The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
AJ, I get the impression you like the company, but are not looking for answers yourself. With regard who owns the company, it's on their website:
https://kodalminerals.com/investors/shareholder-analysis/
With regard the other question around the updated feasibility study, I've posed this for Monday 10am's call:
"With the rise in Lithium prices, do you foresee a higher amount of lithium coming out of the ground in the new feasibility study? Firefinch, your neighbours, just increased total lithium estimates by 74%, do you think that a likely scenario for Bougouni? And is that mostly Spod 5, or does the higher price make it worth chasing harder to reach deposits of Spod 6?"
https://www.investormeetcompany.com/investor/companies
The facts are out there...
The feasibility study from 2020 highlighted the following:
1.94Mt of spod 6% available
Minimum 8.5-year mine life
220,000 tonnes of 6% spod per annum
Price of $680 for spod 6 quoted for calculation
Revenues exceed $1.4bn
Costs are $466 per tonne
Capital estimates required $117m
Turning that into a calculation:
Revenues = $680 x 1.94Mt = $1.4bn
Costs = $466 x 1.94Mt = $900m
Net profit = $500m
Naturally, the price of lithium has gone up significantly. Not only that, looking at firefinch’s updated feasibility study from 6th Dec I think we can expect a higher overall tonnage of lithium ore as spod 5 becomes economically viable.
Firefinch have a lithium mine 94km away and updated their forecasts from 2.3Mtpa of Lithium ore to 4.0Mtpa of lithium ore, a 74% increase, presumably being made up of spod 5 ore. That would give KODAL an expected total tonnage of 3.3Mt, up an extra 1.4Mt.
If we use the new price of $978 (as Firefinch quoted on Tuesday), that would give KODAL’s Bougouni mine some numbers like this:
Revenues = $978 x 3.3Mt = $3.2bn
Costs = $466 x 3.3Mt = $1.5bn
Net profit = $1.7bn (an extra $1.2bn)
It will cost to extract the lithium, but with a processing plant up the road, that might work out very nicely. Naturally Gangfeng and others are looking to snaffle any lithium producers, so we could likely extract the lithium without a fundraising. I haven’t mentioned the gold assets. Nor the fact that we have £12m in the bank and a cash burn of less than £1m per year over the past 3 years. We’re not desperate for cash, just need to find an elegant solution to getting the lithium mined and processed.
Currently the company has a market cap of £50m. Even a 10x increase in the share price would value the company at just £500m. KOD have already secured additional concessions in the area, so this could run for a while. And I don’t see the price of lithium going down in the long term, not until we figure out another way of making batteries.
I appreciate I haven't given you a price target for 3 years time, but they're not the time scales I'm working to (more 7-10 years, with a target price of 10p)
Do your own research, as you can see, these numbers came from just two RNSs, take a bit of time and read a little more about KOD, you won’t be disappointed. If nothing else, read this:
https://kodalminerals.com/wp-content/uploads/2021/09/Group-annual-report-and-financial-statements-for-the-year-ended-31-March-2021.pdf
As Daz mentions, a small mining development and exploration company probably isn't the ideal candidate to trade on technical analysis. Lots of doom and gloom, with people saying we won't know numbers until the 2022 accounts. There are other companies in a more advanced situation than ours, Firefinch, being a great example. See their RNS of 6th Dec...
https://www.investi.com.au/api/announcements/ffx/049fd017-3a7.pdf
Surprisingly to me, no mention of Spod 5, but they did revise their initial estimates from 2.3mtpa to 4mtpa, almost double, which suggests that the spod 5 (ignored in the first feasibility study) probably accounted for much of the extra lithium they plan to extract. It would be reasonable to expect a similar increase from KOD, as they're literally right next door.
Everything I read about KOD reassures me they're on to a winner, it may take the market a little while to catch up, count yourself lucky you can top up at such low levels!
Good luck all, if you can avoid it, don't sell, simply forget about them for a couple of years. Whilst everyone is walking around with a mobile phone's worth of lithium, give it 5 years and many will require 100x as much battery power for cars, homes, industry, etc. The price of Li is only going one way, and KOD are really well placed to benefit from that price rise.
Saw this on Firefinch's site yesterday, categorically denying rumours of a fundraising:
https://www.investi.com.au/api/announcements/ffx/ce295c0d-773.pdf
I think KOD are in a similar position - several options open to them, no the least the fact that Firefinch are building all the requisite processing equipment literally next door.
If you're interested in KOD (and you are on this board), keep an eye on Firefinch, lots of parallels, including an updated feasibility study, taking spod 5 into account. It comes out this month and will be at least 6 weeks ahead of anything Kodal release. Be good insight.
Remember, we have significant gold holdings on the Ivory Coast, we could use that to finance the lithium mining (and we have expertise enough in-house to do that ourselves, if we so chose., look at the board). We don't have to do the JV route. Might just be advantageous to do so.
Pleased I could top up at these prices, I can see the price of lithium going just one direction. Have reached my target holding, will now sit back and relax, see where they are in a couple of years. Doesn't mean I won't continue to read this board, but I'm glad to unplug from the day to day prices of things. Pulls so much focus.
Hi Squeeze, hi Laverda, found this in one of the updates:
The October 2020 Definitive Feasibility Study (DFS) for Goulamina reported a pre-tax NPV (8%) of approximately A$1.7 billion using a price of US$666 per tonne of 6% minimum Li2O spodumene concentrate. Current spodumene prices are circa US$1,000 per tonne or more, with strong lithium demand expected for some time.
Firefinch with its engineer, Lycopodium, are on track to deliver the Updated DFS report in December 2021. The update is focussed on revisions to the flowsheet and process design, capital costs, operating costs and financial modelling.
Maybe the revised figures will include the 5% spod. It would be a very good analogy for what we might expect from KOD's updated feasibility study, due in March/April.
Trouble is MM, the next bit of news is likely to be 4-6 months away ( I doubt we'll see a feasibility study or JV this side of Christmas), so the real gains are likely to be in that kind of time frame too. Many traders I know are looking to make a quick win this week. I too was like that a few years ago, but now don't have time to watch the markets all week. Much happier building up a good stake in KOD and if the price remains low I can increase my holding over the coming months. I reckon we'll see a Li price spike in 2-3 years, hopefully in time for KOD to get their mine up and running to benefit.
I expected a small price rise this morning (and trading has been halted twice because of the significant price movement), but we won’t see bigger moves until the new feasibility study puts the numbers into stone, as others here have mentioned. People are working out potential value of the life of the mine, here are my rudimentary efforts:
Previous feasibility study highlights
o Minimum 8.5-year mine life producing on average 220,000 tonnes of 6% spodumene concentrate per annum, at life of mine ("LOM") lithium average metallurgical recovery of 71%;
o Total LOM will produce 1.94Mt of concentrate with LOM revenue exceeding US$1.4bn; and
o Estimated C1* cash costs of US$431 per tonne concentrate (US$466 including royalties and sustaining capital).
Assuming there is no increase in lithium estimates, we have 1.9Mt of lithium. The previous study put the Life Of Mine revenue as US$1.4bn. Net profit in the region of $400m. That was when Lithium was at $680 at 6%.
If we see prices as expected in 2022 of $1,350 per ton (off recent highs of $2,350 per ton), that would suggest LOM revenue of around $2.5bn, but significantly more profit.
With lithium priced at $680 per ton, profit was around $214 per tonne. At the higher price of $1,350 the profit would be $884 per ton.
Overall, the increase in lithium pricing has seen the Bougouni mine’s profitability jump from $400m to $1.6bn. Last week, KOD had a market cap of £55m, today it is £66m.
Add to that, last week’s news that they purchased the last remaining holding of the bougouni mine (two parties held 10% each and received $600k each for their holding – valuing the mine at just $6m - you can see why they wanted to purchase it), and have just purchased 80% of the rights to more land for shares worth around £84k. This company could see some significant jumps in overall value in the next 3-5 years.
One more thing, Bernard gave himself 6 months to produce an updated feasibility study and discuss potential joint ventures, so do make yourself comfortable. KOD will be a slow, steady rise.
Hi Bmws,
the buy/sell label is simply a reflection of the price being above or below the midpoint. If the price is 34-36 and you pick up shares for 34.9 it will register as a sell. As MMs set the price for trades this may be above or below the midpoint. Same with sells at 35.1, they will register as a buy, regardless of the actual transaction.
Stuart
Hi Stephen, you also have to factor in the cost of getting the gold out of the ground, could easily be in excess of £800 per oz, although that still equates to a healthy profit of £140m. Like others, my impression from the presentation was that the gold was a way of getting some cash to fund lithium, thereby reducing any share price dilution (although they would have seen things the other way around, why borrow money when we can simply progress the tests, find additional resources and sell on).
Hi Johnno, I reckon most of the shares in issue are held by private investors, while the two RNSs have been very positive, PIs are an impatient bunch and I think people are just off looking for faster returns. Obvs, if you're out then you'll miss the RNS saying the mining license has been signed. Nothing has changed, certainly nothing negative. I'm grateful to BA for putting something out there to reaffirm that all is going to plan, good comms, which counts for a lot.
I originally looked at KOD as a long term investment, 2-3 years. Nothing has changed for me.
If I were more cynical I'd suggest that one or more hedge funds or institutional investors want in and are buying relatively small amounts and then drip-selling on positive news, whilst employing people to de-ramp on BBs like this one. Can then pick up larger quantities at a discount.
Sorry Johnno, nothing directed at anyone in particular, just a general rant after skimming the boards (was working all day). I'll be back at 7am to take a look, but other than that, I'm pretty relaxed. If there is no news I get the day off, if significant RNS I'll be busy.
"About 10 out of around 140 RNS for this company were sent at 7am. Possible but unlikely based on past form. That is why this share has people dropping in all day".
If you look, the vast majority of RNSs are related to 'price monitoring' as the share jumps up by significant amounts so frequently throughout certain days, then drifts down on no news (as people cash out to jump on another share that's moving). We should definitely expect an RNS at 7am, if it is a regulatory announcement it will be scheduled in. If it is reacting to the day it will be at any time. We're only interested in the 7am shares.
And where is BA? Honestly, I hope he's still in Africa somewhere, because he seems to be working over there (looking at the twitter feed) and the longer he's over there the more he'll get done, and the bigger one (or more) of the various announcements will be.
It is mildly frustrating to wait, especially as people start calling dates (next wed at 7am? why?), just wait for the various updates we're expecting and think about where you'd be happy to sell some or all of your shares, how do you call the top? What is your trigger price going to be? Or will you be brave enough to ignore the market till lunchtime to see how things pan out?
Speel, I don't think BA is looking to put everything in a single RNS, he (and the wider company) are just getting their facts in order, after all, it is a regulatory news service and they have to follow the relevant rules. The lithium licence will be announced as soon as it has been signed. They can't sit on that news, they can only wait for the prime minister to actually commit pen to paper, the timing of which is completely out of their hands. The results from the gold assays will be announced when the labs have completed their analysis, and we know that there are some delays in labs getting stuff processed, but again, it is price sensitive information, so they can't sit on it (they can look to double check if the results look too good). I believe it would be bad form to sit on the gold news whilst they look to set up a JV, as it should be public domain before any deal is struck.
Private Investors frequently expect news to be announced in the shortest possible time frames, when the company often has to jump through regulatory hoops and other behind the scenes stuff. As another mentioned, the stock market is a mechanism for moving wealth from the impatient to the patient, so if you have faith that this company is moving in the right direction then sit back and relax.
"Yesterday the volume sold was 66% than the value brought and the sp went up. Today 10% have been brought than sold yet the sp is down. How does that work?"
Speel - just because a trade is marked as a sell it doesn't mean that it was sold by the Market Makers, it could well have been a buy. If the SP is 40-42 then a price of anything lower than 41 will be considered a sell, even if it is a buy, because it is below the median price (in this case of 41). Conversely, anything above 41 would be a buy, regardless of whether it is a buy or sell. You can only really look at whether the price is going up or down. And overall volumes. Whilst we see buys (or sells) in the £40k range, that isn't really significant when you look at the market cap of £63m.
Thanks Daz,
If the results are very positive they might want to double check, would they still have to update within two weeks, or could they extend the time to verify their findings? I would have thought it would be OK . Still, hard to know when the elusive RNS might be released, but I'd have thought we see an uptick this afternoon, as people start to worry about Monday morning and FOMO.
"How much does a licenced 1.5 billion lithium mine sale equate per share?"
That is a fair question, but I don't think we'll see many stick their neck out. No doubt, news on gold reserves will push the SP higher, but that's entirely contingent on the kind of volumes they're announcing.
The mining licence will clearly also push the SP higher, but will the licence have caveats? or will a JV with Sino be announced simultaneously? Will both bits of news come out on the same day? I'm guessing that the licence will be announced as soon as it is granted, as it is market sensitive info. The gold deposits data could probably be delayed without worry.
Is Bernard particularly interested in maximising the SP over the coming month? Probably not. News will come when it is due, and I've no doubt that Bernard will have 99 other things on his plate, besides drafting an RNS, so doubt we'll necessarily see any announcement as a matter of urgency. It could be next tuesday, as Daz suggests, but could easily be the following tuesday too. The company won't see any need to rush the gold news out, and the mining licence is firmly in the hands of the Malian govt.
Having said that, I reckon 0.0063 on gold and 0.0082 on licence (which will no doubt fall back in the weeks following).
Good luck to all, we're all here for the same reason, I hope you make a tidy profit and don't sell too soon.