Kodal Minerals Regulatory News (KOD)

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the UK Market Abuse Regulations

Kodal Minerals Plc / Index: AIM / Epic: KOD / Sector: Mining

Kodal Minerals plc

("Kodal" or the "Company" and together with its subsidiaries, the "Group")

Final Results & Notice of Annual General Meeting

Kodal Minerals, the mineral exploration, and development company focused on lithium and gold assets in West Africa, announces its final results for the year ended 31 March 2023.

The Company's Annual Report and Accounts will be made available on the Company's website www.kodalminerals.com shortly. The Company's annual general meeting ("AGM") will be held at 11:00am on 29 September 2023 at Fieldfisher LLP, 9th Floor, Riverbank House, 2 Swan Lane, London EC4R 3TT.

Operational Highlights

Bougouni Lithium Project, Mali ("Bougouni" or the Project")

· US$117.75 million funding package agreed with Hainan Mining Co. Limited ("Hainan") a subsidiary of Fosun International Limited ("Fosun") and its industrial platform for mining and resources:

o  US$65 million reserved to fully fund the cost of the Dense Media Separation (DMS) Project targeting delivery of first production within 12 months of receipt of funds.

o  Additional funds will be deployed to:

§ increase the Bougouni Lithium Project's JORC compliant resource inventory currently at 21Mt @ 1.11% Li2O and extend the mine life; and

§ Support the development of the flotation plant expansion project which has the potential to increase spodumene production from ~125,000 to over 300,000tpa and deliver life of mine (8.5 years) revenue exceeding US $2.15bn.

· DMS Project development scenario presented:

o  Low capital development cost estimated at US$65 million;

o  Payback of two months from commencement of operations;

o  NPV7% of approximately US$420 million post tax;

o  Over 130,000tpa production of spodumene concentrate with an initial 4-year mine life;

o  DMS operation revenue exceeds US$1.05bn in less than four years based on broker consensus pricing averaging US$2,080 per tonnes.

· Bougouni is fully permitted for development and construction once funding package is completed - long stop date for funding package is 30 September 2023.

Gold Portfolio

· Progress towards establishing a maiden resource at Niéllé, in northern Côte d'Ivoire, based on an identified anomalous trend extending over 4.5km and which remains open along strike.

· Intercepts from Niéllé include: 26m @ 1.95 g/t Au from 32m, and 26m @1.79g/t Au from 108m.

· Further resource definition activities at Fatou, in southern Mali, which has a historical resource estimate of ~350 koz Au.

· Recent drill intercepts from Fatou include 23m @ 1.63 g/t Au from 82m, and 6m @ 1.49 g/t Au from 40m.

Financial and Corporate Highlights

· Group loss before other comprehensive income for the year of £1,461,000 (2022: £903,000).

· 27% increase in exploration and evaluation expenditure of £3,227,000 (2022: £2,547,000).

· 37% increase in the value of the gold projects in Mali and Cote d'Ivoire to £3,306,000 (2022: £2,411,000).

· 24% increase in value of the lithium projects in Mali to £11,216,000 (2022: £9,031,000).

· Cash balance of £545,000 as at 31 March 2023 (2022: £1,046,000).

· Post period end, in August 2023, a conditional prepayment of US$3,500,000 was received as part of the funding package with Hainan.

· Cash balance of £1,984,000as at 31 August 2023

Commenting on the results, Bernard Aylward, CEO of Kodal Minerals said:

"We are now on the final furlong with our pre-construction activities at Bougouni and are well positioned to break ground and start building our mine once our funding transaction with Hainan has been finalised in the coming weeks. We have been working extremely closely with the teams at Hainan and Fosun over recent months, and we are grateful for their continued support as we look to close out the final conditions precedent of our joint agreement. All parties are eager to start construction work and we are confident that this can now be expected in short order, as we look to deliver first production from our DMS plant in 2024.

"The coming weeks and months are set to be extremely active for us and I look forward to keeping shareholders updated as we begin our transition from developer to lithium producer."

For further information, please visit www.kodalminerals.com or contact the following:

CHAIRMAN'S STATEMENT

I am pleased to present the Annual Report of Kodal Minerals plc ("Kodal" or the "Company" and together with its subsidiaries, the "Group") for the year ended 31 March 2023.

We had two main pillars to our strategy during the year - firstly, to demonstrate that our Bougouni Lithium Project ("Bougouni Project", "Bougouni" or the "Project") is a high-quality asset with the requisite operational and commercial attributes to bring to production, and secondly, to agree a financing package to bring that to realisation. I am very proud to say that our team has succeeded on both counts. The Company had many parties interested in negotiating for participation in the future of the Bougouni Lithium Project. We are very pleased to have secured an excellent agreement that provides full funding for the development of a mining operation and additional support for the ongoing exploration and development of our highly prospective and extensive land position in southern Mali. The final piece of the agreement is a direct investment into Kodal Minerals Plc that provides funding for the Company to undertake significant growth and assessment of additional opportunities.

Since the acquisition in 2016 of Kodal's most advanced asset, the Bougouni Lithium Project in southern Mali, the Kodal team has worked determinedly to prove up a sizeable resource, undertake test work to confirm an attractive spodumene product for offtake partners, and position itself to be one of the first West African lithium producers by securing key permits early in the development process. This committed and multi-stranded work programme has ensured that Kodal has remained at the front of the pack.

Our ambition of becoming a lithium producer in the near-term is now a reality thanks to the US$117.75 million financing agreement between the Company, Kodal Mining UK Limited ("KMUK") and Hainan Mining Co. Limited ("Hainan") and its wholly owned UK-incorporated subsidiary Xinmao Investment Co. Limited ("Xinmao", and together the "Hainan Group") announced on 19 January 2023. Hainan is a subsidiary of Fosun International Limited ("Fosun") and is the industrial platform for mining and resources within Fosun. Kodal has welcomed the Hainan Group our partners for the development of the Bougouni Lithium Project and we are continuing to work together to ensure conditions precedent can be satisfied. Together the parties are fully committed to the completion of the funding transaction as soon as possible. 

Kodal and the Hainan Group have spent a lot of time working together and finalising plans for the development of the project with activities including additional metallurgical testwork, engineering planning and review and finalisation planning for the proposed Dense Media Separation ("DMS") development. This team development will stand the project in good stead when financing is complete and the actual groundwork commences on site.

As shareholders will be aware, countries and major end users around the world are seeking to diversify lithium supply chains given the critical role the mineral plays in the energy transition. Research suggests that in Europe alone, 38 new gigafactories are being developed which could total ~400-700 GWh of annual battery manufacturing capacity by the middle of this decade. To meet this ambitious target, new sources of lithium are absolutely critical.

Set against this dramatic demand backdrop, lithium prices have surged over the past two years, rising tenfold, then correcting in the first half of 2023. The lithium spot price has retracted from the very rapid highs and some analyst and reporting headlines may have certainly concerned investors. Whilst a lithium price of over $6,000/t of spodumene concentrate containing up to 6% Lithium Oxide ("Li2O") would make Bougouni even more profitable, it should be reassuring to shareholders that the Kodal team took a conservative approach to its pricing forecasts, factoring a life of mine average concentrate price for the DMS development scenario of US$2,080/t, which still delivers payback within three months. The significant upside to this should be clearly evident, particularly when, at the date of writing, the 6% Li2O spodumene concentrate price of US$3,600/t FOB is reported.

It is into this strong market, which analysts believe will continue to tighten over the mid- to long-term as demand outstrips new supply, we look to bring the Bougouni Lithium Project into production. We have an ambitious schedule for production, targeting commissioning and first production in 2024.

The economic fundamentals of the initial DMS development that define the phase 1 development of the project are highly compelling. However it is also important to recognise the future value uplift driven firstly by the development of the larger phase 2 spodumene flotation plant that significantly expands the spodumene concentrate production, and secondly by the focused, well-funded, exploration and expansion drilling that is supported by the financing package. 

Kodal is fully focused on achieving first production through our DMS operation at Bougouni. Kodal will be in a great position following completion of the financing package with our partners the Hainan Group and the Board has longer-term growth plans for the Company leveraging our West African knowledge, our technical expertise and our ability to acquire, explore and develop new exploration projects.

I would like to take this opportunity to thank our shareholders for their long-term support and interest in the Company, and also to the Kodal team for their diligence, commitment and tenacity in achieving our goals. 

Robert Wooldridge

Non-executive Chairman

5 September 2023 

OPERATIONAL REVIEW

Kodal has developed a portfolio of exploration and development assets in West Africa, including its most advanced asset, the Bougouni Lithium Project in southern Mali, and a number of gold exploration assets in Mali and Côte d'Ivoire. Kodal's management has continued to ensure that all government compliance, reporting and fees are kept up to date and all concessions are retained in good standing.

Mining Licence and Exploration Concession Review

Kodal's most advanced asset, the Bougouni Lithium Project, is located in southern Mali. Kodal was granted the Foulaboula Permis d'Exploitation number No2021-0774/PM-RM ("Mining Licence") in November 2021. This covered the proposed open-pit mining and processing operation at Bougouni, making the Project fully permitted for development and construction.

The Mining Licence is valid for an initial 12-year term and renewable in ten-year blocks until all resources are depleted. The Mining Licence is granted under the 2019 Mining Code and extends over a 97.2 square km area that will be a focus for Kodal's exploration programme to delineate further resources to prolong the Bougouni Lithium Project mine life.

Bougouni Lithium Project - Mining Licence details:

As detailed above, Kodal announced the financing package with the Hainan Group on 19 January 2023. At completion of the financing package, the Hainan Group will acquire a 51% shareholding in Kodal's newly incorporated UK subsidiary, Kodal Mining UK Limited ("KMUK"), the company formed to be the developer of the Bougouni Lithium mine through its 100% owned Malian subsidiary mining company Les Mines de Lithium de Bougouni ("LMLB").

On completion of the financing package with the Hainan Group, Kodal will have economic interest of 49% of the Foulaboula mining licence prior to Mali State's participation.

Table of Concessions - Kodal Lithium Concessions in Mali:

The Bougouni Lithium Project concessions surround the Foulaboula mining licence and will be explored for additional pegmatite hosted resources that can be added to the mining inventory. The concessions are all in good standing, and exploration completed to date by Kodal has indicated priority sites for additional exploration within the concessions.

Kodal reached an agreement post period end to sell its Bougouni West concessions, which do not form part of the main Bougouni Project, to ASX listed Leo Lithium Ltd ("Leo Lithium") for a total cash consideration of £2.5 million subject to all agreements being executed, with Kodal to receive £2.0 million and the original concession holder Bambara Resources SARL ("Bambara") to receive £0.5 million.

Table of Concessions - Kodal Gold Concessions in West Africa:

Bougouni Lithium Project Development Status

The Bougouni Project is now approaching construction readiness following the granting of an Environmental Permit in November 2019, a large-scale Mining Licence in November 2021 and securing a financing package (as announced on 19 January 2023).

The Company is implementing a two-phase approach at Bougouni; the first comprising a DMS plant and the second, a larger flotation plant.

The DMS development scenario, announced in September 2022, demonstrated highlights including:

• Capital development cost for the DMS plant and all associated infrastructure and commencement of mining is estimated at US$65 million;

• Estimated NPV@7% of approximately US$557 million (US$420 million post-tax);

• A payback period of three months (based on full equity financing) from commencement of operations.

The DMS option is based on:

• Processing material from the Ngoualana deposit feeding 1Mtpa of lithium ore to a DMS processing plant;

• Utilising a conventional circuit to maximise spodumene recovery of over 130,000 tonnes per annum of spodumene concentrate; and

• An initial four-year mine life.

The DMS operation has a revenue forecast expected to exceed US$1.05 billion in less than four years, based on prevailing broker consensus pricing averaging US$2,080 per tonne (FOB basis). The DMS operation targets production of a 5.5% Li2O spodumene concentrate product which is consistent with other producers currently active in the market.

The future expansion of Bougouni is expected to continue with the construction and commissioning of a down-stream flotation plant expected to be supported by utilising the DMS plant cashflows in order to exploit the resources at Sogola-Baoulé and Boumou, as well as longer term exploration prospects.

The updated Feasibility Study for the flotation plant, announced in June 2022, confirmed a very robust project with key metric highlights including:

• NPV@7% of US$760M (US$567M post-tax) compared to US$293M (US$201M post tax) in the original Feasibility Study.

• Life of mine (8.5 years) revenue exceeding US$2.145 billion based on an average sell price of US$1,060 per tonne (FOB basis).

• C1* cash costs of US$362 per tonne of 6% Li2O spodumene concentrate ("SC6"), and costs of US$474 per tonne including transportation and other selling costs.

• Total production of 2,024,000 tonnes with an annual average production of 238,000 tonnes.

• Capital cost of US$154 million.

* C1 cash cost includes all mining, processing and all general and administration costs per tonne sold, and additional to that the costs of transport to port and associated selling costs

Bougouni Lithium Project Resource Expansion

In March 2023, the Company launched a drilling campaign across the Boumou, Bougouni South and Ngoualana prospects with the objective of enhancing the current JORC Resource inventory and further extending the mine life of the asset. 

Post period end, the Company reported assay results from the drilling programme which confirmed the identification of further high-grade mineralisation and the extension of wide high-grade pegmatite zones.

Highlights included the confirmation of further wide, high-grade extensions at the Boumou prospect with significant results including 24m at 1.13% Li2O from 55m (including 8m at 1.37% Li2O from 55m). The Boumou prospect has been declared as a high priority target for further drilling to extend and define the pegmatite bodies to allow a new resource estimate to be completed.

Results from the Bougouni South target drilling programme also returned significant lithium mineralised intersections including 11m at 1.14% Li2O from 71m and 6m at 1.48% Li2O from 101m. This drilling confirmed extensive pegmatite veins at Bougouni South that require additional exploration including diamond drilling to determine structural controls and extent of mineralisation.

At the Ngoualana prospect, diamond drill holes were completed along the strike of the orebody to obtain variability test samples and returned wide high-grade intersections up to 37m at 2.17% Li2O from 3m to end of hole in drill hole MT004.

Off-take Arrangements

Kodal agreed a binding term sheet with Suay Chin in March 2017 which contemplates that the parties will negotiate an extended off-take agreement for between 80% and 100% of the spodumene product produced at Bougouni for a period of three years. The off-take term sheet sets out certain agreed off-take principles that are to be included in the off-take agreement including the parties agreeing to buy and sell the contract quantity as well as the formal agreement including a right to match any third party off-take terms agreed for a period of three years following the expiry of the formal agreement. Whilst a formal agreement has not been entered into, Suay Chin retains the first right of refusal for a period of three years from first production of product from Bougouni whereby Kodal may not enter into any agreement with a third party to sell more than 20% of future production from Bougouni without having first offered to sell the production to Suay Chin on the terms offered by the third party.

As part of the financing package announced on 19 January 2023, the Company has agreed a 12-month exclusivity period during which Kodal and the Hainan Group will seek to negotiate an off-take agreement over that portion of spodumene production from Bougouni which KMUK is able to sell without breaching its prior agreement with Suay Chin or triggering any existing rights of first refusal.

Gold Exploration Projects

The primary focus during the year under review has been advancing the technical and corporate aspects of project development at the Bougouni Lithium Project, however the Company remains committed to the future exploration and resource development of its gold properties.

In particular, the Board will focus on the progression towards establishing a maiden resource in the near-term for Niéllé, in northern Côte d'Ivoire, where we have identified an anomalous trend extending over 4.5km and which remains open along strike. Intercepts from previous drilling include: 26m @ 1.95 g/t Au from 32m, and 26m @1.79 g/t Au from 108m. Of equal importance is Fatou, in southern Mali, which has a historical resource estimate of ~350 koz Au. Recent drill intercepts from Fatou include 23m @ 1.63 g/t Au from 82m, and 6m @ 1.49 g/t Au from 40m.

Importantly, Kodal will be well funded to advance these gold properties without further dilution to shareholders following Hainan's subscription for new shares in Kodal, which will deliver US$17.75 million in new capital. Some of these funds will be directed towards a comprehensive exploration programme across our priority targets in Côte d'Ivoire and Mali, as well as the assessment of new exploration and development opportunities in West Africa.

A draft budget has been prepared to undertake a major exploration campaign at Fatou, Nielle and Dabakala with the aim of defining significant new gold resources. The exploration programmes will include detailed geological review, geochemical sampling, geophysical surveys, and extensive drilling campaigns.

Bernard Aylward

Chief Executive Officer

5 September 2023

FINANCE REVIEW

Results of operations

For the year ended 31 March 2023, the Group reported a loss before other comprehensive income for the year of £1,461,000, including share-based payment costs of £517,000 (2022: £343,000), compared to a loss of £903,000 in the previous year. Administrative expenses have increased compared to last year as corporate activity has increased with negotiations surrounding the future of the Bougouni Project. The Group has continued to run the offices in Mali and Côte d'Ivoire and significant additional exploration activity for both gold and lithium was undertaken during the year. Further information is provided in the Operational Review above.

During the year, the Group invested £3,227,000 (2022: £2,547,000) in exploration and evaluation expenditure on its various projects and £513,000 of expenditure on the Bougouni West project was reclassified as held for sale. As a result, the carrying value of the Group's capitalised exploration and evaluation expenditure increased from £11,442,000 to £14,522,000 after taking account of the effects of foreign exchange. At 31 March 2023, after taking account of the effects of foreign exchange, the carrying value of the gold projects in Mali and Côte d'Ivoire was £3,306,000 (2022: £2,411,000) and of the lithium projects in Mali was £11,216,000 (2022: £9,031,000).

Cash balances as at 31 March 2023 were £545,000, a decrease of £501,000 on the previous year's level of £1,046,000. Net assets of the Group at the year-end were £14,883,000 (2022: £12,091,000).

Financing

On 4 May 2022 the Company announced that it raised £3,000,000 (before expenses) via a subscription for 130,142,857 shares and an oversubscribed placing of 941,285,712 shares at a price of 0.28 pence per Placing Share (the 'Placing'). The funds raised supported Kodal in the continuing development and preparation for financing and construction of its flagship Bougouni Lithium Project in Mali.

On 3 August 2023, the Company announced the prepayment of US$3,500,000 of the subscription agreement entered into as part of the funding package with Hainan. The prepayment is repayable or convertible into new ordinary shares of the Company should the funding package not proceed. The Company has sole discretion over the use of the funds including for general working capital.

Going concern and funding

The Group has not earned revenue during the year to 31 March 2023 as it is still in the exploration and development phases of its business. The operations of the Group are currently being financed from funds which the Company has raised from the issue of new ordinary shares. On 31 August 2023 the group has cash at bank amounting to £1,984,000.

In January 2023 the Group signed binding agreements with Hainan to enter into a joint venture to develop the Bougouni Lithium Project. Under these agreements, Hainan will subscribe for equity in the joint venture vehicle amounting US$100 million; they will also subscribe for equity of US$17.75m in the ordinary shares of Kodal Minerals Plc, plus the immediate repayment to the Company for historical development expenses amounting to US$5.66m, the agreements together being the Financing Transaction.

Completion of the Financing Transaction is subject to meeting various conditions precedent including Hainan receiving formal Government approval for the investment and Kodal completing a restructure of its Mali subsidiary holdings. At the date of this report, it is noted that Hainan has received all necessary approvals from the Chinese Government authorities to allow it to complete its funding and investment including "Overseas Project Investment Filing Certificates" from the Hainan Province National Development and Reform Commission ("NDRC") and Company Overseas Investment Certificate from the Department of Commerce of Hainan Province. 

Kodal has continued with the restructuring of its subsidiary companies and confirms that the new mining company Les Mines de Lithium de Bougouni has been fully registered and the Mali DNGM notified that this new company will be the owner and operator of the mining licence. In addition, the Company has completed the restructure of Future Minerals SARL such that all of Kodal's lithium assets in Mali are now 100% owned by Kodal Mining UK Limited (the joint venture vehicle for Kodal and Hainan to develop the Bougouni Lithium project). Kodal is continuing to work with the relevant authorities to finalise all regulatory matters to allow completion of the Financing Transaction.

Both Hainan and the Company remain committed to the Financing Transaction and Hainan has recently advanced to the Company a US$3.5m prepayment on its subscription for ordinary shares in the Company. The long stop date for finalising the conditions precedent has been extended several times by mutual consent and the parties continue to work together to expedite the completion of the Financing Transaction at the earliest opportunity.

The Group has prepared cash flow forecasts for the period ending 30 September 2024 under several scenarios, including on the basis that the Hainan transaction completion is delayed for several more months and also that the Hainan transaction does not proceed. Under both of these scenarios the Group will require further funding within the foreseeable future.

The directors are confident of raising sufficient funding to cover ongoing expenditure and overheads, based on indications from Hainan that they would make further prepayments available, and/or the Group will be able to raise further equity given the quality of the Bougouni lithium project, continuing interest from potential investors and finance providers, and forecasts showing continuing strong demand and pricing for spodumene and lithium. Although the Group has been successful in the past obtaining additional funding, there is no assurance that it will be able to do so in the future or that such arrangements will be on terms advantageous to the Group.

These conditions indicate the existence of a material uncertainty that may cast doubt on the Group's ability to continue as a going concern. The consolidated statements for the year ended 31 March 2023 have been prepared on a going concern basis as the Board is of the opinion that the group will be successful in completing the Hainan transaction in the near future and/or securing further funding in order to meet its liabilities as they fall due for at least 12 months from the date of signing these accounts. Accordingly, these consolidated financial statements do not include any adjustments to the recoverability and classification of recorded assets and liabilities and related expenses that might be necessary should the Group be unable to continue as a going concern.

Utilising key performance indicators ("KPIs")

The following KPIs are used by the Group to assist it in monitoring its cash position and assessing costs and exploration and development activities:

The directors have provided more information on the state of the Group's financing and operational activity above.

a) 'Cash and cash equivalents' is used to measure the Group's financial liquidity. Cash and cash equivalents have decreased by £0.5 million in the year as the Group has incurred a higher level of exploration and evaluation expenditure than in prior year.

b) 'Administrative expenses' is used to measure the Group's administrative costs and operating results. Administrative expenses for the year were £0.9 million, an increase of £0.4 million compared to the previous year. Group corporate activity has increased this year with negotiations surrounding the future of the Bougouni Project. The Group has also continued to run the offices in Mali and Côte d'Ivoire.

c) 'Exploration and evaluation expenditure' is used to measure expenditure on the Group's gold and lithium projects. Exploration and evaluation expenditure in the year was £0.4 million higher than prior year as additional exploration activity for both gold and lithium was undertaken during the year.

Financial risk management objectives and policies

The Group's principal financial instruments comprise cash and trade and other payables. It is, and has been throughout the year under review, the Group's policy that no trading in financial instruments shall be undertaken. The main risks arising from the Group's financial instruments are liquidity risk, price risk and foreign exchange risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below.

Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash reserves to fund the Group's exploration and operating activities. Management prepares and monitors forecasts of the Group's cash flows and cash balances monthly and ensures that the Group maintains sufficient liquid funds to meet its expected future liabilities. The Group intends to raise funds in discrete tranches to provide sufficient cash resources to manage the activities through to revenue generation.

Price risk

The Group is exposed to fluctuating prices of commodities, including gold and lithium, and the existence and quality of these commodities within the licence and project areas. The Directors will continue to review the prices of relevant commodities as development of the projects continues and will consider how this risk can be mitigated closer to the commencement of mining.

Foreign exchange risk

The Group operates in a number of overseas jurisdictions and carries out transactions in a number of currencies including Sterling, CFA Franc, US dollars and Australian dollars. The Group does not have a policy of using hedging instruments but will continue to keep this under review. The Group operates foreign currency bank accounts to help mitigate the foreign currency risk.

PRINCIPAL RISKS AND UNCERTAINTIES

The Group is exposed to a number of risks which it seeks to mitigate as set out in the table below:

S172 Statement

The Directors of the Company have a duty to promote the success of the Company. A director of the Company must act in the way they consider, in good faith, to promote the success of the Company for the benefit of its members, and in doing so have regard (amongst other matters) to:

• the likely consequences of any decision in the long term;

• the interests of the Company's employees;

• the need to foster the Company's business relationships with suppliers, customers and others;

• the impact of the Company's operations on the community and the environment;

• the desirability of the Company to maintain a reputation for high standards of business conduct; and

• the need to act fairly between members of the Company.

The Directors are committed to developing and maintaining a governance framework that is appropriate to the business and supports effective decision making coupled with robust oversight of risks and internal controls.

The Board believes that long-term success requires good relations with a range of different stakeholder groups both internal and external. The board has identified Kodal's stakeholders to include employees and consultants working for the Company, the local communities and governments in Mali and Cote d'Ivoire in which it operates, suppliers and contractors, as well as shareholders. As the Company looks to bring the Bougouni Lithium project into development, the importance of capital equipment, suppliers, contractors, local workforce, finance providers and offtake customers will increase significantly.

In the Corporate Governance Report, we explain the regular engagement with employees, communities and local governments in West Africa where we operate; and the impact assessment we have performed on the environment and local society as part of our permitting process. We also comment on the decision-making for the long-term success of the Company, its governance and culture; as well as the nature and methods of communication with all shareholders.

The Group relies heavily on having suppliers and contractors with appropriate levels of experience and expertise of working successfully with junior miners in West Africa, as well as professional advice for AIM quoted companies in London. Accordingly, Kodal is committed to maintaining constructive relationships with all its suppliers and advisers and operating in line with its Corporate Code of Conduct.

Signed on behalf of the Board

Bernard Aylward

Chief Executive Officer

5 September 2023

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 MARCH 2023

The loss for the current and prior years and the total comprehensive income for the current and the prior years are wholly attributable to owners of the parent company.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

AS AT 31 MARCH 2023

The Company's loss for the year ended 31 March 2023 was £1,206,922 (2022: £651,696).

The financial statements were approved and authorised for issue by the board of directors on 5 September 2023 and signed on its behalf by

Charles Joseland

Director

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 MARCH 2023

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 MARCH 2023

Cash and cash equivalents comprise cash on hand and bank balances.

FINANCIAL INFORMATION

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 March 2023 or 2022 but is derived from those accounts.

Statutory accounts for 2022 have been delivered to the registrar of companies, and those for 2023 will be delivered in due course. The auditor's report for the 2022 accounts was (i) unqualified, (ii) did not contain any matter to which the auditor drew attention by way of emphasis without modifying its opinion and (iii) did not contain a statement under s.498(2) or (3) of the Companies Act 2006.

The auditor's report for the 2023 accounts was (i) unqualified, (ii) contained a material uncertainty in respect of going concern to which the auditor drew attention by way of emphasis without modifying its opinion and (iii) did not contain a statement under s.498(2) or (3) of the Companies Act 2006.

 PRINCIPAL ACCOUNTING POLICIES

FOR THE YEAR ENDED 31 MARCH 2023

The Group has adopted the accounting policies set out below in the preparation of the financial statements. All of these policies have been applied consistently throughout the period unless otherwise stated.

The Company is incorporated in England and Wales with registered number 07220790. The Company's registered office is at Prince Frederick House, 35-39 Maddox Street, London W1S 2PP.

Basis of preparation

The consolidated financial statements of Kodal Minerals Plc are prepared in accordance with the historical cost convention and in accordance with UK-adopted International Accounting Standards. The Company's ordinary shares are quoted on AIM, a market operated by the London Stock Exchange.

In accordance with the exemption allowed by Section 408(3) of the Companies Act 2006, the Company has not presented its own income statement or statement of comprehensive income.

Going concern

The Group has not earned revenue during the year to 31 March 2023 as it is still in the exploration and development phases of its business. The operations of the Group are currently being financed from funds which the Company has raised from the issue of new ordinary shares. On 31 August 2023 the group has cash at bank amounting to £1,984,000.

In January 2023 the Group signed binding agreements with Hainan to enter into a joint venture to develop the Bougouni Lithium Project. Under these agreements, Hainan will subscribe for equity in the joint venture vehicle amounting US$100 million; they will also subscribe for equity of US$17.75m in the ordinary shares of Kodal Minerals Plc, plus the immediate repayment to the Company for historical development expenses amounting to US$5.66m, the agreements together being the Financing Transaction.

Completion of the Financing Transaction is subject to meeting various conditions precedent including Hainan receiving formal Government approval for the investment and Kodal completing a restructure of its Mali subsidiary holdings. At the date of this report, it is noted that Hainan has received all necessary approvals from the Chinese Government authorities to allow it to complete its funding and investment including "Overseas Project Investment Filing Certificates" from the Hainan Province National Development and Reform Commission ("NDRC") and Company Overseas Investment Certificate from the Department of Commerce of Hainan Province. 

Kodal has continued with the restructuring of its subsidiary companies and confirms that the new mining company Les Mines de Lithium de Bougouni has been fully registered and the Mali DNGM notified that this new company will be the owner and operator of the mining licence. In addition, the Company has completed the restructure of Future Minerals SARL such that all of Kodal's lithium assets in Mali are now 100% owned by Kodal Mining UK Limited (the joint venture vehicle for Kodal and Hainan to develop the Bougouni Lithium project). Kodal is continuing to work with the relevant authorities to finalise all regulatory matters to allow completion of the Financing Transaction.

Both Hainan and the Company remain committed to the Financing Transaction and Hainan has recently advanced to the Company a US$3.5m prepayment on its subscription for ordinary shares in the Company. The long stop date for finalising the conditions precedent has been extended several times by mutual consent and the parties continue to work together to expedite the completion of the Financing Transaction at the earliest opportunity.

The Group has prepared cash flow forecasts for the period ending 30 September 2024 under several scenarios, including on the basis that the Hainan transaction completion is delayed for several more months and also that the Hainan transaction does not proceed. Under both of these scenarios the Group will require further funding within the foreseeable future.

The directors are confident of raising sufficient funding to cover ongoing expenditure and overheads, based on indications from Hainan that they would make further prepayments available, and/or the Group will be able to raise further equity given the quality of the Bougouni lithium project, continuing interest from potential investors and finance providers, and forecasts showing continuing strong demand and pricing for spodumene and lithium. Although the Group has been successful in the past obtaining additional funding, there is no assurance that it will be able to do so in the future or that such arrangements will be on terms advantageous to the Group.

These conditions indicate the existence of a material uncertainty that may cast doubt on the Group's ability to continue as a going concern. The consolidated statements for the year ended 31 March 2023 have been prepared on a going concern basis as the Board is of the opinion that the group will be successful in completing the Hainan transaction in the near future and/or securing further funding in order to meet its liabilities as they fall due for at least 12 months from the date of signing these accounts. Accordingly, these consolidated financial statements do not include any adjustments to the recoverability and classification of recorded assets and liabilities and related expenses that might be necessary should the Group be unable to continue as a going concern.

Basis of consolidation

The Group financial statements consolidate those of the Company and all of its subsidiary undertakings drawn up to the statement of financial position date. Subsidiary undertakings are entities over which the Group has the power to control the financial and operating policies so as to obtain benefits from their activities. The Group obtains and exercises control through voting rights.

Unrealised gains on transactions between the Company and its subsidiaries are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.

Foreign currency translation

Items included in the Group's consolidated financial statements are measured using the currency of the primary economic environment in which the Group operates ("the functional currency"). The financial statements are presented in pounds sterling ("£"), which is the functional and presentational currency of the Parent Company and the presentational currency of the Group. End of year balances in the Group's West African subsidiary undertakings were converted using an end of year rate of XOF 1 : £0.00135 (2022: XOF 1 : £0.00129).

Transactions in foreign currencies are recorded using the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the rate of exchange ruling at the reporting date and the gains or losses on translation are included in profit and loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the original transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Depreciation, which is included in administrative expenses, is charged so as to write off the costs of assets down to their residual value, over their estimated useful lives, using the straight-line method, on the following basis:

Plant and machinery 4 years

Motor vehicles 4 years

Fixtures, fittings and equipment 4 years

Where property, plant and equipment are used in exploration and evaluation activities, the depreciation of the assets is capitalised as part of the cost of exploration and evaluation assets. The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

Investments in subsidiaries

Investments in subsidiaries are stated at cost less any provision for impairment. Where the recoverable amount of the investment is less than the carrying amount, an impairment is recognised.

Exploration and evaluation expenditure

In accordance with IFRS 6 (Exploration for and Evaluation of Mineral Resources), exploration and evaluation costs incurred before the Group obtains legal rights to explore in a specific area (a "project area") are taken to profit or loss.

Upon obtaining legal rights to explore in a project area, the fair value of the consideration paid for acquiring those rights and subsequent exploration and evaluation costs are capitalised as exploration and evaluation assets. The costs of exploring for and evaluating mineral resources are accumulated with reference to appropriate cost centres being project areas or groups of project areas.

Upon the technical feasibility and commercial viability of extracting the relevant mineral resources becoming demonstrable, the Group ceases further capitalisation of costs under IFRS 6.

Exploration and evaluation assets are not amortised prior to the conclusion of appraisal activities, but are carried at cost less impairment, where the impairment tests are detailed below.

Exploration and evaluation assets are carried forward until the existence (or otherwise) of commercial reserves is determined:

• where commercial reserves have been discovered, the carrying value of the exploration and evaluation assets are reclassified as development and production assets and amortised on an expected unit of production basis; or

• where a project area is abandoned, or a decision is made to perform no further work, the exploration and evaluation assets are written off in full to profit or loss.

Exploration and evaluation assets - impairment

Project areas, or groups of project areas, are determined to be cash generating units for the purposes of assessment of impairment.

With reference to a project area or group of project areas, the exploration and evaluation assets (along with associated production and development assets) are assessed for impairment when such facts and circumstances suggest that the carrying amount of the assets may exceed the recoverable amount.

Such indicators include, but are not limited to, those situations outlined in paragraph 20 of IFRS 6 and include the point at which a determination is made as to whether or not commercial reserves exist.

The aggregate carrying value is compared against the expected recoverable amount, generally by reference to the present value of the future net cash flows expected to be derived from production of the commercial reserves. Where the carrying amount exceeds the recoverable amount, an impairment is recognised in profit or loss.

Intangible assets and impairment

Externally acquired intangible assets are initially recognised at cost and subsequently amortised over their useful economic lives. Amortisation, which is included in administrative expenses, is charged so as to write off the costs of intangible assets, over their estimated useful lives, using the straight-line method, on the following basis:

Software 3 years

Deferred taxation

Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the reporting date and are expected to apply when the related deferred tax is realised, or the deferred liability is settled.

Deferred tax assets are recognised to the extent that it is probable that the future taxable profit will be available against which the temporary differences can be utilised.

Financial instruments

Financial assets and financial liabilities are recognised on the Statement of Financial Position when the Group becomes a party to the contractual provisions of the instrument.

IFRS 7 (Financial Instruments: Disclosures) requires information to be disclosed about the impact of financial instruments on the Group's risk profile, how the risks arising from financial instruments might affect the entity's performance, and how these risks are being managed. The required disclosures have been made in Note 14 to the financial statements.

The Group's policies include that no trading in derivative financial instruments shall be undertaken.

Cash and cash equivalents

Cash and cash equivalents in the Statement of Financial Position comprise cash at bank and in hand.

Other receivables

Other receivables are carried at amortised cost less provision made for impairment of these receivables. A provision for impairment of receivables is established when there is an expected credit loss on amounts due according to the original terms of the receivables. The amount of the provision is the difference between the assets' carrying amount and the recoverable amount. Provisions for impairment of receivables are included in profit or loss.

Non-current assets classified as held for sale

Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continued use. They are measured at the lower of their carrying amount and fair value less costs of disposal. For non-current assets to be classified as held for sale, they must be available for immediate sale in their present condition and their sale must be highly probable. Non-current assets are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of assets held for sale continue to be recognised. Non-current assets classified as held for sale are presented separately on the face of the statement of financial position, in current assets.

Trade and other payables

Trade payables and other payables represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. These amounts are carried at amortised cost. The amounts are unsecured and are usually paid within 30 days of recognition.

Provisions

A provision is recognised when a present obligation (legal or constructive) has arisen as a result of a past event and it is probable that a future outflow of resources will be required to settle the obligation, provided that a reliable estimate can be made of the amount of the obligation.

When the effect of discounting is material, the amount recognised for a provision is the present value at the end of the reporting period of the future expenditures expected to be required to settle the obligation. The increase in the discounted present value amount arising from the passage of time is included in profit or loss.

Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction from the proceeds.

Equity settled transactions (Share based payments)

The Group has issued shares as consideration for services received. Equity settled share-based payments are measured at fair value at the date of issue.

The Group has also granted equity settled options and warrants. The cost of equity settled transactions is measured by reference to the fair value at the date on which they were granted and is recognised over the vesting period, which ends on the date the recipient becomes fully entitled to the award. Fair value is determined by using the Black-Scholes option pricing model.

In valuing equity settled transactions, account is taken of service and performance conditions (vesting conditions), in addition to performance conditions linked to the price of the shares of the Company (market conditions). No expense is recognised for awards that do not ultimately vest.

At each reporting date before vesting, the cumulative expense is calculated; representing the extent to which the vesting period has expired and management's best estimate of the number of equity instruments that will ultimately vest. The movement in the cumulative expense since the previous reporting date is recognised in profit and loss, with a corresponding entry in equity, or for options awarded to executive directors, the award is considered as part of their remuneration and the overall cost is allocated between operating costs and exploration and evaluation cost.

Where the terms of the equity-settled award are modified, or a new award is designated as replacing a cancelled or settled award, the cost based on the original award terms continues to be recognised over the original vesting period. In addition, an expense is recognised over the remainder of the new vesting period for the incremental fair value of any modification, based on the difference between the fair value of the original award and the fair value of the modified award, both as measured on the date of the modification. No reduction is recognised if the difference is negative.

Where an equity-based award is cancelled (including when a non-vesting condition within the control of the entity or employee is not met), it is treated as if it had vested on the date of the cancellation, and the cost not yet recognised in profit and loss for the award is expensed immediately. Any compensation paid up to the fair value of the award at the cancellation or settlement date is deducted from equity, with any excess over fair value being treated as an expense.

Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the Board of Directors, which has been identified as the Chief Operating Decision Maker. The Board of Directors is responsible for allocating resources and assessing performance of the operating segments in line with the strategic direction of the Company.

Critical accounting judgements and estimates

The preparation of these consolidated financial statements in accordance with UK-adopted International Accounting Standards ("IFRS") requires the use of accounting estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the reporting period. Although these estimates are based on management's best knowledge of current events and actions, actual results ultimately may differ from those estimates. IFRS also require management to exercise its judgement in the process of applying the Group's accounting policies.

The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of the assets and liabilities within the next financial year are addressed below.

Exploration and evaluation expenditure

In accordance with the Group's accounting policy for exploration and evaluation expenditure, after obtaining licences giving legal rights to explore in the project area, all exploration and evaluation costs for each project are capitalised as exploration and evaluation assets.

The exploration and evaluation assets for each project are assessed for impairment when such facts and circumstances suggest that the carrying value of the assets may exceed the recoverable amount.

The directors have assessed the Group's gold projects in Mali and Côte d'Ivoire that are not part of the joint venture agreements and determined that they remain prospective. Accordingly, the directors have determined to continue to maintain these licences and explore ways for the Group to advance these prospective areas most effectively. Accordingly, no impairment review has been conducted on these assets.

The directors have assessed the Group's Bougouni Lithium project in Mali, taking into account the updated Preliminary Feasibility Study and the agreement reached with Hainan in January 2023 for the funding of the project. This project continues to be evaluated and there is no indication of impairment. Accordingly, no impairment review has been conducted on these assets.

The Group's exploration activities and future development opportunities are dependent upon maintaining the necessary licences and permits to operate, which typically require periodic renewal or extension. In Mali and Côte d'Ivoire, the process of renewal or extension of a licence can only be initiated on expiry of the previous term and takes time to be processed by the relevant government authority. Until formal notification is received there is a risk that renewal or extension will not be granted.

As detailed in the Operational Review, at the date of these financial statements, the Group's key exploration licences are current. As detailed in note 7, the total carrying value of the exploration and evaluation assets at 31 March 2023 was £14.5 million (2022: £11.4 million). The Group complies with the prevailing laws and regulations relating to these licences and ensures that the regulatory reporting and government compliance requirements for each licence are met.

Valuation of warrants and share options

In accordance with the Group's accounting policy for equity settled transactions, all equity settled share-based payments are measured at fair value at the date of issue. Fair value is determined by using the Black-Scholes option pricing model based on the terms of the options and warrants, the Company's share price at the time and assumptions for volatility and exercise date. The assumptions used to value the options and warrants are detailed in note 5.

For options awarded to the non-executive directors, the award has been considered to be in relation to their overall contribution to the Group and, accordingly, the charge has been included within operating costs in the Consolidated Statement of Comprehensive Income. For options awarded to executive directors, the award is considered as part of their remuneration. This overall cost is allocated between operating costs and exploration and evaluation cost, the latter of which are capitalised against specific projects. For the award of warrants associated with the raising of funds through the issue of new shares, the charge has been treated as a share issue expense and offset against the share premium account.

Recoverability of Intercompany Balances to Subsidiary Undertakings

The Company has outstanding intercompany balances from its directly held subsidiaries resulting from the primary method of financing the activity of those subsidiaries. The balances are shown in the Company Statement of Financial Position. However, there is a risk that the subsidiaries will not commence sufficient revenue generating activities and that the carrying amount of the intercompany balances will, therefore, exceed the recoverable amount. Under the requirements of IFRS 9 management has run various scenarios on the expected credit loss of the Company's intercompany balances, including the project being put into operation, the project being sold and the project collapsing. Management has updated its calculations reflecting additional amounts advanced to its subsidiaries for work on its lithium and gold projects during the year, the reduced the risk of credit loss given improvements since last year in the financial, lithium and gold markets and the reduced risk of project collapse following the granting of the mining licence. At 31 March 2023, amounts due to the Company from subsidiary undertakings totalled £14,296,000 (2022: £10,785,000), net of a credit loss provision of £501,000 (2022: £681,000).

Adoption of New and Revised Standards

The Group has adopted all of the new or amended Accounting Standards and interpretations issued by the International Accounting Standards Board ("IASB") that are mandatory and relevant to the Group's activities for the current reporting period.

New standards and interpretations not applied

At the date of authorisation of these consolidated financial statements, certain new standards, amendments and interpretations to existing standards have been published but are not yet effective and have not been adopted early by the Group. These are listed below. The Board anticipates that all of the pronouncements will be adopted in the Group's accounting policies for the first period beginning after the effective date of the pronouncement. The amendments to the standards noted below are not expected to have a material impact on the Group's consolidated financial statements.

There are other standards and amendments in issue but not yet effective, which are not likely to be relevant to the Group which have therefore not been listed.

NOTES TO THE FINANCIAL STATEMENTS

1. SEGMENTAL REPORTING

The operations and assets of the Group in the year ended 31 March 2023 are focused in the United Kingdom and West Africa and comprise one class of business: the exploration and evaluation of mineral resources. Management have determined that the Group had two operating segments being the West African Gold Projects and the West African Lithium Projects, and a UK administration centre. The Parent Company acts as a holding company. At 31 March 2023, the Group had not commenced commercial production from its exploration sites and therefore had no revenue for the year.

2. LOSS BEFORE TAX

The loss before tax from continuing activities is stated after charging:

Amounts payable to RSM UK Audit LLP and its associates in respect of audit services are as follows;

3. EMPLOYEES AND DIRECTORS' REMUNERATION

The average number of people employed in the Group is as follows:

The directors are key management personnel of the Company. The remuneration expense for directors of the Company is as follows:

In addition to the amounts included above, £282,267 (2022: £79,469) of the directors' remuneration cost has been treated as Exploration and Evaluation expenditure. 100% of the salary cost of the Group's employees in West Africa has been treated as Exploration and Evaluation expenditure (2022: 100%).

Included within the amounts shown above for share based payments, £191,771 has been treated as Exploration and Evaluation expenditure. Four Directors exercised share options in the period, with respective gains on exercise as follows: Bernard Aylward £3,860; Charles Joseland £20,044; Robert Wooldridge £10,509; and Steven Zaninovich £4,632.

a) Matlock Geological Services Pty Ltd ("Matlock") a company wholly owned by Bernard Aylward, provided consultancy services to the Group during the year ended 31 March 2023 and received fees of £139,514 (2022: £97,450). These fees are included within the remuneration figure shown for Bernard Aylward.

b) Zivvo Pty Ltd ("Zivvo") a company wholly owned by Steven Zaninovich, provided consultancy services to the Group during the year ended 31 March 2023 and received fees of £140,000 in the period after his appointment as director on 27 July 2022. These fees are included within the remuneration figure shown for Steven Zaninovich. Steven Zaninovich was appointed to the board on 27 July 2022.

c) In addition to the amounts included above, Geosmart Consulting Pty Ltd, a company wholly owned by Qingtao Zeng, provided consultancy services to the Group during the year and received fees of £24,627 (2022: £27,136).

4. LOSS PER SHARE

Basic loss per share is calculated by dividing the loss for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

The following reflects the result and share data used in the computations:

Diluted loss per share is calculated by dividing the loss attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares. Options in issue are not considered diluting to the loss per share as the Group is currently loss making. Diluted loss per share is therefore the same as the basic loss per share.

5. SHARE BASED PAYMENTS

The share-based payment reserve is used to recognise the value of equity-settled share-based payments provided to employees, including key management personnel, as part of their remuneration.

Options, warrants and performance share rights outstanding for each of the directors at the year-end are outlined below: