Exclusive Bougouni Lithium Project Offtake Agreement Secures 4-Year Sales

What is the Bougouni Lithium Project Offtake Agreement?

The Bougouni Lithium Project in Southern Mali has reached a significant milestone with the signing of a comprehensive offtake agreement between Les Mines de Lithium de Bougouni (LMLB) and Hainan Mining Co. Ltd. This strategic partnership establishes Hainan as the exclusive purchaser of all spodumene concentrate produced by the project's dense media separation (DMS) processing plant.

The agreement represents a cornerstone achievement for the project, providing market security during the crucial initial production phase while establishing a clear commercial framework for the high-quality lithium concentrate being produced at the site.

Key Terms of the Offtake Agreement

The agreement includes several provisions that create a stable operational foundation for the Bougouni project:

• Four-year exclusivity: Hainan Mining will be the sole purchaser of concentrate for an initial 48-month period
• Market-linked pricing: Compensation tied directly to SMM (Shanghai Metals Market) published lithium prices, ensuring fair market value
• Grade-based adjustments: Pricing formula includes standard quality premiums for concentrates exceeding baseline specifications
• Favorable payment structure: 95% of shipment value paid upon loading at the export port, minimizing working capital requirements
• Complete production coverage: Agreement encompasses 100% of spodumene concentrate from the DMS plant

"The offtake agreement sets the price received by LMLB to the SMM published market price with standard adjustments for grade variation, providing market-based pricing for our product while maintaining the opportunity to benefit from any future price increases," noted Bernard Aylward, CEO of Kodal Minerals.

The agreement includes an annual review mechanism for quantities and floor pricing, allowing adjustments that reflect changing market dynamics while maintaining the security of the core partnership structure.

How Does the Bougouni Project's Production Capacity Compare to Industry Standards?

The Bougouni Lithium Project represents a significant lithium operation in Africa's growing critical minerals sector. Its production capabilities position it as a meaningful contributor to global lithium supply, particularly within the expanding electric vehicle battery supply chain.

Current Production Capabilities

The project's production metrics demonstrate substantial capacity:

• Processing throughput: 1.4 million tonnes per year beneficiation production line
• Concentrate production: Expected annual output of 100,000-120,000 tonnes of lithium concentrate
• Quality specifications: Minimum lithium oxide (Li₂O) content of 5.5%
• Current inventory: Over 40,000 tonnes of spodumene concentrate already produced on-site and ready for export

When compared to other emerging lithium projects globally, Bougouni's production scale places it in the mid-tier category – smaller than mega-projects like Australia's Greenbushes but substantial enough to be commercially significant to battery material supply chains.

Technical Performance and Operational Status

The DMS processing plant has demonstrated strong technical performance since commissioning:

• Ongoing optimization work is steadily improving recovery rates and concentrate quality
• Production is advancing toward nameplate capacity with consistent operational improvements
• Quality control systems have validated that concentrate consistently meets or exceeds the 5.5% Li₂O specification
• Current inventory is fully bagged and prepared for export, with shipment pending final regulatory approvals

The project's 5.5% Li₂O concentrate specification positions it favorably in global markets, where typical commercial grades range from 5.0-6.5%. This places Bougouni's output in the medium-to-high quality bracket that is readily acceptable to converters producing battery-grade lithium chemicals.

What Are the Strategic Implications for Kodal Minerals?

This offtake agreement represents a pivotal development for Kodal Minerals, which holds a 49% stake in Kodal Mining UK Ltd (KMUK), the parent company of LMLB. The partnership creates multiple strategic advantages that strengthen Kodal's position in the expanding lithium industry innovations.

Financial and Operational Benefits

The agreement delivers several immediate advantages for Kodal's financial position:

• Revenue certainty: Guaranteed purchases for 100% of production eliminates market placement risk
• Enhanced cash flow: The 95% payment upon port loading significantly reduces working capital requirements
• Pricing stability: SMM index-linked pricing with grade adjustments provides fair market returns while limiting volatility
• Operational focus: With sales secured, management can concentrate on production optimization rather than marketing
• Debt service capability: Predictable revenue streams enhance the company's ability to service any project financing

This structured revenue arrangement significantly de-risks the project's commercial aspects, allowing operational teams to focus exclusively on production efficiency and cost optimization.

Partnership Advantages

The agreement with Hainan Mining delivers strategic value beyond simple product sales:

• Validation of product quality: Hainan's willingness to commit to all production validates the concentrate's commercial acceptability
• Relationship deepening: Strengthens ties with Hainan, which is both an investor and now the exclusive customer
• Market credibility: Demonstrates to investors and lenders that the project has achieved commercial viability
• Expansion potential: Establishes framework for potential future processing expansions or project enhancements

Bernard Aylward, Kodal's CEO, emphasized that "the payment term in the offtake agreement provides confidence in the cash flow of the operation," highlighting how the agreement solidifies the project's financial foundation.

What Challenges Remain Before Commercial Export?

Despite production progress, several critical hurdles must be overcome before the Bougouni Project can begin commercial shipments and realize the benefits of the offtake agreement. These challenges span regulatory, logistical, and operational domains.

Regulatory Requirements

The most immediate obstacle facing the project is obtaining government approval for concentrate export:

• Export licensing: The Mali government must issue formal export permits before shipments can commence
• Administrative process: LMLB teams are actively engaged with government officials to finalize the necessary documentation
• Compliance verification: Demonstrating adherence to all applicable mining and export regulations
• Tax and royalty frameworks: Ensuring all fiscal obligations are properly structured before export approval

The export permit represents the final regulatory milestone before commercial operations can fully commence. While production continues, the more than 40,000 tonnes of concentrate already produced cannot generate revenue until these permits are secured.

Logistical Considerations

Moving lithium concentrate from landlocked Mali to international markets presents significant logistical challenges:

• Transportation infrastructure: Road networks connecting the mine site to export facilities require careful logistics planning
• Port arrangements: Preparations at Abidjan port (Côte d'Ivoire) for handling specialized mineral shipments
• Cross-border protocols: Navigating customs and transit requirements between Mali and Côte d'Ivoire
• Shipping schedules: Coordinating ocean freight schedules with production and road transportation timelines

The logistics chain from mine to port spans approximately 1,200 kilometers across challenging terrain and international borders, requiring robust planning and coordination to maintain efficient product flow once exports begin.

How Does This Agreement Impact the African Lithium Market?

The Bougouni Project represents an important development in Africa's emerging position in the global lithium supply chain. As one of the continent's more advanced lithium developments, its commercial progression has broader implications for regional mineral development.

Regional Significance

Bougouni's advancement strengthens Africa's position in the critical minerals landscape:

• Diversification of global supply: Reduces reliance on traditional lithium sources in Australia and South America
• Demonstration effect: Successful commercialization encourages investment in other African lithium prospects
• Economic development: Creates precedent for value-added mineral processing in West Africa
• Supply chain integration: Establishes new linkages between African resources and global battery manufacturing

Mali's emergence as a lithium producer diversifies the country's mineral base beyond its traditional gold mining sector, potentially creating more resilient economic structures and export revenue streams.

Market Implications

The agreement creates several market dynamics worth monitoring:

• Pricing influence: Addition of new supply source from a previously non-producing region
• Buyer strategies: Chinese companies like Hainan Mining securing supply diversity beyond established sources
• Investment patterns: Potential acceleration of investment in other African lithium assets following Bougouni's commercial validation
• Processing evolution: Possible future vertical integration toward higher-value lithium chemical production in the region

The project establishes important precedents for how African lithium brine market insights can be commercially developed and marketed, potentially influencing development models for other projects across the continent's lithium belt.

What Does This Mean for Investors in Kodal Minerals?

For investors tracking Kodal Minerals' progress, this offtake agreement provides several important indicators about the company's trajectory and potential value proposition. The development substantially transforms the company's risk profile and future prospects.

Investment Considerations

The agreement changes several fundamental aspects of Kodal's investment case:

• Revenue visibility: Clear path to predictable cash flow based on production volumes and market pricing
• Risk mitigation: Elimination of marketing uncertainty during the critical initial production phase
• Balance sheet implications: Enhanced ability to service debt and potentially accelerate investment returns
• Valuation metrics: Transition from exploration/development valuation to production-based valuation models
• Liquidity improvement: Stronger cash position supported by the 95% payment upon port loading provision

While Kodal's 49% interest in the project through KMUK represents a partial ownership position, the agreement's favorable terms enhance the potential value of this stake by reducing commercial uncertainties and strengthening cash flow projections.

Future Growth Potential

Beyond immediate financial benefits, the agreement creates a platform for potential expansion:

• Operational optimization: Stable commercial framework allows focus on reducing costs and improving recoveries
• Resource expansion: Cash flow generation enables reinvestment in exploration to potentially extend mine life
• Processing enhancements: Potential future additions of downstream processing to capture more value
• Portfolio development: Demonstrated ability to bring projects to commercial production improves prospects for additional assets

The establishment of a commercial production and sales framework significantly enhances Kodal's credibility as an emerging lithium producer, potentially improving access to capital for future growth initiatives.

FAQ: Bougouni Lithium Project Offtake Agreement

What is the duration of the offtake agreement?

The agreement has an initial term of four years, with annual reviews of quantities and pricing mechanisms to ensure it remains aligned with market conditions while providing stability for both parties.

Who are the parties involved in the agreement?

Les Mines de Lithium de Bougouni (LMLB), a Mali-registered mining company in which Kodal has a 49% interest through Kodal Mining UK Ltd (KMUK), and Hainan Mining Co. Ltd, which will serve as the exclusive purchaser of concentrate production.

What percentage of production is covered by the agreement?

The agreement covers 100% of the spodumene concentrate produced by the DMS processing plant at the Bougouni Project, eliminating any market placement risk for the operation.

How is the pricing determined?

Pricing is based on the SMM published market price with standard adjustments for grade variation. This mechanism provides market-based pricing while maintaining opportunity to benefit from future price increases in the lithium market.

What is the current production status of the project?

The project has already produced over 40,000 tonnes of spodumene concentrate, which is bagged and ready for export pending final government approvals. The DMS processing plant is operating efficiently with ongoing technical improvements.

What is the expected annual production capacity?

The project is expected to produce 100,000-120,000 tonnes per year of lithium concentrate with a Li₂O content exceeding 5.5%, processed through a 1.4 million tonne per year beneficiation production line.

Table: Bougouni Lithium Project Key Metrics

Future Outlook for the Bougouni Lithium Project

The successful implementation of this offtake agreement for Bougouni Lithium Project positions it for significant growth and development in the coming years, with several potential avenues for expansion and optimization.

Near-Term Priorities

The project team's immediate focus centers on transitioning to full commercial operations:

• Export permit acquisition: Finalizing all regulatory requirements with the Mali government
• First shipment milestone: Completing the inaugural export from mine site to Abidjan port
• Production optimization: Fine-tuning the DMS plant to consistently achieve nameplate capacity
• Quality control: Establishing rigorous systems to ensure consistent concentrate specifications
• Operational cost management: Identifying efficiency opportunities to maximize margins

These priorities focus on establishing stable commercial operations and generating consistent revenue from the existing asset base before exploring more ambitious expansion initiatives.

Medium-Term Development Opportunities

Once baseline operations are established, several growth pathways become available:

• Resource expansion: Further exploration of the project's mineral tenements to potentially increase reserves
• Production scaling: Potential expansion of the DMS plant capacity beyond current specifications
• Recovery optimization: Implementation of advanced technologies to improve lithium recovery rates
• Processing advancement: Evaluation of downstream processing options to produce higher-value products
• Infrastructure enhancement: Investment in transportation and logistics improvements to reduce costs

"This offtake agreement confirms the strong interest of our development partner Hainan in the successful development of Bougouni and we look forward to our first export of product and first shipment to depart from the Abidjan port." – Bernard Aylward, CEO of Kodal Minerals

The agreement provides the commercial foundation upon which these development opportunities can be evaluated and potentially implemented, transforming Bougouni from an initial production asset into a long-term contributor to global lithium supply. As more lithium refinery developments and the Thacker Pass lithium mine come online, competition in the global market will intensify, making strategic partnerships like this increasingly valuable. Furthermore, innovations in geothermal lithium extraction could eventually reshape industry economics, highlighting the importance of establishing strong market positions now.

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