‘Completely preposterous’: Leo Lithium CEO emphatically rejects claims of China collusion with Mali government

Leo Lithium chief executive Simon Hay says Chinese joint venture partner Ganfeng is not to blame for the company’s $520 million exit from the conflict-ridden West African nation of Mali. West Perth-based Leo has cut a deal to sell its remaining stake in the Goulamina lithium project in Mali for $US342.7m ($520m) while about $90m will be handed over to the West African country’s regime to settle a dispute. Leo told the market on Wednesday it shook hands with Goulamina JV partner Ganfeng to offload the 40 per cent interest in the unfinished development, which is on top of the previously announced $99m sale it made to the Chinese battery manufacturer for 5 per cent. Ganfeng will also pay a 1.5 per cent gross revenue fee over 20 years to Leo in exchange for its Goulamina offtake rights. Leo said Goulamina now also falls under a new mining code in Mali, lifting the government’s possible slice in the project from 20 to 30 per cent, plus another 5 per cent “local stake”. The decision to leave Mali behind ignited theories in some corners of the market that Ganfeng and the country’s government were in cahoots to pry Goulamina away from Leo and kept the spoils of the project for themselves. But Mr Hay told The West Australian those assertions were “rubbish” and the company had “never felt anything but support” from Ganfeng. “I’m glad you brought that up . . . it’s completely preposterous that line of thinking, Ganfeng and Leo have been aligned 100 per cent in dealings with the government,” he said. “I’ve sat side by side with them in meetings and they were equally surprised, disappointed and upset with the government’s actions as we were. “They’ve also invested money under the previous mining code . . . which has been forcibly changed.” Leo informed investors on Wednesday the deal with Ganfeng was binding, while a “memorandum of understanding” had been signed with the Malian government to resolve “all outstanding issues”. The West Australian understands Leo had been locked in discussions regarding the Malian government’s free carry stake in Goulamina — which was 10 per cent prior to Leo’s suspension — as well as liabilities relating to Firefinch’s Morila gold mine in Mali. Leo was spun out of Firefinch, which hastily exited Morila in late 2022 — angering local officials. The West understands Firefinch — Leo’s top shareholder with a 17.6 per cent stake — will help contribute to the $90m government settlement. The sale of Goulamina is equivalent to 43¢ per share pre-tax for Leo. Mr Hay, the former chief of Galaxy Resources, says Leo’s major shareholders including Firefinch were “in general very supportive” of the agreement thrashed out to leave Mali. Leo’s shares have been suspended since July last year after it received “correspondence” from the Malian government. At the time of suspension its shares were trading at 50.5¢, albeit in a much healthier lithium price environment and no indication of major issues with the Malian regime. Mr Hay said the next steps for Leo are yet to be fully determined, but he remains bullish on the future potential of lithium and says at least “some cash” will be directly returned to shareholders once the deal goes through. Leo shareholders are set to vote on the sale in mid-July with completion of the transaction targeted for October. Broker Wilsons has given the deal the thumbs up. “The (sale price) is broadly in-line with our existing valuation for Leo Lithium, where our price target is based on a ‘liquidate scenario’ whereby the company sells its remaining stake in Goulamina to Ganfeng for a 30 per cent discount to the pro-rata rate which Leo announced the sale of a previous 5 per cent stake in Goulamina to Ganfeng for $US65m earlier this year,” a note to clients read. In March Leo said construction at Goulamina — the world’s fifth largest spodumene lithium development — was 80 per cent complete. On Wednesday the company reiterated the project remained on track for first spodumene production next quarter. Leo held $69.3m of cash by the end of the March quarter and the Goulamina JV itself held about $33m. The political situation in Mali has gradually deteriorated since a coup d’état in 2021 and the military junta in charge has been cosying up to Russian mercenaries Wagner Group since early 2023. Leo had a $605m market capitalisation at the time its shares were suspended.