the final steps to become a fully-fledged lithium producer in West Africa. The transition from developer to producer is a significant evolution in the business and scale of operations at Bougouni, bringing with it many challenges as well as opportunities, and we remain focussed on supporting KMUK in its successful execution of this important milestone. We are confident that the successful development of the Bougouni lithium mine will be achieved and that the resource base will continue to grow in this highly prospective region which offers multiple opportunities for future expansion.

We have had enormous support from our shareholders over the years, and most recently from our operating partner, Hainan. We are grateful for the continued interest and support from our shareholders, and we look forward to providing regular updates for this exciting year ahead as Bougouni moves into production.

Robert Wooldridge

Non-executive Chairman

2 September 2024

OPERATIONAL REVIEW

The year ended 31 March 2024 was a significant year in our progress towards becoming West Africa's next lithium producer.

Despite the significant headwinds facing junior mining companies in most international capital markets in recent years, the closure of the US$117.5m financing is testament to the quality, long life and upside prospects of Bougouni and our broader strategy.  The project is now fully funded for development and construction is well underway.

During the year, the Bougouni Lithium Project was transferred to KMUK and Hainan took a 51% stake in KMUK for US$100m.  Kodal retains a 49% shareholding in KMUK and continues to hold significant influence over the KMUK business.  Although Kodal has a non-controlling 49% stake in KMUK, both your Chief Executive Officer and your Operations Director are on the board of KMUK and we are closely involved in the day-to-day decision making surrounding the construction and development at Bougouni.

As the Bougouni Lithium Project remains the most important asset for the Group, both in terms of management attention and impact on the financial position, the main focus of this Operational Review is on the project's progress and the strategy for completion of its development.

Following completion of the Hainan investment in November 2023, the team in Bougouni were able to progress the onsite activity and  construction of Stage 1 dense media separation ("DMS") processing plant at a more rapid rate, with first production planned by the end of 2024. In addition, we continued our exciting exploration and resource extension drilling that continued to highlight significant potential for expansion of the Bougouni resource. A summary of progress is provided below.

Development progress

Following a formal tender process in the first quarter of 2024, KMUK entered into contracts with the main contractors for the mine construction, all of whom have made significant progress since the year end:

·    The manufacture of the DMS processing plant and crushing circuit modules was commissioned during the year and has now been completed in China.  The items are currently being shipped to the port of Abidjan prior to transport to site.

·    Structural steelwork fabrication is complete for the main process plant buildings and is currently being transported to Bougouni, along with spare parts, consumables and essential supplies.

·    A consortium of mining contractors comprising Auxin Mining Services Mali SARL ("Auxin") and Enterprise Générale Traoré et Frères SARL ("EGTF") (the "Mining Contractors") was awarded the Mining Contract at Bougouni during the financial year under review and mobilised to site in April 2024. 

·    The Mining Contractors have now completed site clearing, topsoil removal and storage and have commenced the removal of overburden and waste at the Ngoualana open-pit site in order to expose the Ngoualana spodumene bearing ore in readiness for commissioning later in the year.

·    Since the year end, the contract for the site civil construction has been awarded to Bambara Resources SARL ("Bambara"), a local Malian company, working together with an established and experienced Malian-based company, GZB Mali ("GZB"), part of the China-based Gezhouba Group.

·    The preparation of foundations and concreting for the processing plant is continuing on schedule and is expected to be completed in advance of the arrival of the plant and crushing circuit for construction on site.

·    With the absence of reticulated power in the Bougouni region, a 5MW diesel power plant was procured from Jiangsu Fukangsi in China, comprising Cummins engines. The power solution will include in its design the installation of complementary solar power, however due to the short time frame for project construction the solar circuit will be deferred into the future; likely after 12 months of operation.

The development schedule and capital budget for the Stage 1 DMS operation has been reviewed in conjunction with the Hainan team, with costs updated to reflect the awarded contracts and the finalisation of design and construction of the plant items.  The confirmed capital expenditure estimate to build the Project remains at US$65 million, as per the 2020 feasibility study, a testament to the conservative nature of our approach, further emphasised by the ongoing inflationary environment within global supply chains.

Bougouni Development Activity

Registration of the KMUK's new subsidiary mining company in Mali, Le Mines de Lithium de Bougouni SA ("LMLB"), has been completed and LMLB will be the operator of the Bougouni lithium mine with the Government of Mali entitled to a 10% free carried interest and the right to purchase an additional 10% equity interest according to the 2019 Mining Code.  The transfer of the Bougouni mining licence from Future Minerals SARL to LMLB is still pending formal approval of the Direction Nationale de la Geologie et des Mines ("DNGM") in Mali, however the moratorium on dealing with mining concessions imposed by the Malian Government has prevented the transfer to date.  The Government announced on 9 July 2024 that the moratorium will be lifted and Kodal continues to liaise with the DNGM to secure completion of the transfers as soon as possible. 

DMS Plant and crushing circuit

The manufacture of the crushing circuit and the DMS processing equipment is complete with both suppliers delivering on schedule all equipment and associated spares.  The material is now in transit in two cargo shipments from China to the port of Abidjan in Côte d'Ivoire ahead of trucking to site.

The crushing modules were manufactured by Beijing HighDynamic Technology Co., Ltd. ("BHD"), and the DMS equipment manufactured by Haiwang Technology Group ("Haiwang") in Shandong Province, China.  These fabrication groups are specialists in the manufacture of mining plant and have completed several projects of similar size and nature to Bougouni.  The Haiwang group will send key construction specialists to site to supervise the final installation and remain for the commissioning of the plant to ensure full working order in accordance with contractual performance warranties.

Mining Contract

The mining contract has been awarded to the Mining Contractors.  EGTF, a fully owned Malian company, mobilised earthworks equipment to the site in April, and immediately commenced bush clearing, topsoil stripping, and bulk earthworks.

The process plant area earthworks are completed, and assistance has been provided to the civil concrete contractor to ensure the construction of foundations and footings for the plant area continues on schedule.

In May 2024, the Mining Contractors commenced the removal of weathered overburden and waste material from the Ngoualana open pit area that will be the source of the ore to be processed at the Bougouni DMS plant.

Civil Construction - Concrete Contract

Following a tender process to four companies with local region experience and based on the designs from Haiwang, the concrete contract was awarded under budget to a Malian company, Bambara Resources SARL ("Bambara"). Bambara is a Malian company established in 2017 to provide services to the mining industry in Mali. Kodal Minerals plc worked with Bambara previously to acquire the concessions at Mafélé Ouest and Nkeméné Ouest that formed the "Bougouni West" project, further details of which were announced on 30 January 2019. 

Bambara is engaged as the head contractor and will utilise under sub-contract the services of GZB, an established and experienced Malian-based company with a China parent.  GZB boasts 13 years construction experience in Mali, which includes the development of several prominent roads and bridges, and most notably the supply of concrete to the third bridge over the Niger River in Bamako.

Bambara will provide all local labour and services and manage GZB, which will provide much of the equipment, engineering technicians and on-site supervision. The Project team believes this contracting arrangement will be crucial to correctly interpreting the designs and drawings during construction, since they are developed in Chinese, as part of the Haiwang package.

Offtake Agreement

In March 2024, we reached an agreement to terminate the right of first refusal granted to Suay Chin over 80% of the spodumene product produced at the Bougouni Lithium Project.  Kodal and KMUK are continuing negotiations with Hainan to finalise an offtake agreement with Hainan for 100% of the spodumene product produced at the Bougouni Lithium Project.  It has been agreed between Kodal and Hainan that any offtake agreement reached between KMUK and Hainan will be based on market prices for spodumene and will require express written approval from Kodal as a shareholder of KMUK. The offtake agreement with Hainan will initially relate to spodumene production from only the Stage 1 DMS processing plant.

Exploration update

On the 14 November 2023, Kodal announced a significant 40% increase to Bougouni's mineral resource, adding 10.6Mt to bring the overall JORC compliant (refer notes below) MRE to 31.9Mt at 1.06% Li₂O following 3,230 metres of reverse circulation ("RC") drilling completed in the first half of 2023. 

The updated JORC compliant Mineral Resource estimate for the Bougouni Lithium Project, including the Sogola-Baoulé, Ngoualana and Boumou prospects is tabulated below:

Notes: 

These mineral resources are reported in accordance with the Australasian Joint Ore Reserves Committee Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves 2012 (the "JORC Code" or "the Code").  The Code sets out minimum standards, recommendations and guidelines for Public Reporting in Australasia of Exploration Results, Mineral Resources and Ore Reserves.

Sogola-Baoulé resource estimate unchanged from 2019.  A 0.5% Li₂O lower cut-off applied, and resource wireframe defined by a 0.3% Li₂O selected boundary.  Estimate completed utilising Surpac software.

Ngoualana resource estimate reported utilising a 0.5% Li₂O lower cut-off.  All pegmatite mineralisation modelled including zones of waste material for a fully diluted model. Estimate completed using Leapfrog modelling software.

Boumou resource reported using a 0.75% Li₂O lower cut-off. All pegmatite mineralisation modelled including zones of waste material for a fully diluted model. Estimate completed using Leapfrog modelling software.

Figures in table may not sum due to rounding.  The contained metal is determined by the estimate tonnage and grade.

The Boumou prospect, located centrally within the Bougouni granted mining licence area, was a key driver in this increase with the drilling completed in 2023 highlighting wide, high grade pegmatite veins that remained open along strike and at depth.  Following the success of the 2023 campaign and the expansion of the MRE for the Boumou prospect to 13.1Mt at 1.04% Li₂O, the exploration drilling continued in early 2024 with a focus on the continued extension and definition to prepare for an updated mineral resource estimate and future planning of the Project development strategy.

The 2024 drilling campaign has continued to return strongly mineralised pegmatite intersections up to 66m at 1.26% Li₂O from 72m in drill hole KLRC211 and has added significantly to the strike length of the prospect.  Diamond core drilling is ongoing to provide detailed geological information to support the interpretation of the mineralised zones.  The initial geological logging and comparison of the diamond drill core and the logging of the RC drill holes has confirmed the continuity of the pegmatite veins and highlighted the coarse nature of the spodumene mineralisation.

Bougouni Environmental Sustainability and Community Relations

We have achieved two key milestones during the year that are of critical importance to the Project, the Company and our stakeholders; an updated Environmental, Social Impact Assessment (ESIA) and the establishment of our Community Development Programme.

Strong relations with the Malian government are key to our success at Bougouni and in early 2024, KMUK received approval for the updated ESIA for Bougouni Project Phase 1 DMS processing from Mali's Department of the Environment. Professor Tiémoko Sangaré, Minister for Environment, was welcomed to the Project site in early February 2024 and our team presented the Minister with the features and plans for the Phase 1 DMS operation, with a specific focus on the environment and our programme for future community development.

The approval of the ESIA alongside Kodal's Community Development Plan marks the completion of all outstanding permitting. Our positive engagement with the local community in Bougouni is crucial to the ongoing success of the Project, and I am delighted with our team's continued work over the past twelve months. KMUK's financing of current social initiatives has been informed by our community consultations and includes the funding of a full-time school teacher at Kola Sokoura, the village closest to Bougouni, and the donation of several tractors to local communities to support sustainable agriculture. In addition, KMUK has addressed key local infrastructure requirements with the replacement of a broken water pump in the community, upgrades to existing access roads and the installation of additional solar capacity at the local water well at Ngoualana village.

We remain committed to open dialogue and ongoing engagement with community leaders to ensure we maintain our active partnership, and to supporting the communities directly and indirectly as a part of our Community Development Programme.

Kodal Minerals 100% Controlled Assets

Kodal retains a portfolio of gold focussed exploration assets in Mali and Côte d'Ivoire. Kodal's management has continued to review the projects with a particular focus on the legal ownership, the age of concessions and prospectivity and ensures that all government compliance, reporting and fees are kept up to date and that future expenditure on the projects is in line with the Company targets and expectations.

Exploration Concession Review

The Company's gold projects have been reviewed, and the table below contains the assets on which the Company will focus future exploration activity in Mali and Côte d'Ivoire.

Table of Concessions - Kodal Gold Concessions in West Africa:

The Board has undertaken a review of the Group's gold projects during the year, which has resulted in certain of the Group's gold projects being removed from the concession table. 

The Dabakala and Tiebissou projects in Côte d'Ivoire have been removed from the concession table due to significant delays in receiving approval for the renewal of concession in the case of the Korhogo project, and for the Dabakala project the ongoing review of the potential forestry permit and discussions with the DGMG of Côte d'Ivoire have lowered confidence with these licences.

In Mali, the Djelibani Sud, Nangalasso, Sotian and Tiedougoubougou concessions have been removed from the table following the Company's review of the age, prospectivity and low potential for exploration expenditure relative to the focus on the Fatou project.  The Company has negotiated a sale of the Djelibani Sud, Nangalasso, Sotian and Tiedougoubougou concessions to the original vendors of the concessions which is being documented and these concessions are therefore included within assets held for resale at the year end.

As a result of the review of gold projects outlined above, an impairment charge of £1,572,000 (2023:  £nil) has been recognised in the year.

Gold Exploration Strategy

Following the completion of the Hainan financing transaction, Kodal is well funded to undertake the necessary exploration at the Fatou and Niéllé prospects to advance these projects towards maiden minerals resource estimates.  Kodal's exploration geologists have visited both the Fatou and Niéllé sites during the year and developed an exploration targeting assessment to finalise planning of the exploration programmes.

In northern Côte d'Ivoire, the Niéllé project remains a high priority for infill and definition drilling along the 4.5km gold anomalous trend for which previous drilling has returned significant gold intersections including 26m @ 1.95 g/t Au from 32m, and 26m @1.79 g/t Au from 108m.  The geological review of this project highlights the potential for resource definition drilling supported by additional geophysics and surface geochemistry to further extend the prospective gold anomalous corridor.

In southern Mali, the Fatou project is a further priority for gold exploration and geological field visits have confirmed the surface geochemical anomalies, the presence of substantial artisanal mining sites and limited effective historic drilling.  Previous exploration at the Fatou project completed between 2009 and 2014 targeted limited areas of artisanal workings and concluded an historical resource estimate of approximately 350 koz Au.  Kodal geologists have outlined additional extensions to the historic exploration drilling as well as identifying new priority areas.  The Group has completed one exploration drilling programme that returned drill intercepts of 23m @ 1.63 g/t Au from 82m, and 6m @ 1.49 g/t Au from 40m. 

Kodal retains a primary focus on the continued exploration and development of the Bougouni Project, however as development is proceeding the Company is now able to focus more attention on the priority projects of Fatou and Niéllé and expects to undertake exploration programmes over the next 12 months to include detailed geological review, geochemical sampling, geophysical surveys, and drilling campaigns.

Outlook

In summary, the year to 31 March 2024 saw a rapid acceleration of our transition from explorer to developer, whilst the next financial period will see us emerge as a leading West African producer of high quality spodumene concentrates, when Bougouni starts production as currently expected by the end of 2024.

I look forward to reporting on construction progress at Bougouni and on our exploration activities in the months ahead as we edge closer to becoming the first ever London-listed Lithium producer in West Africa.

Finally, I would like to recognise the important contributions of all our stakeholders and partners this year and thank them for their support. Along with them, I look forward to our continued progress and success.

Bernard Aylward

Chief Executive Officer

2 September 2024

FINANCE REVIEW

Results of operations

For the year ended 31 March 2024, the Group reported an operating loss of £3,344,000, including share-based payment costs of £242,000 (2023: £517,000) and impairment of exploration and evaluation assets of £1,572,000 (2023:  £nil), compared to a loss of £1,461,000 in the previous year.  The Group has continued to run the offices in Mali and Côte d'Ivoire and significant additional exploration activity for both gold and lithium was undertaken during the year, although lithium expenditure by the Group ceased in November 2023 following the sale of the Bougouni Lithium Project to KMUK.  Further information is provided in the Operational Review above.

During the year, the Group invested £2,971,000 (2023: £3,227,000) in exploration and evaluation expenditure on its various projects. The sale of the Bougouni Lithium Project reduced the carrying value of exploration and evaluation expenditure by £13,488,000.  Following a strategic review, an impairment charge of £1,572,000 was made against the Group's remaining gold assets. As a result, the carrying value of the Group's capitalised exploration and evaluation expenditure decreased from £14,522,000 to £2,162,000 after taking account of the effects of foreign exchange.  At 31 March 2024, after taking account of the effects of foreign exchange, the carrying value of the gold projects in Mali and Côte d'Ivoire was £2,162,000 (2023: £3,306,000) and of the lithium projects in Mali was £nil (2023: £11,216,000). 

On 15 November 2023 the Group transferred ownership of the Bougouni Lithium Project into KMUK.  The company completed a funding package with Hainan in November 2023, that provided US$100m for the construction, development and commencement of production at Bougouni, for a 51% stake in KMUK.

Kodal continues to hold significant influence over KMUK and is able to participate in the financial and operating decisions of KMUK through its two appointed board members.  As a result, KMUK is recognised as an associate by Kodal for the year ended 31 March 2024.  The investment in KMUK is valued at Kodal's share of the net assets of KMUK and Kodal's share of the profit or loss of KMUK is shown in the consolidated statement of comprehensive income. Kodal's share of the net assets of KMUK as at 31 March 2024 was £31.3 million and of KMUK's loss for the period was £84,000.

As a results of the transaction with Hainan, Kodal has undertaken a revaluation of its remaining 49% stake in KMUK, which has given rise to a gain on sale of a subsidiary undertaking of £30.5 million, recognised in the year to 31 March 2024.  Hainan also made a direct equity investment of US$17.75m into Kodal Minerals PLC.

Cash balances as at 31 March 2024 were £16,327,000, an increase of £15,782,000 on the previous year's level of £545,000.  Net assets of the Group at the year-end were £57,430,000 (2023: £14,883,000).

Financing

In November 2023, the Company completed a funding transaction with the Hainan group regarding the Bougouni Lithium Project in Mali.  Alongside funding for the Project, the transaction also included a US$17.75 million equity subscription by the Hainan group into Kodal.

In addition, the Company has raised £700,000 during the year from the exercise of share options, warrants and performance share rights in May 2023 and November 2023.

Going concern and funding

The Group is still in the exploration and development phase of its business and the operations of the Group are currently being financed by funds which the Company has raised from the issue of new ordinary shares.

The Directors have prepared cash flow forecasts for the period ending 31 March 2026.  The forecasts include additional exploration expenditure for the Group's gold assets, as well as covering ongoing overheads and include a contingency for cash calls on the Bougouni Lithium Project during its development phase.  The forecasts show that the Group has sufficient cash resources available to allow it to continue as a going concern and meet its liabilities as they fall due for a period of at least twelve months from the date of approval of these financial statements without the need for a further financing.  As at 27 August 2024, the Group has cash at bank amounting to £18,477,000. Accordingly, the financial statements have been prepared on a going concern basis.

Utilising key performance indicators ("KPIs")

The following KPIs are used by the Group to assist it in monitoring its cash position and assessing costs and exploration and development activities:

The directors have provided more information on the state of the Group's financing and operational activity above.

a.   'Cash and cash equivalents' is used to measure the Group's financial liquidity.  Cash and cash equivalents have increased by £15,782,000 in the year following the equity investment by the Hainan group. 

b.   'Administrative expenses' monitored as a KPI above excludes one-off legal fees relating to the Hainan funding transaction, 'Administrative expenses' is used to measure the Group's administrative costs and operating results.  Administrative expenses for the year were £1.39 million, an increase of £0.4 million compared to the previous year.   Group corporate activity increased this year as negotiations were concluded regarding the future of the Bougouni Lithium Project, following which the Remuneration Committee approved increases to Directors' remuneration.  The Group has also continued to run the offices in Mali and Côte d'Ivoire.

c.   'Exploration and evaluation expenditure' is used to measure expenditure on the Group's gold and lithium projects.  Exploration and evaluation expenditure in the year was £0.3 million lower than prior year.  Investment in the Bougouni Lithium Project continued until November 2023 when the project was sold to KMUK.  Expenditure after that date focussed on the Group's gold assets which has continued at a lower level.

As the Bougouni Lithium Project enters the development and production phase, additional KPIs are being developed and used by the Board to assist in tracking KMUK's operational progress, including monitoring performance against the production timetable and forecast construction spend and the level of lithium reserves.

Financial risk management objectives and policies

The Group's principal financial instruments comprise cash and trade and other payables.  It is, and has been throughout the year under review, the Group's policy that no trading in financial instruments shall be undertaken. The main risks arising from the Group's financial instruments are liquidity risk, price risk and foreign exchange risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below.

Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash reserves to fund the Group's exploration and operating activities. Management prepares and monitors forecasts of the Group's cash flows and cash balances monthly and ensures that the Group maintains sufficient liquid funds to meet its expected future liabilities. The Group intends to raise funds in discrete tranches to provide sufficient cash resources to manage the activities through to revenue generation.

Price risk

The Group is exposed to fluctuating prices of commodities, including gold and lithium, and the existence and quality of these commodities within the licence and project areas. The Directors will continue to review the prices of relevant commodities as development of the projects continues and will consider how this risk can be mitigated closer to the commencement of mining.

Foreign exchange risk

The Group operates in a number of overseas jurisdictions and carries out transactions in a number of currencies including Sterling, CFA Franc, US dollars and Australian dollars. The Group does not have a policy of using hedging instruments but will continue to keep this under review.  The Group operates foreign currency bank accounts to help mitigate the foreign currency risk.

Principal risks and uncertainties

The Group is exposed to a number of risks which it seeks to mitigate as set out in the table below:

S172 Statement

The Directors of the Company have a duty to promote the success of the Company. A director of the Company must act in the way they consider, in good faith, to promote the success of the Company for the benefit of its members, and in doing so have regard (amongst other matters) to:

•           the likely consequences of any decision in the long term;

•           the interests of the Company's employees;

•           the need to foster the Company's business relationships with suppliers, customers and others;

•           the impact of the Company's operations on the community and the environment;

•           the desirability of the Company to maintain a reputation for high standards of business conduct; and

•           the need to act fairly between members of the Company.

The Directors are committed to developing and maintaining a governance framework that is appropriate to the business and supports effective decision making coupled with robust oversight of risks and internal controls.

The Board believes that long-term success requires good relations with a range of different stakeholder groups both internal and external.  The board has identified Kodal's stakeholders to include employees and consultants working for the Company, the local communities and governments in Mali and Côte d'Ivoire in which it operates, suppliers and contractors, as well as shareholders.  With the Bougouni Lithium Project now fully funded in KMUK and in construction, the relationships with our capital equipment suppliers, local contractors and workforce and our operating partner Hainan are of particular importance.

In the Corporate Governance Report, we explain the regular engagement with employees, communities and local governments in West Africa where we operate; and the impact assessment we have performed on the environment and local society as part of our permitting process. We also comment on the decision-making for the long-term success of the Company, its governance and culture; as well as the nature and methods of communication with all shareholders.  

The Group relies heavily on having suppliers and contractors with appropriate levels of experience and expertise of working successfully with junior miners in West Africa, as well as professional advice for AIM quoted companies in London. Accordingly, Kodal is committed to maintaining constructive relationships with all its suppliers and advisers and operating in line with its Corporate Code of Conduct.

Signed on behalf of the Board

Bernard Aylward

Chief Executive Officer

2 September 2024

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 MARCH 2024

The profit / (loss) for the current and prior years and the total comprehensive income for the current and the prior years are wholly attributable to owners of the parent company.