Member Info for whitebuffalo

Lav,

That the MG is content that KMUK is both responsible for and willing to pay the CGT related to the funding transaction is the extent to which the mining code informs the debate.

The unresolved question is purely a business understanding between Hainan, KMUK, and KOD plc, and we have no insight into any of the non-RNSed background to that.

My personal view is that all of the activity related to the gain in value of the mining license was contained within KMUK and its subsiduries. I think Bernard shares this view.

But my view doesn't matter. It's what was agreed (or overlooked) between Hainan, KMUK and KOD plc that matters.

Ivenoidea,

14% gets you a board member by 12% doesn't?

They could have kept their %share, if they'd wanted to, as they had the right to purchase the number of shares required to maintain their % share of KOD Plc on the same terms as Hainan, I think.

So, why didn't they want to? A case of too many cooks with Hainan now in the kitchen...? Is that why it's suggested Suay Chin are now closing their position in KOD?

I couldn't easily see when and at what price Suay Chin gained their now-12% holding, but it must have been a number of years, so even if they are selling out now it's unlikely to be at a loss... unless someone has some numbers to counter that assumption?

Bloody LSE on my phone. Grrr.

Can someone correct my understanding if I'm wrong: Dr Zeng (representing Suay Chin) resigned from the Kodal board in Sept 2023 for Personal Reasons and was not replaced (I couldn't see an RNS for it). Is that right?

Can someone correct my understanding if I'm wrong: Dr Zeng (representing Suay Chin) resigned from the Kodal boar

Paul,

As part of that consideration, are you including that the resently sign MoU allows The Partners (who I assume are the two shareholders of KMUK) to recover their expenses "as a priority"? Which I interpret to mean that LMLB's revenue can be primarily used to recoup expenditure before the division of profit is considered.

Obviously that might not be the working assumption of the parties involved (which I'd hope is thoroughly documented and cross-checked). But the right to it could have a massive impact on KOD over the next 12-18 months.

Paul,

KMUK has only 2 shareholders and neither the government of Mali or the local people are one of them.

Lav, when you say "Bernard's projection," can you point me in the direction of where this is documented and what the figure is?

I ask because the figures used in the latest presentation and on the Kodal website still assume a Spod price of $2080/t [where it refers to $1b revenue for DMS LOM and $712m projected free cashflow]

Why do you think Bernard (I assume you mean KOD) would pay for a resouce upgrade of the lithium?

George, I don't disagree with that interpretation.

It would make me less content that KMUK paid the $14m Suay Chin termination fee, rather than Hainan, if that is the case.

In both cases you can discuss direct and indirect benefits, but you can also look at both of them as costs to deliver the desired end result, and my initial understanding (or expectation) was that the purpose of the funding package was to deliver the end result.

As you say, without knowing the contents of the finance agreement, it's not possible for us to know, but the argument could be made that KMUK made the gain, not KOD. One of the reasons companies have subsidiaries is to compartmentalise liability.

If Hainan always thought Kodal were, in every eventuality responsible to bear the cost of any taxes, it makes no sense for it to ever have been agreed for KMUK to pay it in the first instance (and then have to reclaim it from Kodal). If, in all scenarios it was Kodal's to bear, surely all the documents would just look to Kodal from the outset, without any reference to KMUK or FM whatsoever?

I've looked through the RNSs that seemed relevant to the funding deal, but I saw no mention of tax liability.

There have been a lot of messages today, and I haven't read most of them. So, I apologise if I'm repeating something, but I'm wondering actually if it is a lack of clarity on Hainan's part that is the problem - because we all know that the entire $100m can be claimed against Kodal until the licence actually transfers (and an MOU is not quite the actual transfer), so, perhaps Hainan simply forgot to add "until the licence transfers" to the end of their statement?

They retain the right to claim against Kodal until the licence actually transfers...?

My assumption is that responsibility for funding stage 2 sits within LMLB, not with KMUK, and certainly not with KOD. (So KMUK might choose to re-allocate returned funds towards stage 2, but there would be no call on KOD to provide funding).

Using this site on my phone is awful, it keeps hiding my keyboard so I press random places on the screen (like post messge when I'm not done).

George,

I agree, there are options in how any income could be used. But it is better to have rights and not use them.

I feel it's useful to remind shareholders that we haven't lost the invested capital (assuming everything goes to plan); that it still appears as a credit on KMUK's balance sheet. And also that 49% of the circa $200 of the AISC costs are actually beneficial to KOD.

It's also interesting to consider the option that, if KMUK's capital expenditure was recouped as a priority, KOD would own 49% of that capital as well as 32% of the mine that the capital built.

George,

I agree, there are options in how any income could be used. But it is better to have rights and not use them.

I feel it's useful to remind shareholders that we haven't lost the invested capital (assuming everything goes to plan); that it'

George,

From the 1st November RNS "It is noted that the KMUK partners retain the right to recover all capital investment and intercompany loans from the operation as a priority."

I didn't set out the two ways as an either/or, but as one then the other.

The Malian government and local investors might want a quick return (who doesn't), but they've signed an MOU that states 'KMUK comes first'.

George,

I just wanted to clarify my interpretation of how income from LMLB will be distributed. The way I see it: because loans and expenses can be reclaimed as a priority, the income will be treated in two ways.

The first way - until all loans and expenses have been recouped by KMUK, all income above ongoing expenses (manpower, repairs, consumables, etc) will be paid to KMUK. For simplicity, as an example, this would be anything above AISC-$200, so at a Spod price of $750, $300pt of concentrate will be returned to KMUK until all loans etc are fully repaid. I believe this works out around $18.375m a year for KOD's share of KMUK. I expect this will be put aside for phase 2. If Spod prices remained at $750, this would take almost 3 years to finish - meaning there is no actual profit during this period. Which, interestingly, is how long the Hainan fixed price lasts.

The second way, after loans and expenses have been repaid, is when LMLB can distribute its profit among its shareholders: MG, HNM, and KOD. But now the AISC does not need to include the CAPEX from construction as that has been repaid. So the AISC should fall by that amount: being $200. So, even if the spod price is still $750 at the end of 2026...(which I hope it wont be), the profit, before taxes, etc would be $300pt. KOD would then receive 32% of that through KMUK, which is about $12.5m annually.

If the spod price rises to $1000 (or Hainan's floor price is higher than $750), the time frame for 'the first way' shortens substantially and the profit share in the second way increases. At $1000pt KOD, through KMUK would receive 32% of $550pt, before taxes, etc - which is about $22m annually.

I'm not an accountant of any kind, but this is my lay interpretation of the information presented. I'm happy to be challenged and/or corrected.

Through their ownership structure, KOD will benefit from owning 49% of the profits received by KMUK. But (as I understand it) KOD will also benefit from KMUK recovering 49% of the already outlaid costs from the revenues of the mine. To put it more clearly, my interpretation is that the income received by LMLB (minus ongoing expenses) can be first used to recoup the monies paid by KMUK to bring the mine into service: KOD, through KMUK, have a right to get back their 49% of the $100m+ that has been spent before we need to consider who gets what share of any profit.

I also think that Hainan being a significant shareholder in KOD, and the main shareholder in KMUK means they have a deeply vested interest in the venture being a success.

It would certainly be a gamble, but perhaps they anticipate the company will continue to reach new all-time-lows in their pursuit of shareholder value, and they'd rather be outside the tent pizzing in should another discount placing arrive to accelerate that?

I am surprised they managed to trade that many shares without moving the share price.

As I understand it, the OPEX AISC includes recouping CAPEX (and exploration costs). As this is stated for the DMS, which has an initial LOM of 4 years (@125ktpa - meaning 500ktpa), I expect $200 of that $647 is to reconstitute that $100m in KMUK's coffers.