Another UK-listed miner has welcomed Chinese capital as companies turn abroad for cash hunting for raw materials to fuel the electric vehicle industry.
Kodal Minerals (KOD) will give Chinese firm Hainan Group a 51 per cent of its Bougouni mine in Mali in exchange for $100mn (£81mn). The company will also take a 15 per cent stake in Kodal, through a 100 per cent premium share subscription worth almost $18mn. The miner’s shares were up 36 per cent on the news.
Last year, Kodal announced its quick route to production to take advantage of high lithium prices. The company will use $65mn to build a processing plant at Bougouni, with the rest of the cash to go into working capital.
This comes after UK-listed firm Bacanora Lithium handed the majority stake in its mine to a Chinese company, before eventually being bought out.
Bacanora first failed to raise cash to build a mine and then accepted a project-level financing arrangement. It was after this deal, which handed Ganfeng Lithium the majority stake in the Sonora mine, that the Chinese company launched a takeover bid. This was backed by the board but faced a shareholder campaign against the buyout.
Hainan chair Liu Mingdong said the investment in Kodal and Kodal Mining UK Ltd was in line with Hainan Mining's strategy of improving the level of resource and feedstock security, and commencing the building of our lithium hydroxide supply chain.
However the deal is announced amid growing rifts between Western governments and Chinese money flowing into the mining sector. In Canada, where many mining hopefuls are listed, the government ordered Chinese companies to sell stakes in TSX-listed lithium mine developers, even when the asset itself is elsewhere.
Kodal boss Bernie Aylward said the deal would quickly prove a good one for its UK shareholders. "This is a great outcome for Kodal following a competitive and complex process to ensure we received appropriate recognition for the underlying value of this asset," he added.
Analyst John Meyer from Kodal's broker SP Angel said the deal highlighted the "desperation of lithium processors and their client gigafactories". "This is a great deal for Kodal and is also a great deal for Hainan which is locking in yet another supply source for China Inc.," he added.
