Kodal tussles with Bougouni partner over $15M Mali tax payment

U.K.-based mineral explorer and developer Kodal Minerals (LSE: KOD) and its Chinese joint venture partner Hainan Mining Co. in the Bougouni lithium project disagree over who is responsible for a US$15-million tax payment owed to Mali’s government as the country seeks to raise its stake in mining ventures.

Mali updated its mining code and enacted changes last year. Kodal’s 49%-owned subsidiary, Kodal Mining UK Limited (KMUK) and Hainan reached an agreement with the government on Nov. 1 that brings Bougouni in line with the code and gives Mali a 35% stake in the project.

The new set of rules seeks to increase the government’s stake in mining ventures, requiring Western miners like Kodal, Barrick Gold (TSX: ABX; NYSE: GOLD), and Resolute Mining (ASX: RSG) to renegotiate their ownership structures.

Hainan made a statement suggesting that the tax payment, arising from its US$117.5 million funding committed to the project last year, should be borne by Kodal. Kodal responded on Tuesday, saying that recent agreements with Hainan and the Mali government prove that the tax payment obligation lies with KMUK, which is 51% owned by Hainan.

Kodal says it reserves the right to make a claim against Hainan if necessary. The company stated it would provide further updates on the matter as developments unfold.

The company’s shares lost a quarter of their value on the announcement, trading 19% lower to 0.32 pence on Tuesday afternoon in London. The company’s market capitalization now sits at £67.73 million (US$88 million).

The dispute highlights tensions in Mali’s mining sector as the government pushes for greater control of assets under the revised code.

Before the licence transfer and the current tax payment disagreement, production at Bougouni was expected to begin in next year’s first quarter. Estimated production has been pegged at 125,000 tonnes of spodumene concentrate annually. This output can be ramped up to 230,000 depending on the market demand, the company has said.

Located 170 km south of the capital city Bamako, the asset is situated in an area hosting several established mining operations, including Hummingbird’s Yanfolila mine and B2Gold‘s (TSX: BTO) Fekola mine.

Kodal and Leo Lithium (ASX: LLL) have been competing to develop Mali’s first lithium mine. In June, Leo Lithium decided to sell its stake in the Goulamina project to China’s Ganfeng Lithium. The Australian firm said at the time that the risks associated with operating in Mali and the impact of new mining code meant selling its part was in the best interests of its shareholders. It also noted that first spodumene production was expected in the third quarter of 2024, but did not rule out possible delays.