4 Reasons to add Kodal Minerals #KOD to your Watchlist - Vox Markets
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4 Reasons to add Kodal Minerals #KOD to your Watchlist

The content of this blog (or content associated with it) is not intended as investment advice. The author holds an interest in the company mentioned. Please do your own research.

Kodal Minerals #KOD
Share Price: 0.198p
Market Capitalisation: 12.88m

Kodal Minerals is a lithium focussed development and exploration company centred on the development of its Bougouni Lithium Project in Southern Mali. They also hold a suite of gold assets in West Africa.

4 REASONS TO ADD KODAL MINERALS #KOD TO YOUR WATCHLIST

“By 2025 there will be, a minimum of, 20 times as many electric vehicles on the road, than in 2016.”

We are at the start of an electric vehicle revolution and one of the major components in Lithium-ion batteries, surprisingly, is lithium. Lithium-ion batteries in cars contain around 40 to 100 kilograms of lithium, compared to less than 0.1 for consumer electronics

According to a report by the International Energy Agency, the total number of electric cars registered in 2015, was 1 million.

Last year the number of electric vehicles on roads worldwide rose to 2 million.

Even though that doubled last year, the global electric car stock is only 0.2% of the total number of passenger light-duty vehicles in circulation.

There is a “good chance” the global electric car stock could reach carmaker estimates of between 9 and 20 million by 2020 and between 40 and 70 million by 2025, the report said.

This means by 2025, there will be, a minimum of, 20 times as many electric vehicles on the road, with rechargable batteries than there was in 2016.

WHAT WILL THIS MEAN FOR LITHIUM SUPLY AND DEMAND?

There’s no doubt the it’s a fast growing market but it’s also dynamic, which means forcasts for supply and demand can vary depending on the source of the information.

Last year, around 200,000 tonnes of lithium was consumed, a growth of between 15,000 to 20,000 tonnes from a year earlier.

The CEO of SQM, the world’s largest lithium producer said, “We believe it is highly probable that worldwide demand will exceed 500,000 tonnes by 2025.”

According to Reuters, analysts at “The Lithium Spot” note that supply is pretty much in line with the average demand forecast, meaning “demand is either right in line or could be slightly outpacing supply for 2017.”

The assumption is that all the new capacity ramps up smoothly. It’s a big assumption. The potential for supply-demand gaps to open up over the coming decade is significant.

Even a hardening consensus that there will be enough supply for the next two or so years rests on a series of questionable assumptions about how efficiently new supply can be brought on stream and then integrated into the existing production chain.

Beyond that short-term timeframe, the uncertainties just grow ever larger.

Joe Lowry, lithium industry consultant and commentator, takes the view that even with the recent spate of new project announcements, it is quite possible that a supply shortage will cause significant issues in the battery supply chain by 2023.

“There’s a pivot,” says John Kanellitsas, vice-chairman of Lithium Americas, a miner that is developing a lithium project in Argentina. “There’s much more consensus on demand; we’re no longer even debating demand. We’re shifting to supply and whether, as an industry, we can deliver.”

Some now point to the possibility of a “lithium supercycle”, echoing what unfolded in the iron ore market at the turn of the 21st century, when Chinese demand drove prices higher.

So if one things certain it’s this: demand for lithium is growing rapidly and there’s potentially enough supply, IF that supply can be brought online smoothly and efficiently AND that actual demand doesn’t outpace current forecasts.

 

“These test results now confirm that this spodumene can be converted to a final lithium carbonate product that will be seen as a premium product compared to many others in the market”

Kodal Minerals’ primary focus is on the exploration and definition of the lithium mineralisation at the Bougouni Project in Southern Mali.

The Bougouni Project consists of two concessions, the Kolassokoro and Madina concessions (boxes above) , which cover a contiguous area of 500km2. The project area is located approximately 180km south of Bamako, the capital of Mali, with excellent access to the project via sealed road from Bamako.

Work programmes conducted across Bougouni have confirmed the presence of high grade lithium mineralisation and to date, results from their Ngoualana prospect seems quite to be the most promising.

The Ngoualana Prospect

Results of their diamond core drilling programme, completed on August 11th, include:

o 41.5m at 1.71% Li2O from 45.89m;

o 27.25m at 1.61% Li2O from 28.65m;

o 26.25m at 1.51% Li2O from 30.46m; and

o 17m at 1.69% Li2O from 25.55m.

Further detailed metallurgical test work will be completed on the mineralised zones of the drill core, and a composite bulk sample is being collected.

Bernard Aylward, CEO of Kodal Minerals: “These diamond core drill results provide us with a high-level of confidence in the information captured from the earlier reverse circulation drilling, and continue to demonstrate the high-grade mineralisation and continuity of the Ngoualana prospect. We will continue with the metallurgical testing of the diamond core to improve our understanding of the characteristics of the mineralisation.”

 

COMMERCIALITY

Lithium chemicals are produced either from lithium bearing brines or minerals (like Kodal’s project). The lithium has to be of good quality to be converted to lithium carbonate to make cathode material for lithium-ion batteries.

On 9th October 2017, Kodal announced that Shandong Ruifu Lithium Co, one of the largest lithium carbonate producers in China, had produced a high quality, low impurity battery grade lithium carbonate using spodumene concentrate from the Company’s Bougouni lithium project in Southern Mali.

On the metallurgical and processing testwork, Bernard Aylward, CEO of Kodal said: “These test results now confirm that this spodumene can be converted to a final lithium carbonate product that will be seen as a premium product compared to many others in the market.

“Kodal is maintaining a very busy exploration and definition programme at Bougouni and this ongoing programme of testing is a key criterion in our overall assessment of the project. Our programme includes the extraction of a 5,000 tonne bulk sample to be shipped to China for further testing and review of potential plant design parameters. The bulk sample will be treated through to a lithium carbonate product to provide a full process review”

 

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“They currently have around £4.8m in cash, which means they’re fully funded to carry out their exploration progamme.”

On 10th March 2017, Kodal completed a £500,000 share placing and entered into an agreement to commence negotiations for an off-take agreement for the future spodumene concentrate produced from its Bougouni Lithium Project, as well as a potential further investment into the company of up to £4.3 million, with Suay Chin International, a Singapore registered company.

Suay Chin has strong support from Shandong Mingrui Chemical Co, which is a long-term supplier to existing lithium carbonate producers in Shandong Province.

On 3rd November 2017 Kodal announced it had received the final payment in regard to the equity subscription agreement with Singapore-based Suay Chin International.

This receipt completes the Suay Chin subscription following which it will have subscribed a total of £4,825,266 which will represent 20.0% of the Company’s enlarged issued share capital.

In summary, Kodal has now received from Suay Chin the following subscription investments:

· Subscription of £500,000 at 0.30 pence per Share for 166,666,667 Shares as announced on 10 March 2017;

· Subscription of £3,300,000 at 0.38 pence per Share for 868,421,052 Shares as announced on 8 May 2017;

· Subscription of £694,297 at 0.38 pence per Share for 182,709,973 Shares as announced on 31 July 2017; and

· Subscription of £330,968 at 0.38 pence per Share for 87,096,953 Shares as announced today.

In a recent interviewBernard Aylward, CEO of Kodal said they currently have around £4.8m in cash, which means they’re fully funded to carry out their exploration progamme.

 

“At 0.0198p the share price is hoovering around 10 month lows and more than half of what it was at before Kodal agreed an offtake agreement with Suay Chin International”

(Click to enlarge)

At 0.0198p the share price is hovering around 12 month lows and more than half of what it was at before Kodal agreed an offtake agreement with Suay Chin International, which has boosted their coffers by £4.8m via a subscription at a 30% premium to the current share price.

Back in December 2016 the share price rose, mostly on speculation that a Chinese takeover was in the offing, from 0.1p to 0.5p. This caused a lot of people to chase the share price up.

By February, with no expected takeover annoucement, the share price started to falter, falling from 0.5p to 0.2p within a month.

On 10th March Kodal announced the offtake agreement with Suay Chin International. Even though this collaboration was a great endorsement of their Bougouni Lithium Project and temporarily boosted the share price to 0.35p, it also allowed alot of stale bulls to exit. Since this date the share price has drifted, aside from the odd spike, slowly downwards to where it is today, oversold at 0.198p.

Exploration is not without its risks but Kodal are fully funded for their current exploration project and have achieved some significant milestones in the last year and yet their share price is at a 12 month low.

Back in January the share price was a 0.5p, double what it is now and since this time they’ve managed to secure £4.8m from a major Singaporean investor, well connected in the Chinese lithium sector, drilled out decent grade lithium mineralisation, which has produced a high quality, low impurity battery grade lithium carbonate.

Over the next few weeks / months I expect a steady stream of news from their 10,000m drilling programme, which aims to expand and definine the lithium pegmatite veins previously identified. Then there’s the results of a 5,000t bulk sample, which is being shipped to China for further large scale processing testwork.

There’s no doubt lithium demand will increase over the next decade or so, the more pertinent question is, can producers keep up with it? China, at the forefront on the EV revolution, are fully aware how strong this demand will be. This is why they are looking to secure this future supply and it looks like Kodal Minerals, especially at this level, good be one of the benefactors.

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The content of this blog (or content associated with it) is not intended as investment advice. The author holds an interest in the company mentioned. Please do your own research.

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Mentioned in this post

KOD
Kodal Minerals